Israel’s Free Market has expanded and developed tremendously from where it was years ago. Netanyahu’s (previous) reforms in privatization and tax reduction have certainly made a difference. Israel has profited as a result and our surviving this global economic crisis is certainly good proof of this.
But the Socialist contingent in the Knesset, Shelli Yachimovich (Labor) and Haim Katz (Likud) are threatening to tear all this progress down in one shot.
Socialist and liberals believe that the market is a limited size pie that gets sliced up accordingly. If one person makes too much, it comes at the expense of someone else, and it isn’t fair that any one person makes so much more than someone else.
Capitalists and Free Marketers understand that the market is not limited in size, and the goal is to create new wealth. And market forces determines salaries and value for labor done and wealth creation.
These Knesset Socialists believe that “excessive” (as they define it) profit taking is bad, and a Jerusalem Post editorial states in an attempt to justify this Socialist view and legislation that will put a relative cap on corporate salaries, that salary X "is a figure most of us would consider immensely more than sufficient".
Sorry Jerusalem Post, but who are you (or a bunch of socialists) to decide how much I think is enough?
The title of the editorial is “Caps for the fat cats”, but it can just as easily be called “Punishing Success”.
If this legislation goes through, we’re going to see 3 things.
(1) Executives will leave Israel for freer market where they can get salaries and bonuses that reflect the wealth they are generating – and Israel will lose as a result.
(2) Companies will find very creative ways to reward their wealth generating executives appropriately, so nothing will be changed in terms of the distribution of wealth.
(3) Companies will fire all their low salary employees and hire them back through third party agencies on limited contracts – probably at very bad conditions.
What this legislation does not do, and here is the real problem, is place salary caps on the average public-sector company employees in relation to the average Israeli’s salary for a similar job. That is where the real abuse of the Israeli public happens.
There is no reason that public employees, supported by our tax shekel should make so much more (and that’s before the perks and pensions) than the average Israeli in an equivalent job, is there?
In 2007 the average monthly salary was NIS 7,922, while the average salary for a public servant (paid for from our taxes) was NIS 11,786.
With around 100,000 public servants making NIS 3000 a month more than the average Israeli, that works out to 4 billion tax payers shekels a year extra taken from the pockets of the average Israeli!
While in 2008, employees of public-owned monopolies made 2.5 times the average Israeli’s salary.
But let’s take it a step further, did you know that the average MK, Shelli and Haim included, make around 3-4 times more in individual gross salaries than the average Israeli?
So to rephrase the Jerusalem Post, as public servants (with a lot of side-benefits and perks) their making the same salary as the average Israeli "is a figure most of us would consider immensely more than sufficient".
Wouldn’t you agree?
But Shelly and Haim aren't addressing their salaries.
Shelli and Haim are playing with wealth redistribution for everyone else and trying to legislate into law an attempt to stifle Israel’s free market in the name of ideological Socialist fiscal equality for all.
Let’s instead see more privatization, reduced personal income taxes, and cutting VAT in at least half for starters.
I saw an interesting related post here.
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