The Unmaking of the Histadrut

In May 2004, Dani Ben Simhon of the Workers Advice Center (WAC) did a study of the Histadrut, Israel's General Federation of Labor. We excerpt four sections: I. The Introduction; II. The Histadrut's attitude toward Palestinian workers; III. Its decline during the last decade; and IV. The rise of new possibilities. Because of the document's length, we have omitted sections dealing with Israeli Arabs and migrant workers: for these groups, see Challenge # 85 or www.workersadvicecenter.org/delegation-document2.htm

The Histadrut was founded in 1920 as "The General Federation of Jewish Labor," the avowed purpose of which was to "conquer labor" from the hands of Palestinian Arabs. It quickly became a major base in the political leadership of the "yishuv" (the pre-state Jewish settlement of the land). Even when it functioned as a labor union, its aims were always geared toward the Jewish population.

In addition to representing workers, the federation developed an entrepreneurial wing. It grew to be a giant, encompassing agricultural, industrial, construction, marketing, transportation and financial concerns: for example, the factories of Hevrat Ha-Ovdim (the General Cooperative Association of Labor in Israel), Bank Hapoalim (the Workers' Bank), the General Health Fund, a newspaper, sports teams and more.

The Histadrut aimed from the start to establish Jewish economic autonomy. Its cooperatives (e.g., Tnuva in agriculture, Koor in manufacturing, the Mashbir in distribution) were concerned with the whole economic gamut, from employment through production to consumption, all geared to Histadrut members. Their dwellings were built by a Histadrut company, Solel Boneh, and supplied by its Shikun Ovdim (Homes for Workers). Its pensioners used its network of old-age homes (Mish'an). Under its General Health Fund, it provided the Jewish population with hospitals and clinics.

After the creation of the State in 1948, the Histadrut retained its centrality. Its little red membership booklet was a precondition for getting hired. In order to be a member of the main health fund, you had to be a member of the Histadrut. As the only recognized workers' representative, the federation amounted to a state within a state.

Although it erased the word "Jewish" from its full name, the Histadrut refused to give full membership to Arab workers until 1959. The nationwide growth in construction and manufacturing created such a labor shortage that the organization finally admitted them.

The conquest of the West Bank and Gaza Strip in 1967 raised the question of how the Histadrut should relate to Palestinian workers. Economic control over the Territories quickly became a cornerstone of Israeli occupation. According to the conception of Defense Minister Moshe Dayan, the incorporation of Palestinian workers into the Israeli labor market would undermine the indigenous Palestinian economy, which was curtailed to foster dependence on Israel. The defense establishment thus killed two birds with one stone: it controlled economic activity in the Territories (until the late 1980's, they formed Israel's biggest export market after the US), and it supplied Israeli manufacturers, contractors and farmers with a cheap labor force. The Histadrut accepted this arrangement, lending its hand not only to the exploitation of the Palestinians, but also to its consequence: the erosion of the bargaining power of their Israeli counterparts.

Israel had a twofold interest in bringing an additional labor force into its economy. First, this economy had long been expanding, largely on the basis of infusions from abroad. Its annual growth rate since 1948 had hovered around 10% (and continued thus until 1972). One might expect that the increasing demand for workers would be reflected in higher wages, but the large reservoir of cheap Palestinian labor kept the lid on.

Israel's second interest was to consolidate its political control over the Palestinians in the Territories. This interest "was no less important, and perhaps even more so, than the army's 'professional' struggle against Palestinian violence."1 Instead of acting like a labor union in the workers' defense, the Histadrut accepted the army's criteria for distributing work permits. The availability of Palestinians assured profits to its own manufacturing and agricultural concerns, while as a labor union it could pocket Palestinian payments to its pension funds, the health fund, and its administrative apparatus. "Bent on bureaucratic ambitions to tighten their control, the two big Israeli institutions [namely, the army and the Histadrut – DBS] worked together to perpetuate the postwar status quo in order to build up their power."2

The exploitation of Palestinian workers was institutionalized by a cabinet decision of October 1970. It provided that the military administration should supervise their employment. Their wages would be distributed by the Payments Department of the National Employment Service, which gave firms permits to hire them and received reports on the number of hours they worked. In this way, both the government and the Histadrut could be certain of getting their cuts.

