Addressing the Legitimacy Gap in the Israeli Corporatist Revival


  • Guy Mundlak is at the Faculty of Law and Department of Labour Studies, Tel-Aviv University.


Since the mid-1980s, Israel's labour law and industrial relations have transitioned from a Continental corporatist system to an Anglo-American pluralist system. The process has been characterized by greater fragmentation of the labour market and the system of interests' representation. However, in recent years, there have been several episodes of nationwide collective agreements and social pacts. These agreements resonate with a second generation of social corporatist bargaining that has been identified in some European countries. In this article, I question the legitimacy of the new agreements. The legitimacy gap evolves from the use of corporatist instruments against the backdrop of a pluralist system. I discuss the attempts to increase the legitimacy of the corporatist instruments, pointing to their limited success. Future attempts must consider solutions that track the hybrid nature of the industrial relations system and devise institutions that bring together the traditional corporatist social partners and the new pluralist agents. Of particular importance is the need to consider the role of the new associations in civil society that voice the interests of the growing segment of disadvantaged workers in the secondary labour market.

1. Introduction

The study of industrial relations and labour law in Israel has documented a significant change in the nature of the system, from the corporatist past to the present pluralist model (Mundlak 2007). As opposed to many classical studies of corporatism, which cluster industrial relations regimes, award scores to corporatism and then measure various outcomes, such as inflation, inequality, growth and level of industrial action (cf. Visser 2007), the advantage of a single-case study is that it allows for ambiguities, enables studies of causation and accommodates a demonstration of institutional embeddedness and path determinacy. In the Israeli context, the simple story of a transition from corporatism to pluralism is incomplete. The system was never perfectly corporatist (Shalev 1992), and it does not neatly conform, at present, to the pluralist script. For reasons of path determinacy, Israel is situated in an interesting spot in which the agents in both the legal and industrial systems have a broad repertoire of institutions at their disposal, some borrowed from the corporatist toolkit, others from the pluralist.

Although the system has grown to resemble pluralist models, the tracks of corporatism have not been erased. Over the last few years, the General Histadrut, the largest trade union, and the Federation of Economic Organizations (FEO — the employers' associations) have, to some extent, retained their central role in the industrial relations system, and there have been several episodes of centralized bargaining arrangements that were extended by executive orders. The fact that corporatist residues continue to stick resonates with other attempts to identify a new type of ‘second-generation social corporatism’ across Europe. The new corporatism is no longer concentrated or centralized; it does not huddle under the protection of a labour party; and it is no longer separated from the heavy hand of the regulatory state. These new forms of second-generation social corporatism may provide an innovative, distinctive model that brings together the virtues of older-style social corporatism and pluralism.

However, it is too easy to dismiss attempts at categorization by suggesting that they are merely two ends of a continuum. In this case, moving along the continuum from one point to another may also indicate a fundamental disruption to the internal logic of each terminus. My objective in this article is to observe the alleged corporatist revival in Israel and to question its stability and endurance. The circumstances leading to four recent examples of collective agreements with state-wide coverage or impact are outlined. These examples are of help in distinguishing between the new and the old corporatist agreements. I argue that the new episodes of corporatist negotiations with broad coverage must be viewed against the backdrop of growing pluralist fragmentation of the labour market, the regulatory regime that governs it and the entry of new agents into the system of interests' representation. This discrepancy yields a legitimacy gap. While the traditional corporatist and pluralist models provided a coherent response to the legitimacy problem, the fusion of both into a new model of second-generation corporatism runs the risk of losing moral and institutional coherence, eventually failing to provide a lasting solution.

In Section 2 of the article, I briefly summarize the transition from corporatism to pluralism in Israel's labour law and industrial relations, and the fragmentation of the Israeli labour market and regulatory regime. Section 3 is devoted to describing four agreements that were negotiated over the last few years and highlights the circumstances that enabled them as well as their distinct features in comparison with the old corporatist agreements. In Section 4, I discuss the legitimacy gap and the attempted means to address it. These, I will argue, are in conflict with one another, casting doubt on the future of the new corporatist revival.

2. From corporatism to pluralism . . . and back?!

Corporatism is characterized by several institutional features, including the state's exclusive recognition and support of trade unions and employers' associations, the concentration of interests' representation and centralization within each side of the corporatist triangle, as well as the centralization of outcomes (broad application of collective agreements). At the core of the corporatist project lies the centrality of the collectively negotiated norm, as well as its relative immunity from legal intervention. It is a system in which social and economic norms generally, and in the labour market in particular, are developed alongside the formal legal regime. Pluralism can be described as corporatism's Other (Schmitter 1974). Pluralism is characterized by the assimilation of trade unions and employers' associations to other forms of association. The labour–capital axis has no priority over other social cleavages. The state is not implicated in ensuring centralization and concentration and does not grant the bargaining agents and collective agreements any immunity from state intervention.

Israel's corporatist regime developed during the years prior to statehood. Within a decade after statehood (1948), the General Histadrut, the employers' associations and the state, working together, developed a legal design that accorded the social partners the power to negotiate state-, sector- and enterprise-level agreements that were legally binding. Basic statutory standards reflected the prevailing standards in collective agreements, but these did not cover wages and protection from dismissal, which were negotiated solely in collective agreements. The law advanced centralization by displaying a preference for broad (state- and sector-wide) agreements. The concentration of interests on labour's side was advanced by giving particular standing to the largest trade union. The law also accorded much weight to collective bargaining by securing the partners' autonomy in bargaining, drawing on the complementary instruments of derogation clauses in regulation (allowing collective agreements to derogate from statutory standards) and using extension orders (enabling the extension of collective agreements erga omnes). Finally, in 1969, the Labour Court was established, in which a professional judge sits together with the workers' and employers' representatives, reflecting the trilateral nature of the Israeli industrial relations system at that time.

