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workers with no rights

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legal warning: The information here should not be understood legally as financial advice. If you believe anything on this site is in error, please contact me. I am always open to corrections, new ideas, and new opinions...

Many workers in Israel receive no rights whatsoever.  Employers take advantage of payroll law in order to sneak in the payments to cover legal rights that an employer should pay and then consider it part of the overall pay.  This system is often used to deprive workers of pension payments, vacation days, sick days, and even transportation to and from work.

How is this done?  There are a couple of ways to do this.  It can be done by writing long contracts that stipulate a lower wage amount than the amount originally presented.  Then afterwards the legal amount for each right is added.  For example, let’s say I advertise that I am looking for someone to work for 60 shekels per hour.  I can write a contract that states that the worker will get 30 shekels + transportation, which I value at 15 shekels. + pension substitute + vacation substitute + sick day substitute = 60 shekels (note: I am making up the numbers here).  Alternatively, a contract can be written only paying for the hour worked, by the hour, even if it is a part or even full time job.

So what’s wrong with this?  Doesn’t the worker get his money anyways?  Yes and no.  When one sees a job that pays 45 shekels per hour for 10 hours a week, he or she expects 450 shekels plus the legally required minimal benefits.  But in this case, the worker expects one wage, then gradually understands all the different items that the wage covers, effectively lowering the wage that the worker gets paid.  The worker, usually lower level, thinks he or she is finally getting a break and not earning the minimum wage, just to find out that they actually are.  Most people do not do the math, so it is really the corrupt taking advantage of the complicated legal jargon in order to drown the average worker.

What is the real danger of this system?  Economically speaking this system moves the burden of all of these programs and payments that should be covered legally onto the shoulders of the worker.  In English, this system is a form of deception abused in order to steal from the poor.  Also, these “by the hour” contracts are also used to fire sick workers, pregnant women, and pretty much anyone at anytime without any recourse.

So why is this legal?  This system is legal because it allows small businesses to hire people for occasional services without the worker being an independent business by himself.  Imagine what a pain in the neck it would be for me to have to open a tik or register as a worker, even if I am just working one time for a couple of hours.  The problem is that this system is taken advantage of by clever lawyers and corrupt businessmen who have no regard for their workers.

If you’ve been following this blog, you’re probably looking at me now saying “okay mr.  smarty pants, what’s the solution”  Well, I’m glad I asked.

As always, knowledge is the key.  But in our case a tool is needed in order to provide this knowledge.  This brings me to my current pet project, the job payoff index.  The job payoff index is an index whereby any job can be evaluated for what it really pays, including all benefits, in order to give a worker one solid number that he or she can use to compare jobs and measure what each one really pays, looking past all the legal mumbo jumbo.  Dishonest employers would no longer be able to tout large deceitful hourly wages once the truth is opened wide and set for all to see.

Additionally, the index would also help job seekers looking for a subjective way to compare the payoff of several offers.  For example, this system would allow me to compare one job that offers a car with another that has a better pension plan and more vacation days.

The job payoff index would use the following formula:  The salary and benefits paid by a job minus the minimal salaries and benefits that must be paid by law.  Obviously, I just listed a very hard bunch of variables that need to be defined.  For example, what is the real price of having sick days?  What is the cash equivalent of not getting a pension?  What is the price or stability and being warned before being fired?  I have to work this out.

If anyone out these is a numbers nerd, an economic nerd, or a current employer who knows the laws, I’d greatly appreciate your help. You can e-mail me at jonnydegani@gmail.com and I’ll tell you where I am holding, what I think I need, and ask for your opinion on the matter.

I thank everyone in advance for considering helping.  I think we could work together to really make a difference.  Thanks and Kol Tuv.


8 Comments

  1. Genius says:

    I love your blog and love that you’re coming at this issue with the idea of helping people, but you are way out of line here. Try putting yourself in an employer’s position:

    You’re a businessman and you’ve got a budget to hire an additional employee. You find someone good and negotiate a wage/salary that reflects the value he’ll add to your company. But the government regulates whom you can hire, to do which tasks, at what hours, on which days, under what conditions. There are also mandates that you must pay all sorts of extra money – some directly to the employee above the negotiated amount, and some to different arms of the government itself.

    What exactly is a businessman with a budget to do? It makes perfect sense that he’ll negotiate a total compensation package with his employee rather than a partial one. Doing so is not dishonest or deceptive. It is a perfectly normal and expected adaptation to a terrible situation that this democracy has created for business.

    On top of this, the courts are so biased in favor of employees that they can expect to win in nearly any case they bring, almost irrespective of its merits. If I had employees, in addition to negotiating based on net figures rather than wage/salary alone, I’d feel obliged to take all sorts of additional precautions to avoid lawsuits – by refusing to hire people who are statistically more likely to sue me and by firing anyone who made a habit of complaining.