The Histadrut and the Labor government were partners in this arrangement. The federation's concern was not to ensure equality of workers' rights, but rather equality in the cost of employing them. On the surface, it appeared that their wages and social benefits were subject to existing labor agreements. In the small print, however, the government added several limiting provisions. With regard to National Insurance, in particular, it permitted coverage in only three areas: work accidents, employer bankruptcy, and a grant on the birth of a child in an Israeli hospital (a rarity for Palestinians). Of the 11% that was taken from the wages of each Palestinian worker for National Insurance, only 1% was slated for these three areas. The rest went to a special "Equalization Fund," which was supposed to supply the population in the Territories with social and cultural services. In fact, this money was used by Israel to finance the Occupation. The workers paid the full National Insurance tax, but they did not benefit from most of the rights that this tax is supposed to cover: e.g., unemployment compensation, old-age pension, disability benefits, a monthly child allowance, and vocational training.

The Histadrut's handling of the Palestinian workers did not differ greatly from that of personnel ("manpower") companies, "because by means of the regime and the military control, it took workers from the Territories and attached them to employers, while in return getting cheap labor for its own enterprises and an additional source of membership dues."3 (In addition to the National Insurance, each Palestinian worker had to pay 1% of his wage as dues.) The Histadrut was a full partner in the short-sighted policy that kept the Palestinians from developing economic independence. “The result was absolute dependence on Israel, such that "economic separation is no longer viable, at least until a more solid economic base will be developed in those places [i.e., the Territories – DBS]."4

Starting in the late 1970's, new labor unions began to crop up in the Territories. They were closely connected to the political-military organizations of the Palestinian national liberation movement. These militant unions attracted thousands of workers, including those who commuted to Israel. The Israeli authorities regarded them as part of the resistance, clamping down with an iron hand. Leaders were imprisoned or deported. Their offices were closed. Their activists were subjected to pursuit, interrogation and torture. The Histadrut did nothing.

The Israeli human-rights group B'tselem reported that Israel, by means of the Shin Beth (General Security Services), was using the work permits as a tool to get workers to collaborate. The workers understood that by agreeing, they would be assured of this entry ticket to Israel's economy. Those who refused found themselves on a blacklist, and their work permits were cancelled.5

Here too the Histadrut sat with folded arms. It also used its prestige abroad to keep the Palestinian unions from gaining international recognition.

After the signing of the Oslo Agreement in 1993, in accordance with the change in Israel's relation to the PLO, the Histadrut altered its position toward the Palestinian unions. It sought to take control of them and use them to legitimate its entry into the Arab world.

In its founding document of 1998, WAC describes in detail the post-Oslo attitude of the Histadrut toward the Palestinian unions. Israel's policy of closure, and its "capture" of the Palestinian economy, only increased after Oslo.6 The Paris Protocol of 1994, which defined the economic relationships between Israel and the Palestinian Authority (PA), perpetuated this dependence in all fields, including customs duties, infrastructures, imports and exports. The passage of commuting Palestinian workers was left to Israel's discretion, in accordance with its needs.7

In March 1995, within the context of Oslo, the Histadrut made an agreement with the Palestinian unions, permitting it to collect membership dues of 1% as before – but this time half of that sum would go to those unions. The agreement also stipulated that the Histadrut would pay the unions eight million shekels as compensation for the money that it had collected from Palestinian workers in the past. This arrangement aroused fierce opposition in Palestinian circles. Its opponents pointed out that the amount was ridiculously low. The Histadrut, after all, had taken its 1% from tens of thousands annually in the course of 26 years, without providing services in return. The Palestinians estimated the sum owed them at 1.5 billion shekels.