The legal system served the corporatist structure of the industrial relations system. First, it left matters of healthcare and pensions in the hands of the trade unions, relying on and even extending the concept of the ‘Ghent system’, which delegates the provision of social services to the trade unions so as to augment the comparative advantage of trade union membership and thereby encourage membership itself (Haberfeld 1995). Despite the turbulent environment of industrial relations in Israel, the state took part in negotiations with the social partners and gave them considerable leeway for bilateral state-wide negotiations as well in both the public and private sectors. The Labour Court provided a less juridified forum for the resolution of labour disputes, deferring to the communications that brought the social partners together. By the early 1980s, approximately 80 per cent of the workers in Israel were organized, of whom the vast majority belonged to the General Histadrut. The coverage of collective agreements was not identical but was similar in scope (approximated at more than 80 per cent, before taking account of extension orders). Most employers were members of employers' associations, and the associations coalesced in the FEO, so as to unify their voices in negotiations, lobbying and policy making (Cohen et al. 2003).

The decline of the corporatist industrial relations system was caused by a combination of universal and domestic reasons. Globalization, demographic and technological changes, as well as the composition of economic activity, all made the centralized corporatist pact more difficult to secure. The decline of the Labour Party and regression of social democracy, which was gradually replaced by a strong neoliberal political culture, also shook the foundations of the corporatist pact. When the Ghent system was removed in 1995, the membership rate in trade unions had already declined to 56 per cent. A decade later (2006), membership rates had further declined to approximately 33 per cent, and the coverage of collective agreements (without taking into account the coverage of extension orders) was down to 56 per cent of the workforce (Cohen et al. 2007). Since 1985, nationwide pacts have almost disappeared, sector-wide bargaining has declined considerably, and instead decentralized enterprise and occupational bargaining (in the private and public sectors, respectively) has become more dominant (Kristal and Cohen 2007). Moreover, controversies over the basic premises of co-operation frequently surfaced and distorted the communications that previously kept the system intact (Mundlak 2007).

In tandem with the changes in the structure of industrial relations, the change in the source of labour market regulation and interest representation was rapid. First, there was an incremental substitution of centralized and concentrated bargaining with the use of regulatory means by all branches of government (Mundlak 2007). This process was complemented with the growing importance of non-labour associations in civil society, such as human rights and workers' advocacy groups. Class-based protection from dismissals, rooted in collective agreements, was gradually replaced by identity-based protections to discriminated groups and individuals (Mundlak 2009). The collective regulation of wages was supplemented by minimum wage legislation, judicial protections, and even executive interference in collective agreements. The use of derogation clauses in legislation and of executive orders gradually disappeared.

The double movement (Polanyi 1944), which consisted of the decline in collectively negotiated norms and their substitution by state-centred regulatory provisions, did not translate into a labour regime tilted unilaterally against labour. Prima facie, many new regulatory provisions sought to extend protections to workers, in lieu of those that were extended in collective agreements (minimum wage and protection from dismissals), or extend protections in regulatory spheres that were not regulated by collective agreements (human rights at work) (Davidov 2009; Mundlak 2007). Other regulatory changes resonated better with neoliberal reforms, most notably in the sphere of social welfare services. Among the relevant changes were the erosion of unemployment benefits in a series of legislative amendments from 1990 onwards (Gal 2005), and later, a far-reaching retrenchment of the welfare state during the years 2002–2005 (National Insurance Institute of Israel 2003–2006).

The new regulatory environment and the declining coverage of centralized collective agreements exacerbated the growth of atypical and precarious forms of employment, the purpose of which was to introduce more numerical flexibility, but mostly in the sense of avoiding the employers' duty to provide employment benefits (Mundlak 2004). The amoebic growth of atypical work started with a rise in employment through temp-work agencies, coupled with long-term contractual arrangements with workers qua independent contractors and providers of services (Raday 1999). While some judicial decisions and regulations sought to retard the development of non-secure forms of employment, other decisions and executive actions legitimized these atypical forms. Moreover, employers gradually developed innovative means of instituting non-secure forms of employment where regulation was more difficult to formulate, notably by means of subcontracting to service providers. In the growing cleavage between the primary and secondary labour markets, collective bargaining contributed little to preventing the separation itself and was continuously used as the basis for privileging workers in the primary sector.

Whereas in the past the secondary labour market was relatively small and reserved for well-identified demographic sectors (new Jewish migrants predominantly from Middle Eastern countries in the first decades of statehood, Israeli Palestinians, daily workers from the occupied Palestinian territories, and later, migrant workers) (Bartram 1998; Semyonov and Lewin-Epstein 1987), in the post-corporatist years it has flourished and come to include more workers from the shrinking primary sector. Workers in the secondary labour market find few rewards in the remains of the corporatist system or in the evolving pluralist system. The system of collective agreements may no longer cover them; or they may be covered by state-wide collective agreements (e.g. for the security workers branch), but absent an active workers' committee at the shop-floor level, they cannot effectively claim their rights (Davidov 2005). Moreover, as will be explained in the following sections, de novo affiliation of workers with a trade union is hardly an obvious option. Employment rights do not address compensation directly and seek to ensure mostly qualitative rights, for example, in the field of equal opportunities or fair process in dismissals. The cuts in the security accorded by the welfare state have weakened workers' bargaining power, as they stand in greater need of a source of income. These cuts adversely affect the more vulnerable segments of society, such as single mothers, who have no recourse to a stable income other than accepting any job, whether provided in a secure employment arrangement or in a precarious alternative.

In sum, despite the new regulatory safety net, the outcomes in terms of labour market measures lean heavily towards pluralist levels of segmentation, inequality and poverty. Some problems of inequality stem from low levels of participation in the labour market among well-defined groups, most notably ultra-Orthodox (Jewish) men and Arab women. Other problems are the result of growing inequality among salaried workers, particularly between workers in the primary and secondary labour markets. Moreover, the growing level of inequality has been shown to be partially an outcome of the declining level of centralized collective bargaining (Kristal and Cohen 2007). Whereas the corporatist system sought to secure broad representation of interests, which is not based on individual or localized power, the pluralist system is more accommodating of differences in wages and benefits that are constructed by the markets and the regulatory provisions.