    Finally, I take issue with your notion of “rights” for employees. There is no such thing and an employment contract is just like any other contract, listing obligations from each party to the other. Whatever is not in an employee’s contract is not his right, and if he doesn’t like it, he should renegotiate his contract or go work somewhere else with a better one. People do this all the time. I’ve done it. It’s called asking for a raise and then, if the boss refuses, quitting a lousy job.

    Anyway, I like your idea of a “job payoff index.”

    • jonnydegani says:

      We should theoretically have two opposing forces in a free market democracy: the businesses, who should only be doing what they can in order to help their bottom line, and employees, who should demand collective rights via their own elected government. In this sense, workers’ rights is half of the equation of the free market in a western country.

      Unfortunately, we live in a country that is partially a corpocracy – a government where the corporations determine legislation. These corporations find loopholes in order to deny workers’ rights. This is a classic example. I am not asking that employees give any extra rights – only those that the government, a supposed servant of the people, agreed to allow the people.

      When workers receive less money initially, and money is held for pension and vacations, then the burden of cost will fall on other suppliers in the economy and people save money. Okay, in English. If workers get 100 shekels per hour, the price of items throughout the economy will reflect that. On the other hand, if workers get 90 shekels, the prices all over the economy will be less because people will have less to spend. The money not spent is instead set aside for retirement when workers can spend it to their needs. It is social security done intelligently. In fact I applaud the Israeli government for seeing the people’s needs and demanding that every job gives a pension.

      Also, if you remove sick leave and maternity leave as a right through a contract, and this becomes the common practice, then people who will be sick for some reason will fall financially and have a domino effect on the economy. Look at the United States and how many people are ruined financially because of an illness. In the US it is because of lack of medical care, but if businesses can dump their employers mercilessly, we will suffer the same effect.

      Putting the economic effects of this trend aside, let’s look at this from a point of view of honesty. By law, a businessman with a budget has to evaluate how much he can spend and then advertise the amount the potential employee can get per hour. Will there be a discrepancy (due to payroll taxes etc.)? Sure. Will it cause a wedge in consumer and producer surplus like any tax? Absolutely. But big deal! That is how a business is run. What gives a businessman the right to advertise he is paying 50 shekels per hour when he is really only paying the equivalent of 30 shekels per hour? A business cannot advertise how much he is paying a worker and include payroll taxes in his calculation – that would be false advertising. So to here, the employers need to follow uniform guidelines in advertising the effects of the payoff of a job. The only reason that employers deprive workers of their pension, sick days, etc, is that they want to hide these costs just like including payroll taxes in the cost of a salary. Otherwise, why hide them? It costs the same to give the benefits as to not give the benefits (I wonder what would happen if they let the emplyer choose…). I am not arguing that pension costs are like payroll taxes; one is recieved by the worker and one is recieved by the government. I am arguing that by breaking what is considered the uniform way to advertise what a job pays, employers decieve workers who confuse what they are not recieving.

      In truth, the job payoff index would solve many employers problems as well. If employers had a solid way of reflecting what they will pay, then the size of the wedge between consumer and producer surplus would be understood and would therefore become much less.

      On a final note, I have seen that you dabble in game theory and economics on a regular basis (I have read your blog as well). I would be very interested in what you think would go into the index, namely how to evaluate the economic effect of not having sick days and a pension. What do you think?

  2. Jo Guy says:

    it’s very simple, guys…in Israel you ask is it netto or brutto and so the contract negotiations begin…
    with my employees, i advertise the bruto (gross) sum. after all, how much they contribute to their pension, among other things, is up to them, and each person’s actual wage they take home at the end of the day varies based on their other sources of revenue, et cetera.
    if you’re going after employers who abuse the system, i fully agree with you. but in this country if a worker doesn’t take advantage of his own tlushim and agrees to be at the whim of his employer, that’s your freedom..

    • jonnydegani says:

      I agree with you 100% – only the bruto (gross) sum should be mentioned. That is the honest way to present a salary and it should be the uniform way. How much a worker pays into the pension is something else entirely.

      What I was referring to is employers who include how much they (the employer) pay into the pension as part of the bruto. And even worse, including sick days, vacation days, holidays, and dmei havra’ah as part of the bruto as well.

  3. Genius says:

    We should theoretically have two opposing forces in a free market democracy:

    A market-oriented economy (“free market” is redundant) and democracy are mutually exclusive. They are in fact polar opposites. Property rights, the central organizing value of market economies, are fundamentally incompatible with majority rule, the guiding principle of democracy.

    the businesses, who should only be doing what they can in order to help their bottom line, and employees, who should demand collective rights via their own elected government. In this sense, workers’ rights is half of the equation of the free market in a western country.