Despite this dispute, the agreement became an accomplished fact. The Histadrut at last began to conduct seminars for union activists and to pay lawyers defending Palestinian workers in Israeli labor courts. With the outbreak of the second Intifada, however, it cut all connection to the Palestinian unions.

Toward the end of the 1970's, the Israeli economy was beset with difficulties. A major part of the crisis was due to the Histadrut. Its huge companies had run at a loss, depending on the government to bail them out. It had provided overly generous subsidies to farmers and the kibbutzim. At all levels and in a wide range of professions, its employees had received tenure, and many became unproductive or redundant. Almost 40% of the work force was employed in the government. The country remained addicted to infusions from abroad. Then came the war in Lebanon (1982), costing $5 billion – and the government printed money. By 1984 the rate of annual inflation had settled into triple digits. The foreign debt had doubled to $23 billion. Foreign reserves dropped below the $3 billion red line.

The closed, monopolistic economy had reached a dead end, and Israeli capitalists pressed for change. After the 1983 elections, the two major parties, Labor and Likud, formed a national-unity government under Yitzhak Shamir and Shimon Peres. There was need for a national consensus in order to achieve two things: withdrawal from the depths of Lebanon and economic recovery.

In 1985 a Stabilization Plan was passed, creating sudden disinflation and high interest rates. These had an adverse effect on Koor, the Histadrut industrial conglomerate, whose debt soon reached $1.3 billion. In its union "hat," the Histadrut agreed to a wage freeze and the cancellation of subsidies on basic consumer items.

Stabilization introduced deep structural changes, designed to adapt the economy to the new winds of globalization wafting in from Washington and London. The plan won massive approval from both American and Israeli economists. Tariffs were reduced, and Peres brokered a free-trade pact with the US. Clearly, Israel's industries would not be able to compete if worker output did not improve. Peres' answer was to dismantle, prune or privatize forty corporations belonging to the government and the Histadrut, including Koor. Given tight, expensive money, firms had to rationalize. From 1985 till 1989, industrial output shot upward without increases in staff. Instead, unemployment rose from 6 to 9%.

As a result of the Peres plan, the labor market changed beyond recognition: The employers got a series of releases from taxes and pay raises, plus freedom in determining wages and in the make-up of the work force. More and more workers were employed on a piece-work basis rather than according to the Histadrut's system of collective agreements. An increasing share of economic activity occurred outside any organized framework, on the basis of personal labor contracts. There was a vast increase in employment through personnel ("manpower") companies, bypassing collective labor agreements. In a study from the years 1995-1997, it was found that personnel companies supply at least 85,000 workers per month, or 5% of the wage earners in Israel, four times the norm for developed countries.8 (Last year the number rose to 150,000.) The Histadrut accepted this new reality without a peep. Indeed, it took part in the celebration by setting up its own personnel company.

Another practice became widespread in the 1990's: the outsourcing of labor-intensive industries such as textiles to Egypt, Jordan and other lands of cheap labor. Where this was not possible, as in construction and agriculture, the Histadrut sat by while the government permitted the import of cheap, unorganized labor.

The Histadrut, as the guardian of organized labor, should have been there to fight against the breakdown of collective agreements. It should have fought for the rights of migrant workers instead of letting them serve as a cheap labor reservoir. This was not done. The "new Histadrut" was busy with other things, as we shall see.

In the last decade, the Histadrut has undergone far-reaching changes. From its status as an economic superpower – the biggest employer in the public sector, with a monopoly over labor relations – today it struggles for its life.

First, since before the founding of the State there had been an unhealthy intimacy with the Labor Party, which in the 1950's was known as Mapai. This had become notorious for discriminating against Jewish immigrants from Arab lands (who got partial revenge when they helped defeat Labor in 1977 and continued to oppose it thereafter). It later emerged that the Histadrut had regularly and secretly channeled funds to the Labor Party. This money came from the members, who had to be members, recall, in order to belong to the country's largest and securest health fund. Thus part of the money paid by captive members for health insurance went instead to the coffers of a political party.