With regard to the general decline in coverage of collective agreements, and the greater decline in trade union membership rates, the polarization of the labour market further highlights the significance of these trends. The decline in membership and coverage is not uniformly apparent across the workforce. As might be expected, and in line with trends in other countries, membership is more common among older workers, in the public sector, and in traditional industrial sectors. It is less common among low-waged workers and at the high end of the labour market (professional workers in the high-tech sector). As inequality grows, the stronger groups in the labour market view trade unions as archaic, while low-waged workers perceive trade unions as an unreachable option, and also as a part of ‘the system’ that disadvantages them in the labour market (Cohen et al. 2007, 2009).

Consequently, the double movement embedded in the pluralization of the Israeli industrial relations system has not reached all workers evenly. Collective bargaining is no longer to the benefit of the workforce as a whole. There are identifiable demographic groups that are excluded from the labour market, and a larger share of the workforce remains outside the domain of collective representation. These are the ingredients that account for the waning legitimacy of the traditional social partners as representing the collective voice of ‘labour’ and ‘capital’.

3. New appearances of corporatism in a pluralist environment

The depiction of transition thus far might suggest that there was a wholesale shift from corporatism to pluralism. However, over the last couple of years, there have been several indications that the shift was not as hermetic as it may have seemed. Attempts at regulation are being met by counterefforts by the social partners to self-regulate by collective agreements. Gradual isolation of the social partners from the political sphere by means of law and politics is being met by attempts to identify new political opportunities. In this section, four examples of what may seem to be a corporatist revival are illustrated. The following examples demonstrate the meshing of pluralist and corporatist institutions at various levels of governance — ranging from deliberations over the budget, through social pacts that are grounded in state-wide collective agreements and branch-level negotiations over secondary labour market arrangements, to collective bargaining in the pluralist sphere of human rights at work.

The Deliberations over the Budget — 2009

After the fall of the centrist political coalition in 2008, new political elections were held in which a right-wing coalition was established with the participation of the Labour Party. The Labour Party, once a prominent force in Israel, has shrunk considerably, and is currently the fourth-largest party in the parliament. In the corporatist heyday, a strong affiliation between the Labour Party and the General Histadrut was a key to the understanding of labour market politics in Israel. Since the 1990s, the relationship between the party and the General Histadrut has been turbulent. Whether in the coalition or in the opposition, the Labour Party was not effective in halting the process of marginalizing the social partners from the political arena, and even actively contributed to it. The welfare reform in the years 2002–2005 deliberately bypassed the social partners. Important social reforms, such as the abolition of the budgetary pension in the public sector, were instigated with an imminent threat of legislation in the absence of the General Histadrut's concession. Other trade unions were totally isolated from the process (Mundlak 2007). Similarly, a cut in the public sector wages, issues of privatization and cutbacks in welfare provisions were all advanced with little or no consultation or co-operation with the social partners.

The new 2009 coalition faced the pressing need to considerably cut the state's budget despite growing unemployment and a sense of financial insecurity. The Labour Party's declining power was countervailed by its pivotal position in the right-wing coalition. Due to an ad hoc alliance between the party's leader and the leader of the General Histadrut, the traditional corporatist pattern of partnership has resurfaced. Strong ties between the leaders of the General Histadrut and the FEO completed the necessary circle that brought together the tripartite partnership. In the coalition agreement between the ruling Likud Party and the Labour Party, it was agreed to establish a ‘round-table forum’ in which representatives of the executive branch would convene with the heads of the General Histadrut and the FEO to consult on economic issues.1 At the forum's meeting, the Histadrut proposed concessions by means of a temporary halting of state-wide benefits that are extended in extension orders (known as ‘convalescence benefits’) in return for abstention from a broader wage cut. The employers' associations demanded greater investment in economic activity that can stimulate growth. The General Histadrut demanded, in return for its concessions, the legislation of various privileges to trade unions, including the duty to bargain with a newly established union, greater penalties for employers who engage in unfair labour practices during the workers' organizing drive and a reduction in the percentage of workers who must join the trade union for it to be a ‘representative trade union’. This is perhaps the first proposal to significantly amend the law of collective bargaining since it was legislated in 1957.2 The Histadrut also demanded amendments to other employment statutes, including protection against dismissal of workers who are on sick leave and heightened registration requirements for temp-work agencies, as well as — for the first time — for subcontractors in the cleaning and security sectors.

The 2009 budget pact was generally accepted in the parliament but encountered some critique from other agents in the industrial relations system. On the one hand, trade unions outside the General Histadrut have thus far been reluctant to agree to the withdrawal of convalescence pay. They argue that the flat concession does not differentiate between low-waged and high-waged workers, and therefore, the costs of the concessions are not justly distributed.3 Non-union labour organizations have underscored this argument, pointing at the uneven impact of the concessions on workers in the secondary labour market. Some of the trade unions outside the General Histadrut have argued further that they recently received wage raises to correct for previous years, and that their gains should not be retracted on the basis of the agreement negotiated by the General Histadrut.4 More generally, they repeat claims from previous incidents, according to which the General Histadrut has lost the legitimacy to represent the many workers organized by trade unions outside the General Histadrut's umbrella. They further claim that some of the proposals for amending the law of collective bargaining provide the same guarantees to the freedom of association that were already secured by the Labour Court, and can potentially even derogate from the court's ruling.5

On the other hand, the Chamber of Commerce, an employers' association that represents small- and medium-sized enterprises, filed an unprecedented lawsuit against the social partners, demanding a halt to the legislative amendments required by the pact. The National Labour Court rejected the petition, holding that consultation between the government and the social partners should, in fact, be the preferred method for self-regulation of the labour market.6 As of this writing, the Chamber of Commerce is considering whether to petition against the decision in the Supreme Court.

