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Israel Studies 3.2 (1998) 119-158

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The New Labor Law as a Social Text:
Reflections on Social Values in Flux

Guy Mundlak

Introduction: Labor Law as a Social Text

ISRAELI LABOR LAW IS CURRENTLY in flux. What is the source of its instability? Many would pinpoint 1 January 1995 as the pivotal day that distinguishes the "old system" from the newly emerging one. On that day the new National Health Care Insurance Law went into effect, cutting the umbilical cord between health care provision and trade union membership and simultaneously nationalizing health care by guaranteeing all citizens and residents of Israel health care insurance. 1 This dramatic change in the Israeli health care system seems unrelated to labor law, and its effects on industrial relations and the governance of the Israeli labor market only a marginal derivative. The law on labor relations has remained the same. Participants in the Israeli industrial relations system have remained, at least in the preliminary stages, the same. Yet, given the fact that the Histadrut, Israel's major trade union, had dominated the provision of health care in Israel, then a health care reform must also be regarded as a labor reform. One of the major social and financial pillars of the Histadrut was torn down. The damage was even greater than expected, because the other pillars holding up the Histadrut's temple were already shaking: its pension plans revealed a huge actuarial deficit, and it started selling its vast economic activity, which included a major bank, an insurance company, and the largest industrial concern in Israel. What was deemed by some to be a "state within a state," and by others as the "fourth branch of government," turned into a lean organization with enormous debts and grave organizational difficulties. 2

Although I do not wish to downplay the dramatic effect of the changes in the health care system, I believe that it is wrong to overemphasize this reform as the sole reason for instability in labor law. The dramatic health care reform was not only a result of backroom politicking, political tit-for-tat, [End Page 119] or other strategic maneuvering far removed from the public eyes. Ironically, the harsh consequences of this reform on Israel's major trade union were brought about by the Histadrut membership's vote for new union leadership. Health care reform was at an impasse until labor cleared the way for its enactment by democratically electing the reform's initiator, Haim Ramon, to head the trade union. We should thus search for the roots of the 1995 breakdown in earlier years.

The growing weakness of Israeli trade unions and its effects on labor law did not start on the first of January 1995. It has been a longer process that can be traced back to the late 1980s, and its social roots were planted even earlier. The weakness of the industrial system is partially a result of changes that have affected all industrial democracies, and include the effects of global competition and the changing nature of the national labor market. At the same time, underlying recent changes is also an idiosyncratic shift in the values the shape Israeli society. Crudely stated, social values have shifted away from the social-democratic past into a neo-liberal future.

The new Health Care Insurance law is only a mirror image of a society in a state of transition, perhaps even confusion. The fact that the new law succeeded in achieving simultaneous privatization and nationalization aptly demonstrates the particular, and peculiar, starting point for social reform and its hesitant trajectory for change. The dialectics of the new society need not be viewed as a disadvantage. Unlike countries with a clear socio-political trajectory, Israel is facing the challenge of defining its own path amidst the growing pressure toward neo-liberal premises and the still strong social-democratic heritage. The verdict is still in the distant future. At present, social values are in a state of transition, with labor law changing in tandem. The relationship between law and society...


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