Second, there were the factors already mentioned: make-work, redundancy, widespread tenure, and protectionism contributed to low productivity. As a harsh corrective came the Stabilization Plan of 1985. It received, as said, full cooperation from the Histadrut, which accepted the layoffs and wage-freezes with "understanding." Here was the only workers' organization in the country, paving the way to globalization, permitting "flexibility" in the labor market by releasing employers from limitations that had been established for the workers' benefit.

Third, despite the sale of its companies through the years, such as Koor, Solel Boneh, and Bank Hapoalim, budget deficits were not eliminated. The Histadrut pension funds were ensnared in debt.

But the immediate, decisive blow was struck by Haim Ramon, who was elected to lead the Histadrut in 1994. Ramon was a prince within the Labor Party, a probable heir to the old guard. As Health Minister in the government of Yitzhak Rabin, he pushed for national health insurance. This would cut the tie between membership in the Histadrut and membership in the main health fund, a tie that had held the population hostage while providing a secure source of funds. Why then would a Labor minister work for such a suicidal change?

His party, in any case, refused to go along. It emasculated the national-health proposal. Ramon resigned his post and declared that he would run on an independent slate – contra his own party – in the upcoming Histadrut elections. Joined by Amir Peretz, he gambled against the odds and won by a big majority. He then cut the knot to the health fund, and the Rabin government put a restored national-health bill through the Knesset. The Histadrut had lost its hostage. Membership dropped from 1,800,000 to 650,000 in 1995. The loss of dues led to a sharp increase in the federation's deficit. Ramon responded by selling off assets. Says Dr. Yossi Dahan, Chairperson of the ADVA Center: "It was one of the biggest heists of the century. Within a matter of days or weeks, a body that had once controlled 25% of the economy was transformed into a bankrupt. How did this robbery take place? We still know only about some of the cases. For example, [the real-estate company] 'Shikun v'Binui (Housing and Building)' was sold for 300 million shekels. Within a few months its value reached 1.2 billion."

In late 1995 (after Rabin's assassination), having dismantled the Histadrut Empire, Ramon resigned his hard-won chairpersonship and returned to the Labor Party, leaving Amir Peretz in charge of the dwarf that remained.

Ramon had done the party great injury. Why then did it take him back, as well as all the other Laborites who had joined his revolt? There are indications that something quite different was at work beneath the surface. Already in the 1980's, the Labor Party – as distinct from its faction in the Histadrut – had decided that the future lay with globalization. In this regard, the Histadrut seemed an albatross weighing down Israel's economy. Even though the federation had accepted the Peres reforms with "understanding," as an empire it belonged to organized labor, the foe of a globalized, easily exploitable labor market. There are indications – cited in Ha'aretz in April 1994 9 – that Ramon was the secret emissary of PM Yitzhak Rabin. The head of the Labor Party itself had taken the decision to slaughter the milch cow!

When we recall the overall situation, this interpretation may not seem improbable. There were the economic opportunities offered by globalization; Rabin's need for public support in the Oslo process; the disreputable connection between the Histadrut and the Labor Party; the electorate's resentment at being a hostage of the Histadrut because of health-fund membership; the federation's reputation for waste, mismanagement and protectionism; its association with the old Labor party of discrimination. The Histadrut old guard, besides, had always supported Shimon Peres in his intra-party rivalry with Yitzhak Rabin.

In tandem with the weakening of the Histadrut's central apparatus, the big unions within it rose in power, especially those of the white-collar workers, the public sector, and the big monopolies (the electric company, the ports, the telephone company, the aircraft industry and others). This fact explains the influence that these unions have within the Histadrut today. They are capable of waging extended strikes, opposing the government's intentions to reduce the public sector. By contrast, where industries are labor-intensive, union influence has declined considerably.