National Mandatory Pension

Partial pension coverage has been documented in Israel for years (Kristal et al. 2008). The Israeli pension system was based on a universal, albeit low, level of old-age pension from the National Insurance system, which was complemented by second-tier pensions and third-tier individual savings. Until the mid-1990s, pensions were a monopoly of the General Histadrut, and membership in the Histadrut-owned and Histadrut-managed pensions was a derivative of coverage in applicable collective agreements. In the mid-1990s, a pension reform opened new pension funds that operated differently from the Histadrut-owned funds. These plans were open to any employee who wished to join. On the one hand, changes that were introduced in the years of the welfare reform (circa 2004) increased mobility between pension funds and employees' choice of pension plans, but on the other hand they also imposed higher management fees and curtailed some of the savers' rights. The two reforms also had adverse effects on the General Histadrut, which lost a significant pillar of power. Despite the attempt to enhance access to pensions, a considerable segment of the labour force remained without any pension savings. Poor pension coverage was a common attribute of the more general category of low-waged workers in precarious working conditions (Kristal et al. 2008; Mundlak 2004). This also accounted for the state of poverty among the elderly and their reliance on income supplements (welfare) from the National Insurance, above and beyond the basic universal old-age pension.

Proposals for a mandatory pension scheme were presented in parliament numerous times over the years but did not succeed in gaining political support. In 2007, following the progress in the legislation of mandatory pension,7 the General Histadrut and the FEO concluded a nationwide collective agreement on mandatory pension. The agreement was extended by the Minister of Trade, Commerce and Labour in 2008 to all employers and employees in the state.8 The collective agreement and the extension order, which provide a relatively lean pension guarantee to those who have no pension coverage whatsoever, stalled the more generous legislative proposals.

The regulation of pensions by means of autonomous collective bargaining between the social partners, in lieu of legislation, was typical of the corporatist past of the Israeli system, suggesting the sustainability of the corporatist heritage. At the same time, some reservations are necessary. First, despite the advantage of mandatory pension in a system where pension was beyond the means of many workers, the new arrangement further cuts and segments the labour force. It does not create a universal right to pension for all workers but rather provides partial coverage to workers who are mostly clustered in the secondary labour market. In that sense, it also helps to legitimize the labour market's segmentation.

A second feature of the new arrangement was that it did not constitute an outcome of comprehensive corporatist deliberations. This was well demonstrated by the petition that was submitted to the Supreme Court by four NGOs: two advocating the interests of the Arab minority in Israel, one advocating the interests of people with disability, and a social-economic think-tank and policy advocate.9 The petition argues that the agreement (and extension order) discriminate against people who did not serve in the military because the pension is accorded only to workers over the age of 20 (women) and 21 (men). These are the ages at which most Jewish workers enter the labour market after taking part in compulsory military service. The petition is currently still pending in court, and its outcomes are yet to be determined. However, at its core, as derived from the parties' briefs to the court, it is a pluralist challenge to a corporatist arrangement. The petition was brought by non-representative, non-members NGOs that claim, on behalf of the populations whose interests they are advocating, that the universal arrangement was achieved in negotiations but at the price of inequality and the denial of rights of marginalized and generally discriminated-against groups — Arabs, the disabled and others who do not take part in military service.

The Temp Workers Collective Agreement

The development of the law on temp-work agencies is complicated and has been outlined in detail in previous writings (Mundlak 2007: ch. 7; Raday 1999). However, it is important to juxtapose it with the other developments outlined here. The law on temp-work agencies was amended in 2000, following a steep rise in the use of temp workers, particularly for long-term postings in order to circumvent rights accorded to workers by collective agreements. The 2000 amendment to the law stipulated that workers who are employed through temp-work agencies are entitled to equal rights, comparable with those of workers who are hired directly by the user of their services, from the first day of employment. At the same time, the law offered a possibility of derogating from the equality provision if a general collective agreement (as distinct from an enterprise-based agreement) is concluded and extended by the Ministry of Trade, Commerce and Labour.10

At the time the amendment was legislated, it was assumed that immediately thereafter, the General Histadrut, being the largest trade union in Israel, would conclude a general collective agreement, which would then be extended. However, a series of events presented an obstacle to this expected outcome. The General Histadrut initiated deliberations with an employers' association that represents temp-work agencies, but its demands were refused. The association turned to the National Histadrut, a small rival trade union, which offered better terms to the employers, and together they concluded a collective agreement. The parties submitted the agreement to the Ministry of Labour, asking that it be extended, but the General Histadrut submitted an objection to the ministry and to the court. The main argument was that the National Histadrut is not the representative union in the sector. As the legal proceedings wound on, several of the largest temp-work agencies established a separate employers' association and concluded an agreement with the General Histadrut, which was submitted to the ministry for extension. The National Histadrut filed similar objections with regard to the General Histadrut's representative status. While the ministry was trying to find a pragmatic solution for identifying the representative union, the equality provision came into effect, despite all expectations that it would merely serve as a penalty default rule that is no more than a platform to derogate from. Subsequently, in 2004, the two trade unions and the two employers' associations signed a ‘treaty’ regarding the rights of temp-work agencies, which was then extended to all the employers and temp workers in the private sector.11 The equality principle, therefore, applies at present only to the public sector.

At present, the law of temp-work agencies includes a combination of hard regulatory provisions and collective agreements. As the governance of the sector thickens, there is a greater turn to hiring peripheral workers through subcontracting arrangements, rather than temp-work agencies. Despite some attempts by the General Histadrut to extend protective measures to workers employed through subcontractors, the slim protection they enjoy is only that which was developed by the Labour Court.12 Ironically, the encompassing regulation of employment of temp workers has been made possible by the fact that other forms of precarious employment were made possible and convenient. Moreover, there is an ongoing ‘territorial dispute’ between the regulatory provisions and the domain of the collective agreement, as cause lawyers representing low-waged workers seek to undermine the collective agreement and reinstate the equality provision.13

The Employees' Privacy at Work Agreement

A final example of encompassing collective bargaining is in the area of privacy rights. Issues of privacy have been trickling into the courts since the 1990s as part of a general interest in the issue of workers' rights as human rights and, conversely, the application of human rights to the private sphere. The few cases on privacy discussed issues of tests, the use of a polygraph at work, monitoring and surveillance. The Labour Court started to write decisions that gradually culminated in a jurisprudence of privacy at work. In 2007, several cases came to the courtroom regarding employers' surveillance of employees' computers, inter alia for the purpose of reading their emails. Questions of human rights at work were never at the centre of the trade unions' agenda, and the cases were brought to the court by individual plaintiffs. In an appeal of a decision by the regional labour court, the National Labour Court asked for the position of the Association for Civil Rights in Israel (ACRI), which is the largest human rights organization in the country.14 ACRI's position was that the regional court did not extend adequate protection to the right of privacy. During the court's hearings, the General Histadrut and the FEO asked the court not to decide on the case and to leave the matter to the self-regulation of the social partners, by means of collective agreements.

