David R. Henderson  

Israel's Nasty Minimum Wage

The Writing on the Wall... Should College Attendance be S...
The government is considering establishing work camps in the south of the country, where illegal migrant workers will receive shelter, food and medical care, Army Radio reported Wednesday. In exchange, illegal migrants would perform manual labor outside the camps, but would not earn a salary.

They would stay at the camp until their asylum claims are decided, which could take months or years.

This is from a recent story in the Israeli newspaper Haaretz.

What does this have to do with the minimum wage? Read on:

"We contacted many kibbutzim in an effort to have Sudanese asylum seekers released for farm work," she said. "Despite the argument they desperately needed workers, most of the coordinators at the kibbutzim rejected my request after they learned they would have to pay the asylum seekers at least minimum wage, as provided by law, [and] could not make deductions from their salaries beyond what the law on foreign workers requires."

In other words, the Israeli government is saying:

You can pay the minimum wage or more, or you can pay zero, but don't let us catch you paying anything below the minimum wage and greater than zero.

Update: Typo noted by Mike, Ryan Vann, Scott Clark, and by e-mail, Bryan Caplan, fixed. Thanks guys. I sure ruined my closing flourish, n'est-ce pas?

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CATEGORIES: Labor Market

COMMENTS (8 to date)
Mike Hammock writes:

"You can pay the minimum wage or less"

I think you meant to say "you can pay the minimum wage or more".

david friedlander writes:

The reasoning provided here is abysmal. What if the kibbutzim offered "enlightened slavery" in that the refugees work for free but receive a small amount of food each day. Should the government allow that? Economics is not the only factor that plays a role in decision making. I wouldn't be surprised if the author wrote an article about how "love" is economically inefficient since the time spent "loving" can be utilized making money.

geckonomist writes:

What? Work camps, food, shelter?

Jewish economic refugees are encouraged to settle in the country, but non-jewish political refugees are concentrated into camps????
How much more can a country discriminate?

Ryan Vann writes:

'I think you meant to say "you can pay the minimum wage or more".'

No, he meant what he said. The story essentially says that there are zero wage labor camps and minimum wage, and both of those are legal. However, anything between the floor (zero) and the cap (min wage) is an illegal wage.

scott clark writes:

I think Henderson's wording is messed up too. I would write it as the Israel gov't saying "you can pay minimum wage or more, or we can pay zero, but don't let us catch you paying anything in between zero and the minimum."

The Old Testament Israel, in accordance with what they saw as God's Law, had open immigration. Something about one law for stranger and native born alike. There were some restrictions on transfering ownership of farmland outside of cities for foreign born people, but inside walled cities they were accorded full property rights and protection of the law. And unless you were born an Egyptian or an Ammonite, your family would have full citizenship within three generations(only a citizen could be a judge and confess the law). If you were from Egypt or Ammon your family had to live in Israel for nine generations before being a citizen (so much for one law for strangers and native born alike, way to stick up for your principles). This was before Old Testament Israel went mad and got rid of the whole judge system and decided they wanted a king, against God's advice, according to the story.

Zac Gochenour writes:

The wording is incorrect in the posting (as of now - should be "or more" not "or less"). What is meant is you can pay wage=0, or wage >= minimum, but not 0

Strange as it may seem this is pretty standard. In the U.S. I can hire an office worker as my "intern" and give them exactly zero pay, but I cannot legally hire someone for $1/hr. But my understanding here reading David's linked story is a bit different: the government is saying "we can pay zero, but you better pay the minimum wage." They justify this be claiming the worker "salary" goes to pay for the work camps.

The really sad thing about the story is that while an Israeli gov representative admits that "a bed is an incentive compared to what they have," the plan is "opposed by human rights groups" such as Amnesty International who claim that asylum seekers "have the right to live in dignity and earn a living." The simple solution, to allow private employers to charge a market rate for labor, does not seem to be seriously considered by anyone.

Ryan Vann writes:


There does seem to be an element of doublethink with the acceptance of free labor and rejection of low wages, even in the US (as you mentioned). I seem to recall Nancy Pelosi (I think it was Pelosi) being grilled for essentially benefitting from free labor, provided by interns, while supporting min wage hikes. I don't recall what show it was on; I'll try to find it if anyone is interested.

Anyway, I think the widespread acceptance has to do with an assumption of implicit necessity. That is, someone working as an intern likely isn't doing so in order to put food on the table (well at least not immediately) whereas someone willing to take a sub-minimum wage probably is. As such, the person working out of necessity is due a certain amount of dignity (in the form of wages, of course). Whether this assumption has any moral validity or makes Economic sense (I don't think it does either), I do believe it is the reason why someone can support both zero wage work and setting minimum wages simultaneously.

The key difference, in this case (which I think you touched on a bit) is that the migrant workers are obviously working out of necessity. Israel’s government being able to offer zero wages while private interests can’t offer any (unless it is x amount or more) would be much harder to defend morally than the above scenario.

Les writes:

It seems to me that the non-economists need a translation.

David is saying that citizens are already paying once for the illegal immigration camps through the taxes that citizens pay to the government.

Now the government is asking any potential kibbutz employer to pay minimum wage if it employs an illegal immigrant. But this minimum wage would go to the government, rather than the illegal immigrant worker. So, whether or not employed, the illegal immigrant worker gets food and lodging. No incentive then for the illegal immigrant to work.

Nor any incentive to the kibbutz to employ him - at the minimum wage, the kibbutz can hire anyone who is willing to work at the minimum wage.

Thus what has been accomplished? What has been accomplished is yet another example of how a minimum wage reduces employment for unskilled workers, and deprives employers of unskilled employees willing to work at a wage below the minimum. It also explains why labor unions love the minimum wage, because it reduces competition for jobs.

Finally, it explains why politicians love the minimum wage, because it makes them look caring and gets them union support and helps them win elections, while the harm to the economy goes unnoticed by most of the public.

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