    Well, this sounds vaguely corporatist; I’m sure Mussolini would see something there to like. Instead, just rewind to Econ 101. Remember produces and consumers? Workers are producers of labor and employers are consumers of labor. See, labor is a service just like any other and is subject to the same economic laws as any other.

    Unfortunately, we live in a country that is partially a corpocracy – a government where the corporations determine legislation. These corporations find loopholes in order to deny workers’ rights. This is a classic example. I am not asking that employees give any extra rights – only those that the government, a supposed servant of the people, agreed to allow the people.

    Since our government is supposed to be a “servant of the people,” you’ve already defined it as a democracy (remember, the regime is who rules and on whose behalf).

    If Israel is an oligarchy, which I think is what you mean to suggest it is in part, where is the legislation that bans employees from ever leaving their jobs or changing careers? Where is the legislation establishing strict price controls for every good and service, including wages? Where is formal, government-organized slavery?

    When workers receive less money initially, and money is held for pension and vacations, then the burden of cost will fall on other suppliers in the economy and people save money. Okay, in English. If workers get 100 shekels per hour, the price of items throughout the economy will reflect that. On the other hand, if workers get 90 shekels, the prices all over the economy will be less because people will have less to spend. The money not spent is instead set aside for retirement when workers can spend it to their needs. It is social security done intelligently. In fact I applaud the Israeli government for seeing the people’s needs and demanding that every job gives a pension.

    If your main concern is low prices, that can be achieved in any number of ways: higher worker productivity through better technology and infrastructure; money that increases in relative value over time (viz, gold). If your main concern is to increase savings, that’s all well and good, but personal savings can not effectively be imposed from above by government fiat. I, for one, consider the “savings” taken from my paycheck to be yet another tax and I haven’t the faintest hope ever of seeing it again. That’s partly because I know how this country works and also partly because I don’t expect to live long enough to see it, due to some chronic medical problems.

    Also, if you remove sick leave and maternity leave as a right through a contract, and this becomes the common practice, then people who will be sick for some reason will fall financially and have a domino effect on the economy. Look at the United States and how many people are ruined financially because of an illness. In the US it is because of lack of medical care, but if businesses can dump their employers mercilessly, we will suffer the same effect.

    As a student of history, I don’t remember reading about any economy that collapsed because individuals failed to secure medical treatment for their illnesses by negotiating for health insurance or buying it directly from insurers (excepting plague conditions, but mandatory medical insurance for all can’t prevent a society from being broken by plague).

    You may like to see this as a black/white (health care = good; no health care = bad) issue, but it’s not. Everyone agrees that health care is good. I want just about everyone to be covered by health insurance. But I want them to take responsibility for it – if it’s important to them. And, though I think the system of obtaining health insurance through one’s employer is basically broken, perhaps some aspect of it can be preserved; if that’s the case, I think it’s great for employers to offer health insurance to their employees. But I think it should be a negotiated benefit and not imposed from above.

    Putting the economic effects of this trend aside, let’s look at this from a point of view of honesty. By law, a businessman with a budget has to evaluate how much he can spend and then advertise the amount the potential employee can get per hour. Will there be a discrepancy (due to payroll taxes etc.)? Sure. Will it cause a wedge in consumer and producer surplus like any tax? Absolutely. But big deal! That is how a business is run. What gives a businessman the right to advertise he is paying 50 shekels per hour when he is really only paying the equivalent of 30 shekels per hour? A business cannot advertise how much he is paying a worker and include payroll taxes in his calculation – that would be false advertising. So to here, the employers need to follow uniform guidelines in advertising the effects of the payoff of a job.

    Speaking of honesty, you know as well as I do that employers in Israel never advertise their wages; compensation is always the last thing discussed in job interviews here. That being said, an employer advertising NIS 50/hour (net) would be stating the amount that he’s willing to pay. Prospective employees who come to interview and learn the exact terms would not be under any obligation to sign the contract. Realistically, people turn down job offers all the time after learning the specific conditions of the employment. I turned down an offer from a company that would have expected me to work on shabbat. Did they advertise that their employees work on shabbat? No, I learned it at the interview. That’s what the interview was for.

    The only reason that employers deprive workers of their pension, sick days, etc, is that they want to hide these costs just like including payroll taxes in the cost of a salary. Otherwise, why hide them? It costs the same to give the benefits as to not give the benefits (I wonder what would happen if they let the emplyer choose…). I am not arguing that pension costs are like payroll taxes; one is recieved by the worker and one is recieved by the government. I am arguing that by breaking what is considered the uniform way to advertise what a job pays, employers decieve workers who confuse what they are not recieving.

    This is getting into circular reasoning. I’m opposed to all these taxes and mandatory expenses; I believe employers are acting rationally when they seek to minimize what their employees get without earning it. I can’t fault them for acting rationally to minimize the damage to their businesses.