Within weeks of the hearings in the Labour Court, a collective agreement was drafted, with almost state-wide coverage.15 The agreement stipulated that the employer has proprietary rights over emails but established various safeguards for workers' privacy as well as a bipartite procedure (in the domain of collective relations, outside the courtroom) to appeal an employer's decision to enter the worker's mailbox. ACRI and privacy experts contested the agreement and lobbied the parliament, which, in a meeting of its Labour Committee, condemned the agreement for its slack protection of employees' privacy.16 At the time of writing, a request for the extension order and the court's decision on the case are still pending.

Unlike the other agreements described above, the agreement on workers' privacy is exceptional in several respects. First of all, it concerns qualitative issues that were generally outside the scope of collective bargaining. Second, it came in response to litigation on workplace issues that was not initiated by the trade unions and was assumed to be in the domain of human rights litigation. Third, it established a grievance procedure that is strongly situated within the tradition of collective relations and was intended to marginalize judicial intervention on the basis of rights litigation. However, like the previous examples, this agreement demonstrates the ongoing tension between the traditional domain of encompassing collective bargaining as a mode of autonomous self-regulation and the new agents that take part in the governance of the employment relationship.

Situating the New National Agreements in Context

The characteristics of the new agreements described here resonate with processes that have been identified in various European countries. Starting from the early 1990s, institutions that had been historically linked with corporatism, most notably social pacts, reappeared, sometimes surfacing in countries where they were not particularly familiar in the past, such as Ireland and Spain (Hancke and Rhodes 2005; Rhodes 2008; Teague 2004; Visser 2007, 2008).17 Despite the many variations in the form, content and applicability of the new social pacts (Avdagic 2008), they have been clustered as a new type of corporatism because something in the corporatist logic has been sustained: co-operation between exclusive and uniquely selected associations, attempts at centralization by means of co-operation, or non-juridified solutions. It is particularly noteworthy that even if the parties to the social pacts are no longer centralized, they are still the sole representatives of labour. Feminist movements, identity groups and ‘green’ groups have not gained an equal standing and importance comparable with those of the social partners in the past (cf. Barnard 2002). In fact, the literature on social pacts generally disregards non-union/business organizations in civil society altogether.

On the other hand, many features of the new corporatism distinguish it from the old, and the variations of corporatist imperfection are many (Hancke and Rhodes 2005; Molina and Rhodes 2002). Studies point to a new logic of corporatist pacts, which is contrasted with that of the old-type Keynesian pacts (O'Donnell 2001; Rhodes 2001). The new pacts have been termed supply-side or competitive corporatism (Siegel 2005). Others have emphasized that the new corporatism is characterized by various forms of co-ordination but not necessarily by the concentration and centralization of associations (Baccaro 2003). What currently characterizes social pacts are not singular, recognized, and state-endorsed labour and employers' associations, but rather democratic coalition building among associations, albeit from within a limited set. Finally, despite the alleged corporatist revival, there are also findings indicating that comprehensive pacts have not been sustained at the same level of intensity following the turn of the century (Hancke and Rhodes 2005; Visser 2008).

The four agreements described here share many of the features that characterize the rather vague set of options that fall within the domain of the new corporatism in Europe. These characteristics can be subdivided into those pertaining to the agreements' content and those pertaining to the process and participants.

In terms of content, all of the agreements are an outcome of concession bargaining under the threat of hard regulation that could worsen the partners' situation. Paradoxically, they have emerged at times when the government is weak but were motivated by the threat of action on behalf of the government (cf. Rhodes 2008: 11). In all four examples, there has been no proactive initiation of new arrangements, but rather a concern that legislation would impose undue restrictions on employers or employees. In some cases, the mere threat of legislation was sufficient to prompt an agreement (most notably in pensions, but also in the negotiations over the budget and employees' privacy), while at other times the agreement has sought to explicitly derogate from the existing law (temp-work agencies and, to a lesser extent, on workers' privacy). In some cases, the concern over the threat of regulation was voiced by the employers (privacy, temp-work agencies), while in others it was voiced by the union (2009 budget) or by both sides (pensions). The strong personal relationship that was forged between the heads of the FEO and of the General Histadrut has been of help in presenting the concerns as mutual in all four examples. However, both sides sacrificed, to some extent, the interests of the parties they represented. On the employers' side, this was particularly evident in the attack launched by the Chamber of Commerce against the 2009 budget pact. The General Histadrut drew criticism particularly for the low pension rate, minimal rights granted to workers hired through temp-work agencies (as well as the absence of protection for workers employed through subcontractors) and the slim protection for privacy.

The alleged compromise in each of the state-wide agreements bears out the need to assess the agents who took part in the process. As noted in the previous section, the General Histadrut has a membership rate of approximately little more than 20 per cent of the workforce (which is approximately 66 per cent of the overall membership rate in all Israeli trade unions). Membership in employers' associations has declined dramatically to approximately 30 per cent of the employers in the private sector (Cohen et al. 2005). The agreements were, therefore, a compromise struck by the social partners in reliance on their past grandeur, even though their membership is in constant decline and their public image is relatively low as well, both among their members and in the general public (Cohen et al. 2005, 2009). The various examples demonstrate that the two major social partners can no longer hermetically seal collective bargaining from the ‘interference’ of external agents. Voicing these concerns are the dissidents, including rival trade unions (in the 2009 budget pact and the collective agreement for workers in temp-work agencies), dissenting employers' associations (contesting the 2009 budget pact), human rights organizations (challenging the agreement over pensions and the privacy agreement) and cause lawyers representing low-waged workers (challenging the scope of the temp-work agreement).

