Analysis from Israel
Competition and differential pay benefits the public sector, not just medicine and academia.
Maybe the Messianic era really is at hand. Ordinary Egyptians are for once not buying anti-Israel conspiracy theories, directing their ire instead at radical Islamists in Sinai and Gaza. The US State Department (!) is protesting the ban on Jewish worship on the Temple Mount. And here in Israel, change is even beginning to creep into our ossified civil service.

One year ago, a new collective wage agreement was signed with public-sector doctors. I can’t remember a signed agreement ever generating as much opposition from union members as this one did. But according to data published by the Israel Medical Association last week, the deal has been a whopping success – if your yardstick is the welfare of the health system as a whole rather than that of a few senior doctors.

The agreement was controversial for several reasons. What made it unique, however, was that instead of giving all union members the same raise in percentage terms, it awarded differential raises: Doctors working in either specialties or geographic regions that were suffering a shortage received the highest increments. And it turns out that medicine is no exception to the laws of economics; doctors respond to financial incentives just like anyone else.

In just one year, outlying areas of the country recruited 184 new doctors, the IMA reported. For some hospitals, the increase was dramatic: The number of residents at Safed’s Rebecca Sieff Hospital rose 39 percent; Poriya Hospital in Tiberias saw a 61 percent jump.

The differential raises also attracted 430 new doctors to specialties with shortages. There’s still a shortage of anesthesiologists, the IMA warned. But Beersheba’s Soroka Medical Center was able to reopen an internal medicine ward it had closed for lack of internists, and several hospitals filled vacant neonatology slots.

All this was possible thanks to a rare willingness on the part of three people to sacrifice short-term personal interests for the long-term greater good. Finance Minister Yuval Steinitz and Prime Minister Benjamin Netanyahu had to endure being lambasted by the media and the public throughout a five-month doctors’ strike, the longest in Israel’s history. And IMA President Dr. Leonid Eidelman had to endure opposition and vilification from both senior doctors at hospitals in the center of the country and young residents at those same hospitals, all outraged that, having secured jobs in the choicest locations, they wouldn’t also be getting the highest raises.
One year later, many of these doctors are still griping. But the country as a whole has clearly benefited.

Nor is medicine the only entrenched bureaucracy to get a shake-up lately. Though Ariel University Center hasn’t yet become a full university, it has already forced some new thinking into the higher education bureaucracy.

Ariel’s salutary impact was largely thanks to an accident of geography: Because it is located in the West Bank, it isn’t subject to the Council for Higher Education like all other Israeli colleges are. Instead, it’s subject to a parallel body known as the Council for Higher Education in Judea and Samaria.

Five years ago, when the college first applied for university status, the CHE was vehemently opposed: It is dominated by the existing universities, who always oppose new competition. But because the CHE-JS is independent, it didn’t have to accept that answer. Instead, it created a completely new category – the university center, which is more than a college but less than a university – and conferred that status on Ariel for five years, along with a promise that if the college met certain benchmarks, it would then be upgraded to a full university.

At the time, the academic establishment was openly contemptuous: Who ever heard of a “university center”? But within a few years, the CHE had become so enamored of the idea that it commissioned an outside consultant, New York University’s Institute for Higher Education Policy, to help it create a new funding model that would enable the establishment of many university centers. It now aims to inaugurate the new model in 2013.

The CHE concluded that under the old, two-tier model, applied research was falling through the cracks, since colleges focused on teaching and universities on theoretical research. But industry, government and the defense establishment all need applied research. And that despised new creature, the “university center,” could fill the gap nicely, it decided.

Once again, it turns out that government bureaucracies are no exception to the laws of economics: The moment you create competition, you allow new ideas to enter the system – which is precisely why Ariel ought to be granted the upgraded status a blue-ribbon academic advisory panel has decided it deserves.
These two principles – competition and differential pay – desperately need to be introduced in the rest of the civil service as well. School principals, for instance, should be given much more autonomy, enabling them to try out innovative educational strategies that, if successful, could be adopted by other schools. This necessarily includes authority to hire and fire teachers, since no innovation is possible if the staff balks. And teachers themselves should be offered higher pay for teaching in distressed neighborhoods or towns, to encourage some of the best and the brightest to tackle this challenge.

The ports, where an initiative to create competition by allowing privately-owned wharfs alongside state-owned ones has long been stalled, are another prime example. The first private port, Israel Shipyards, was finally granted a license in 2007, and four years later, its market share had jumped to 20 percent, putting it ahead of its state-owned rival, Haifa Port. It achieved this result by offering flexible hours and lower prices – the kind of benefits that enable importers and exporters to lower prices to the consumer (assuming they aren’t themselves cartels). But proposals to introduce competition at Ashdod Port, the country’s largest, have so far gone nowhere.

Turning competition and differential pay into public-sector norms won’t be easy; the Histadrut labor federation has been fighting such reforms with all its might. But the long-term benefits to the country are worth the short-term price of massive strikes. All that’s needed is a government with the courage the wage the fight.

The writer is a journalist and commentator.

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Why Israel Needs a Better Political Class

Note: This piece is a response to an essay by Haviv Rettig Gur, which can be found here

Israel’s current political crisis exemplifies the maxim that hard cases make bad law. This case is desperate. Six months after the coronavirus erupted and nine months after the fiscal year began, Israel still lacks both a functioning contact-tracing system and an approved 2020 budget, mainly because Prime Minister Benjamin Netanyahu is more worried about politics than the domestic problems that Israel now confronts. The government’s failure to perform these basic tasks obviously invites the conclusion that civil servants’ far-reaching powers must not only be preserved, but perhaps even increased.

This would be the wrong conclusion. Bureaucrats, especially when they have great power, are vulnerable to the same ills as elected politicians. But unlike politicians, they are completely unaccountable to the public.

That doesn’t mean Haviv Rettig Gur is wrong to deem them indispensable. They provide institutional memory, flesh out elected officials’ policies, and supply information the politicians may not know and options they may not have considered. Yet the current crisis shows in several ways why they neither can nor should substitute for elected politicians.

First, bureaucrats are no less prone to poor judgment than politicians. As evidence, consider Siegal Sadetzki, part of the Netanyahu-led triumvirate that ran Israel’s initial response to the coronavirus. It’s unsurprising that Gur never mentioned Sadetzki even as he lauded the triumvirate’s third member, former Health Ministry Director General Moshe Bar Siman-Tov; she and her fellow Health Ministry staffers are a major reason why Israel still lacks a functional test-and-trace system.

Sadetzki, an epidemiologist, was the ministry’s director of public-health services and the only member of the triumvirate with professional expertise in epidemics (Bar Siman-Tov is an economist). As such, her input was crucial. Yet she adamantly opposed expanding virus testing, even publicly asserting that “Too much testing will increase complacence.” She opposed letting organizations outside the public-health system do lab work for coronavirus tests, even though the system was overwhelmed. She opposed sewage monitoring to track the spread of the virus. And on, and on.

Moreover, even after acknowledging that test-and-trace was necessary, ministry bureaucrats insisted for months that their ministry do the tracing despite its glaringly inadequate manpower. Only in August was the job finally given to the army, which does have the requisite personnel. And the system still isn’t fully operational.

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