In a unanimous 56-0 vote the parliament of Israel has approved a piece of legislation that will cap the salaries of banking and insurance executives at the equivalent of $650,000 USD or 44 times that of the lowest paid worker in the company, any pay which comes above the cap will be subject to higher taxes.

The legislation is one of the toughest ever introduced in any country and is designed to reduce to a widening pay gap. The average pay of a worker in Israel is the equivalent of $30,000 USD while some executives have seen their pay rise to $2.1 million USD.

The legislation is part of a larger campaign to reform the nation’s banking system and reduce the inequality between workers and executives. Banks in Israel make large profits from a wide variety of fees that include withdraws and deposits. According to the finance committee, the salaries of financial executives has soared in recent years and it has been reported that 10 of the top 40 companies with the highest paid executives in Israel are financial firms.

Critics of the new law, which comes into effect in 6 months, have argued that it will worsen the country’s current economic woes by discouraging investment in Israel and tarnishing their business reputation.

Switzerland tried to institute a similar law in 2013, that would limit the top executive pay to 12 times that of the lowest paid worker, but was rejected. It was proposed amid a shift in top pay from 6 times the lowest to roughly 43 times the lowest.

 

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