The relationship between collective bargaining and the law also distinguishes the new agreements from the old. While the Law of Collective Agreements (1957) sought to isolate collective bargaining from legal interference and from challenges from organizations that might undermine the strength and cohesion of the social partners, in the current climate the contesting agents draw on legal means to address the shortcomings of the agreements that were signed. In the four examples described here, lawsuits and political lobbying have been used in an attempt to undermine the new agreements.

4. The new social pacts and the legitimacy gap

The representation gap has been documented with regard to pluralist systems generally and in Israel as well. It is the difference between the share of workers who are members of a trade union and the share of those who wish to be members of a trade union (Freeman and Rogers 2006). The legitimacy gap mirrors the representation gap and can be identified by the discrepancy between the high coverage rate of collective agreements and low levels of membership. Israel is among the countries that have experienced a considerable drop in membership rates despite the relatively broad coverage of collective agreements (e.g. Austria, the Netherlands). Naturally, low levels of membership do not necessarily indicate a legitimacy gap because the representation gap may carry a stronger effect (workers cannot become members despite their wish to do so). However, a growing disparity between membership and coverage, the fragmentation of interests' representation, and the gradual move from class-based to identity-based labour politics indicate the prevalence of a legitimacy gap.

The legitimacy gap can be characterized as a product of polar basic assumptions that underlie the old and the new in Israeli industrial relations. The ‘old’ treated the trade unions and employers associations as senior partners alongside the government in the regulation of the labour market. The law sought to invest the social partners with exceptional powers to negotiate broad collective agreements that were then almost immunized from interference by competing trade unions, dissenting employers, individual workers, the state and other associations. A strong variation of the European Ghent system sought to ensure a high level of membership in trade unions as a means of strengthening the union (through membership dues) and legitimizing its exceptional power in the process of self-regulation. The freedom of association was not perceived as the grassroots organizing of workers but as the participation of social partners in governance, highlighting the exceptional importance of mediating the labour–capital cleavage to the utility, stability and legitimacy of the corporatist system.

The emergence of the pluralist system, from the late 1980s, advanced a qualitatively different understanding of the freedom of association. The Ghent system was withdrawn, the political view of partnership was consistently degraded by the political agents, and at the same time, the social and legal importance of other associations in civil society increased. There was constant collision between collective agreements, no longer centralized and concentrated as in the past, as well as between collective agreements and individual bargaining. The freedom of association was reoriented towards the acknowledgement that workers have a right to associate if they wish to do so. Thus, the social partners must draw their power from their membership and not from the state.

Once intermeshed, the distinct premises of the two systems led to a legitimacy gap. While the corporatist institutions, including the capacity to negotiate and extend state-wide agreements, remained, the state's endorsement and support for the system was removed, and it was expected that grassroots power would be used instead to justify the power accorded to the social partners. The legitimacy gap can be found at two levels. The external legitimacy gap refers to the objections voiced by the political system, rival trade unions and other associations in civil society against the use of state-delegated power for the purpose of self-regulation by the social partners. The internal legitimacy gap refers to the reluctance of workers to join as members of the social partners, or their objection to the particular agreements. These internal and external dimensions of the legitimacy gap are interrelated.

Addressing the External Legitimacy Gap

The recent national agreements are drawn on the basis of the corporatist power that was accorded to a highly selective list of players — the most representative trade union and the employers' associations. Selectivity was intended to ensure the concentration of interests, particularly on the labour side, by limiting the role of other trade unions and associations. The transition to a pluralist system relaxed the gatekeeping of the corporatist system, allowing the entry of new unions, enabling more flexibility in the determination of smaller bargaining units, and awarding limited standing in courts and legislative processes to human rights organizations and to other associations that represent workers' interests, but not as a trade union.

These changes have the advantage of accommodating a better match between individuals' preferences and the association of their choice. Workers who wish to have collective representation may lean towards the prevailing trade union or choose to be members of a new union, or to receive individual consultation from other associations (such as a workers' advice centre). Workers are also represented on the basis of their affiliation to a group, such as single parents, pregnant women, the elderly or a minority, which may have a greater impact on their work opportunities, income and benefits. At the same time, the fragmentation of collective bargaining, in tandem with the increasing segmentation of the labour market, renders the possibility of self-regulation on behalf of all workers and to the benefit of all workers a more difficult, if not impossible, task. An exchange with employers, or with the state, does not affect all workers equally, and there is a risk of a negative impact on some workers. With the pluralization of the system of interests' representation, any centralized agreement is vulnerable to legal challenges. Hence, the social partners themselves cannot deliver the promise of stability and finality for their agreements. An individualistic rights discourse gradually substitutes for collective agreements with universal provisions, thereby moving the focus of attention from collective bargaining to legislation and adjudication.

While a representative trade union was a stable partner to negotiations with a ‘long bargaining memory’, which was helpful to advancing mutual concessions in bargaining over time, some of the new associations are not bounded by the same logic of negotiations. A human rights organization risks nothing when litigating against the collective agreement on privacy, pensions or temp workers' rights. It is not a members-based association, it does not need the power that stems from being accorded representative status by the state, and it derives its funding and social support from taking a hard stand precisely where unions may have incentives to compromise. Under these circumstances, neither the political system nor rival trade unions and associations are willing to advance and support social pacts. The legitimacy of the social partners is constantly being contested. The pluralist system of interests' representation undermines the traditional social partners' capacity to advance stable, broad, centralized and concentrated compromises.