    Perhaps it’s the case that someone sits down to a job interview with a lot of questions about what the job pays (this is how I’ve felt on all of about 50 job interviews so far in Israel), or thinking he knows what it pays but soon to learn what it really pays. Again – that’s why job interviews exist, and that’s why contracts exist.

    In truth, the job payoff index would solve many employers problems as well. If employers had a solid way of reflecting what they will pay, then the size of the wedge between consumer and producer surplus would be understood and would therefore become much less.

    On a final note, I have seen that you dabble in game theory and economics on a regular basis (I have read your blog as well). I would be very interested in what you think would go into the index, namely how to evaluate the economic effect of not having sick days and a pension. What do you think?

    Well, I like the idea of a job payoff index – as an employee. I’m sure it would have to be designed and implemented industry-by-industry by the employees themselves, because employers have a lot of reasons not to participate. As I’m sure you know, it’s more common in Israel than in America to pay different employees different salaries for doing the same job – or rather, for doing similar jobs with the same job title and description. The employees getting more tend to be the ones, naturally, who are more productive – and the ones, characteristically for Israel, who have better personal and family connections.

    For public sector and unionized industries, much of the data is probably available via the Histadrut. For the higher paying industries like high tech, you could start with the salary data that Jacob Richman publishes (Computer Jobs in Israel), though that’s voluntary and probably quite skewed.

    Two potentially interesting data to consider:
    1. The percentage of prospective employees who accept a job offer after it’s been extended. This doesn’t tell you anything directly about the job’s payoff, but we can assume that employees are acting with all their own interests in mind and choosing the job with the best ultimate payoff.
    2. The percentage of employees who leave a job voluntarily to work in any other company doing comparable work. Again, it doesn’t tell you specifically what one job pays versus another, but it does suggest what they pay relative to each other.

    • jonnydegani says:

      I agree that a market oriented economy and a democracy are mutually exclusive. My feeling is that these two interests are meant to counter one another to reach an equilibrium that will fit the workers in their economy. I know that there will be times when things will be tougher for the worker, in which case they will pull toward legislating a tighter reign on the economy. And I know there will be times when workers will feel the economy is being held back, in which case they may choose to loosen up on legislation. But will all market forces and legislative forces, trends may exist and we will pull in the direction we need at the time. There is no one perfect equilibrium; it will change and we need a clear legislative process to allow this.

      Israel has a complicated history as far as socialism goes. Israel used to be much more socialist and has loosened the reigns over time. In some cases (for example health care) it worked great; in other cases (pension fund investing) we have seen devastating consequences. Israel is irrationally between two worlds. There are two main reasons for this: corruption and experimentation. We see corruption all over, and this obviously loosens the reigns on some government activities, while holding others tight based on specific lobbying. For example, Israel’s building water factories is subject to the lobbying on Mekorot, Israel’s attitude toward war may be in part attributed by Israel’s weapons lobby. Lobbies have power and without instituting a war on corruption, we may never know the full extent of it. The other reason Israel is not consistent in legislation is experimentation. Like any country, Israel tries making some businesses more free market and controlling some; sometimes it works and sometimes it does not. In the 80s and 90s, Israel used a government program to have “incubators” that matched bio-tech products to businessmen in order to have a bio-tech boom. On the other end of the spectrum, Israel loosened up the Health Care system and made it work much better. But Israel also tried loosening up on government controlled areas and failed. For example, laws for investment of pension funds were loosened up, even taking on risky non-diversified investments overseas.

      Getting back to the dishonest contracts. The dishonest contracts are usually aimed at lower level workers. In the case of lower level workers, wages are often advertised for the job. Yes, these people can go to the interview and reject the job, but many of them do not truly understand what is happening in their contract until it is too late. I do not reward ignorance, but there is a line between the worker’s ignorance and the employer’s taking advantage and I believe that these contracts cross it. I know it is an arbitrary call and I think this is where we disagree.

      “I’m sure it would have to be designed and implemented industry-by-industry by the employees themselves, because employers have a lot of reasons not to participate. As I’m sure you know, it’s more common in Israel than in America to pay different employees different salaries for doing the same job – or rather, for doing similar jobs with the same job title and description. The employees getting more tend to be the ones, naturally, who are more productive – and the ones, characteristically for Israel, who have better personal and family connections.”

      I am looking to begin with something general and hope it can leave some variable to be changed by industry. I don’t think the point is to see if the wage it fair, but to see what is being earned, including all the benefits. If that is a fair number or not is between the employer and employee. I basically want to turn all forms o

  4. […] from jobs in the United States. (Although, busi­nesses here often take advan­tage of new work­ers who do not know […]

  5. […] Posted by jonnydegani in budgeting, economics, finance, job search, pensions, taxes. trackback A long time ago, I discussed the need for a singular method to measure how much one receives from a job, including […]

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