Since the mid 1980's, the Labor Party and the Likud have been basically in agreement on the country's economic-social agenda, leaving the Histadrut without political representation. Its big labor councils lost their influence on the centers of power. Given the danger of further privatization, a new party, Am Ehad ("One People"), emerged in 1999 to fill the vacuum. Its list consisted of candidates from the Right and the Left. Amir Peretz, a former Labor Party dove, and Likudnik Haim Katz, erstwhile head of the aircraft industry's labor council, were supposed to lend political flexibility to Am Ehad. This would enable it to join either Likud or Labor, with the power to make or break a coalition majority. Thus the interests of the big labor councils would be protected.

In order to bypass ideological impediments and keep options open, the new party avoided taking a position on central political questions. It did not state a preference in 1999, for example, as to who should be Prime Minister, Ehud Barak or Binyamin Netanyahu. In the end, Am Ehad received only two mandates and remained outside Barak's coalition. It did nothing to stem the influx of unorganized migrants, who continued to take the jobs of Palestinians from the Territories and Israeli Arabs. When Ariel Sharon formed a national-unity government in 2001, Am Ehad joined. Here it voted for the separation barrier in the West Bank, thus excluding most Palestinian workers. (See article, p. 4.) This chapter in the Histadrut' history will forever be a mark of disgrace.

In the Knesset elections of January 2003, Am Ehad won three mandates, but because Likud and Shinui formed a neo-conservative majority on economic issues, it lost any chance for influence. The Likud-Shinui government launched a drastic attack on whatever remained of the welfare state – and, in particular, on the Histadrut. One leading member of the Finance Ministry said frankly that the greatest achievement of his office was the breaking of organized labor: "There is no longer any need for organized labor in Israel, because the state has taken over its historical function: to ensure worker's rights. The Histadrut, after all, doesn't concern itself with the seamstresses of Yarka [a Druse village – DBS] or the workers exploited by the personnel companies. What protects them is the law and the social security net, both of which the state provides. That is why organized labor has declined in the last decades from 70% of the economy to a mere 20%. If we succeed in implementing reforms in education and banking, its share will decline even further, below 20%."10

Finance Minister Binyamin Netanyahu has not hesitated to attack sectors that until now were sacred cows. The Histadrut's failure to prevent the privatization of the pension funds, El Al Airlines, the ports and the banks has moved local labor councils to look out for their immediate interests while claiming part of the spoils from the sales. Seeing this defeatist attitude on the part of the councils, and feeling his own camp crumbling beneath him, Peretz concluded that Am Ehad's days were numbered. In September 2003 he put out feelers toward the Labor Party, and in May 2004 he rejoined it. This merger closes a circle in the life of the new Histadrut, returning it to the point it left a decade ago: namely, the Labor Party. Now, however, the Histadrut is a toothless body, smashed by the market economy. A labor union that takes refuge in the Labor Party endangers itself, for that party is committed to globalization and the market economy no less than the Likud.

The waning of the Histadrut gives wide freedom of action to capital and leaves workers an easy target of exploitation. On the other hand, the decline of an organization that once monopolized labor-employer relations opens a chance for other bodies to appear. For the first time the conditions have arisen for the growth of an alternative.

Broad sectors of workers have been left without a union framework, especially temporary workers, Arabs, migrants, and those in personnel companies. Taken together, these groups constitute the majority of the working class in Israel. In the vacuum left by the Histadrut, new bodies have arisen in the last decade: e.g., Kav la'Oved (the Workers' Hotline), Commitment, The Center for Aid to Foreign Workers, and WAC. Each seeks, in its own way, to defend and advance the rights of workers abandoned by the Histadrut. The Arab population in particular has a tradition of independent organizing, which was suspended in the 1950's when the Histadrut absorbed it. This sector can serve as the basis for a new union, accessible to all, not connected with the Zionist establishment. WAC's efforts re-open this possibility for all those workers who do not have a voice in the new Histadrut. n