Solutions to the external legitimacy problem seek to resurrect the institutional centrality and primacy of the social partners. However, what seems, at the time of writing, to be the success of the 2009 budget pact is based on the establishment of a round-table tripartite forum that stems from a temporary coalition agreement between political parties. This is a circumstantial success that is contingent on the incidental conditions of the current political coalition. However, the rapidly declining power of the Labour Party and the strong basis of partnership between the current leaders of the General Histadrut and the employers' associations are not part of any lasting institutional structure geared towards encouraging more negotiations in the future. Although a National Economic Council was established by an executive decision in 2006 to provide information and consultation on economic matters,18 proposals to institutionalize a tripartite social-economic council on the basis of the old corporatist institutions in Israel and similar councils in Europe and South Africa (cf. Webster 2006) have not come to fruition. A different attempt at bringing back the social partners, albeit as equals to other associations in civil society, can be identified in the assignment of seats on the advisory council to the newly established Commission of Equal Rights at Work.19 However, the social partners have been slow in staffing their representatives to the council, while human rights organizations are becoming active in steering the commission in certain directions. Under these circumstances, the rapid contestation and use of the courtroom (by the dissident Chamber of Commerce) and dissenting negotiations (by trade unions outside the General Histadrut) in the case of the 2009 budget pact demonstrate the lean basis of legitimacy on which the pact was achieved.

Internal Legitimacy

The alternative to institutionalizing external legitimacy is to solidify a stronger basis of support from the workers themselves, according to the pluralist prescription. That is, the traditional social partners can aim at strengthening support from employers and employees by offering services and interests' representation that are well suited to their needs (cf. Heery and Adler 2004). The internal alternative has not been adequately utilized either.

Membership in employers' associations is currently low. However, there are no visible attempts by the associations to recruit greater support for their activity. The most important move undertaken for that purpose was to recognize the status of employers who wish to be quasi-members without accepting the application of collective agreements signed by the association. While this enables quasi-members to take part in training and support lobbying efforts, it avoids the major reason for which employers' associations were established — to promote a concentrated and centralized voice of employers in collective bargaining. Employers that join the associations as quasi-members signal further weakening of the legitimacy accorded to collective agreements.

The problem of the General Histadrut is even more severe, as the rate of membership is the most commonly used indicator to legitimize the power granted to trade unions (Visser 2007). Given that until 1995 the Ghent system precluded any need by the General Histadrut to engage in organizing, no culture of organizing, similar to that which exists in North America, developed (cf. Bronfenbrenner et al. 1998). The initial attempts by workers to organize after 1995 drew fierce employers' objections, which resulted in efforts to dismiss the organizing workers. Case law and statutory provisions attempted to remedy these problems, along the lines of the pluralist logic of North American countries. Nevertheless, despite the indications of a representation gap in Israel, organizing drives have been few and far between, and for the most part, unsuccessful.

Only recently, a growing effort to organize workers can be recognized. Elbowing the General Histadrut into the activity of organizing are, among others, new small trade unions that have begun to appear. None of them undermine the General Histadrut's membership or central position, but they do present to the general public an alternative of grassroots unionism, far removed from the traditional practices of the General Histadrut. Among these unions are ‘Power to the Workers’— a newly (2008) established ‘democratic union’ that seeks to organize workers while empowering them with greater voice and control over their mission.20 The union organizes workers in sectors where state-wide collective agreements negotiated by the General Histadrut are in effect but were not being adequately enforced and implemented (e.g. in the security branch), as well as new groups of workers in coffee shops and restaurants, cleaning workers, guides in a science museum, and the teaching personnel of the Open University. ‘The Workers Advice Center — Ma'an’, an NGO, which thus far has sought to increase the participation of Israeli-Palestinian workers in the labour market by drawing on strategies of lobbying and providing a unique employment exchange service, is also looking into the more formal organizing option.21 This includes the representation of Palestinian workers from the Occupied Palestinian Territories in Eastern Jerusalem. However, the organization also assisted the collective organization of workers in the Educational Television Station who were employed in precarious forms of employment. Shacham organizes workers in the entertainment industries, most of whom are employed as freelancers and independent contractors.22 A new trade union representing ultra-Orthodox workers in day cares was also recognized by the court as a breakaway union from the former trade union that represented them.23

Against the backdrop of the neoliberal tilt of the welfare reform (2002–2005), the small unions offer a political, ideological and associational alternative. At the same time, the new organizations do not provide any internal legitimacy to the new national agreements, and may even undermine that legitimacy for several reasons. First, they are based on a pluralist logic of organization and bring with them the more adversarial approaches and strategies that are common in the North American model.24 The adversarial and juridified thrust of the new organizing drives contest, rather than legitimize, the comprehensive and non-juridified corporatist alternative. Second, despite the substantial resources invested in each organizing drive, the results have been mixed. Some organizing drives have failed altogether, while a few were concluded with agreements that fall short of being a collective agreement under the law (and hence, a ‘gentlemen's agreement’). Third, some of the new unions have evolved from the system of human rights representation and identity-based NGOs. Their efforts are concentrated in small bargaining units and enterprise-based bargaining. Their commitment to the national pacts negotiated by the social partners is just as tenuous as that of the human rights organizations themselves.

There is an intrinsic tension between the organizing logic of the new unions and the corporatist logic of the new national agreements. Not only are the new trade unions not partners to the negotiation of state-wide agreements, but the prevalence of broad agreements also renders the new organizing more difficult. Where a sector agreement is in place, many legal questions arise regarding the potential tension between it and enterprise bargaining. Moreover, it is more difficult to organize workers when a sector-wide agreement applies to them, as they question the reason why they should pay membership dues when a collective agreement applies to them regardless of their membership. Finally, the new pluralist rights discourse and regulation, parts of which are lobbied by the non-union players, extend some universal protections to all workers, reducing the comparative advantage of the domain of collective bargaining.

5. The road ahead

There are various strategies for union revitalization (Frege and Kelly 2004), but not all can be effective in narrowing the legitimacy gap. Paradigmatic pluralist and corporatist systems are in a state of equilibrium. Pluralist systems encourage and recognize small bargaining units, and the coverage of agreements is limited to the relatively homogeneous unit. Legitimacy derives from membership in the unit. Corporatist systems promote broad coverage that is matched by a broad membership base. Pooling together a broad clientele grants stronger political legitimacy to the agreements, and the agreements aid in constituting more homogeneous preferences among diversified interests. When corporatist institutions, such as social pacts, are practised against the backdrop of a pluralist system, the legitimacy gap emerges. This is the source of the social pacts' fragility. Under these circumstances, I have argued, both corporatist attempts to remedy the external legitimacy gap and pluralist measures to address the internal legitimacy gap are ineffective. Moreover, both types of strategies can undermine each other. In hybrid systems in which coverage and membership greatly vary, centralized or co-ordinated solutions require a different approach.

