Israel Business Management

Recently, there has been an advertising campaign on Israeli radio, alerting companies to new proposals making their way through the legislative process. The proposals have to do with unions and how a company must allow representatives of a union access to the employees (if at least a third of the employees show interest). There is also a proposal that prison terms become mandatory if salaries are not delivered on time.

You can see more details on the proposed laws here.

Are these laws good for business overall? Does allowing unions almost free access to employees improve the economic situation? Does it help management-worker relations?

I believe that if Israel is to be successful, it must be a free market economy and not one overloaded with union and government involvment.

There are a number of reasons for this:

1. A number of years ago, Israeli labor was inexpensive to that in the US. That allowed work in areas like technical writing to succeed here. As the salaries here have risen and work has been found at cheaper costs in places like India, Israel has begun to lose these markets. Take the diamond business in Israel, where cutting used to be done locally. But, today, the Indians can do it far cheaper, so the nature of the diamond business has changed. So, the cost is no longer a driving factor in global business operating here. The factor is the "brain power" that is found here. There are very smart people here that can offer different values to companies than just cheap labor. But, is that enough to keep these global enterprises operating here if unions and government impose fines and jail time.

2. Unions can be good for certain businesses at specific times and in specific industries. But, there are downsides. Just look at the car companies in the US, where the unions were an albatross around their collective necks and the unions continued to feed off of the car manufacturers until it was too late. Only when union management realized that the companies were going to disappear and obviously in the process hurt those that supported the unions, did they come to the negotiating table to talk about concesssions. What industries will be destroyed in Israel if unions are given carte blanche to the work floor.

3. I was involved in layoffs in two of the more difficult countries in Europe - France and Italy. I can say from first-hand experience that it is hard to dismiss employees there during a layoff, so that the overall company can survive. In some companies, they have tried to close their operations completely and outsource the local market sales and support to 3rd parties, just to avoid the anguish and cost of dealign with the unions.

So, when the government steps in to make laws of this type, does it ultimately help the working population or is it just looking at the immediate situation with a lack of regard for the big picture and bringing more business to Israel?