Absent innovative solutions, the pluralist equilibrium is likely to prevail, leading to the gradual removal of the residues of corporatist institutions. This is the source of scepticism with regard to the future of the new generation of social pacts (cf. Visser 2008).

The most significant challenge that emerges from the four examples concerns the need to take seriously the pluralization of associations and agents that are taking part in the governance of the labour market. Even when co-operative agreements have been reached, the polarization of the labour market and the evolving structure of interests' representation — which includes veteran unions, new unions that promote grassroots organizing, work centres and human rights organizations — have rendered the agreements exceptionally vulnerable to rights-based litigation and contestation. It is no longer sufficient to seek a method to foster tripartite co-operation; a new, four-legged structure of co-operation, which integrates civil society in a broader sense, must be achieved.

Innovative solutions must seek to match the hybrid nature of the system. That requires a combination of voluntary interests and state regulation. As to the former, the traditional social partners and the new players must establish a more co-operative and co-ordinated relationship with each other. What this requires is that the interests' disputes that are brought to the Labour Courts and the legislature ex post be internalized and applied to the negotiations ex ante. At present, there is a strong cleavage between the agents in the industrial relations system and the new pluralist associations (e.g. as was demonstrated in the privacy and pensions agreements). Hesitant co-operation with other unions occasionally materializes (e.g. in the temp-work agencies), but oftentimes, the trade unions do not succeed in initiating voluntary co-ordination (e.g. the 2009 budget cut).

The examples presented here were designed in the shadow of law. This indicates that co-operation is not merely a matter of interpersonal relations but an institutional matter that can be encouraged when the various agents are rewarded for co-operation or penalized for fragmentation. For example, the agreement on temp-work agencies was achieved only after it became clear that continuing legal battles might lead to the sacrifice of the position of all the agents involved (two competing employers' associations and two competing trade unions). The use of penalty default rules in legislation at the pluralist end, and the integration of all associations in political councils at the corporatist end, can induce better integration and co-operation that might be of help in bridging the legitimacy gap.


  • 1

    Coalition agreement between the Likud and the Labour Parties, dated 24 March 2009.

  • 2

    A significant amendment to the Collective Agreements Law (amendment #6, 2001), in which the freedom of association was explicitly recognized and extended protections to workers who seek to organize, was a codification of previous court cases and not a proactive amendment by the legislature itself.

  • 3

    Compare with a letter from the head of the High School Teachers Union to its membership (6 June 2009).

  • 4

    Ynet, The Eini Bypass: the Ministry of Finance Will Reduce Convalescence Pay in Legislation (Hebrew edition,; 1 June 2009). For a strong critique of the agreement, typical of the NGOs' opposition to the concession forged by the General Histadrut, see Workers Advice Center, The Eini–Netanyahu Package: A Temporary Truce (1 June 2009;

  • 5

    Knesset Labour Committee, Protocol 75 of a meeting held on 12 July 2009.

  • 6

    National Labour Court (collective dispute) 54/09 Chamber of Commerce —General Histadrut and others (unpublished 2 June 2009).

  • 7

    Several proposals were in consideration at the time, most notably the one submitted by Member of Knesset Zvulun Orlev — Mandatory Pensions Proposal (submitted to the parliament on 3 July 2006).

  • 8

    General Collective Agreement on Mandatory Pension Insurance, signed by the General Histadrut and the FEO on 19 July 2007 (Collective Agreements Registry 7019/2007), extended by the Minister of Labour (YH — Government Records 5772, 29 January 2008).

  • 9

    Petition 4572/08 6849/08 to the Supreme Court (HCJ) Sout el Amal and three other petitioners v. The Minister of Industry, Trade and Employment, the FEO and the General Histadrut(petition filed 4 August 2008, still pending).

  • 10

    The Law of Hiring Worker through Temporary Work Agencies (1996) – Section 13. An additional provision (Section 12A) held that after 9 months of continuous employment at the same establishment, a direct employment relationship will be forged between the employee and the employer who recruited her services from the temp-work agency. I will not discuss here the fate of this important arrangement.

  • 11

    Collective Agreement on the Employment of Workers through Temporary Work Agencies in the Private Sector (Collective Agreements Registry 7019/2007, 16 February 2004), extended by the Minister of Labour (YH — Government Records 5326, 1 September 2004).

  • 12

    Tel-Aviv Labour Court 3054/04 Natalya Shmuelov — Punes Cleaning and Bank Hapoalim (10 December 2006).

  • 13

    National Labour Court 131/07 Gila'ad Goldberg and others — Ortal Inc. and others (13 May 2009).

  • 14

    National Labour Court 90/08 312/08 Tali Isskov and others — Ministry of Industry, Commerce and Employment and others (pending).

  • 15

    Collective Agreement between the General Histadrut and the FEO was signed on 25 July 2008 and submitted for registration.

  • 16

    The Knesset Labour Committee, Protocol 491 of a meeting held on 15 July 2008.

  • 17

    Social pacts are not the only form of sustained corporatist logic. Other forms, such as co-ordinated decentralization of collective bargaining, introduce a more flexible arrangement while maintaining a relatively high level of co-ordination (Sisson and Marginson 2002; Traxler et al. 2008).

  • 18

    Executive Decision No. 430 to establish the National Economic Council, 10 September 2006.

  • 19

    The new Commission was established in an amendment to the Equal Opportunities at Work Law (1988, as amended 3 January 2006).

  • 20 (in Hebrew and Arabic).

  • 21

  • 22 (Hebrew).

  • 23

    National Labour Court (collective disputes) 9/07 The Union of Ultra-Orthodox Day-Care Providers — Agudat Israel Teachers Unions (15 September 2008).

  • 24

    Compare with Tel-Aviv Regional Labour Court (collective disputes) 504/09 Power to the Workers, a Democratic Union and others — Davidson Institute (23 March 2009).