problems in the system, and will end with a very general description of some aspects of the reform required in this area. 1. the wage system and labor relations in the public sector in israel i will relate mainly to the public sector, which includes large companies some of which are on the way towards privatization and some of which have already been privatized. i will speak about the public sector for two reasons ( a ) it comprises a relatively large part of israel ’ s economy, with on average about 30 percent of all employees, while in the oecd the average is less than 20 percent. ( b ) it seems that labor relations in the public sector are particularly problematic, and most strikes, of which there are many by international comparison as i said, take place in that sector. in general terms it can be said that the wage of a public sector employee in israel is derived from a number of parameters, chief among them his seniority, i. e., years of service, the system of grades ( according to different wage scales : ahid, the basic or uniform scale ; mahar, the scale for university graduates ; teachers ; doctors etc. ), and the grade within the scale. this component of the wage is the basic wage, and to this many additional payments are added, giving the total wage. by the way, the total list of such additional payments and benefits contains over 1, 000 items, not only making it very difficult to understand a pay slip, but even worse, causing lack of transparency. instead of negotiating over wages in simple terms, negotiations take place in terms of benefits, with hardly anyone really understanding their true value, which may well be the reason for using them. wages are adjusted generally once every few years in wage agreements following negotiations on a collective basis. this contrasts with the situation in the business sector where, at least in principle, the wage is derived from the employee ’ s output. and if in the private sector it is difficult to make a precise assessment of an employee ’ s output, in the public sector it is far more difficult to do so. 2. the main problems in the wage system and labor relations in the public sector in israel • the basic wage described above, deriving from such factors as seniority, wage scale and grade, is only part of the gross wage, and in most cases does not constitute more than 50 percent of it. • it is worth noting that in the public sector wages are not necessarily based on employees

initially envisaged did not work. importantly, the root of the problem in fact lay in the loose assessment of simple risk factors, rather than the complex technology of securitization itself. specifically, the basic standards of risk management, such as the credit risk of the original debtor, risk monitoring, liquidity risk of investment vehicles, and the degree of correlation between the risk factors, were neglected. in addition, we should not forget that there was a lack of preparedness for the tail risks that occurred when great stress was imposed on the financial markets. if we consider the foregoing, the heart of the problem can be attributable to two elements : lax risk assessment due to a behavioral pattern of market participants who put the pursuit of profit first, and the so - called agency problem based on information asymmetry. of course, the resolution of the problem is not easy. strengthening of regulations and introduction of further advanced financial technology cannot control all the risks nor completely resolve the agency problem. in addition, as long as the pursuit of profit is a basic incentive for market participants, lax risk assessment under certain market conditions might result from human nature. while i do not deny the importance of enhancing risk management through the advancement of financial technology, it is perhaps difficult to control human nature and psychology with financial technology. what is of the utmost importance is for market participants to avoid a deep sense of complacency in relying on financial technology for risk management, and to remain vigilant in maintaining the crucial risk awareness, that is known as “ self - discipline ”. in my view, the unsolved part of uncontrollable risks and agency problems might be somewhat solved by this “ self - discipline ”. we need to recognize again that regulations and advanced financial technology are not a substitute for “ self - discipline ”. in that regard, future financial supervision and regulation that are currently being discussed on a global basis, should be carefully crafted from the viewpoint of whether they would function to strengthen the internal “ self - discipline ” of market participants, rather than merely being an externally imposed compliance regime. preempting excessive behavior of market participants – the sharing of “ common sense ” i will now turn to the issue of whether there are ways to preempt the excessive behavior of economic entities and market participants. as previously mentioned, the current financial crisis grew out of the need for an adjustment of the imbalances that accumulated through the mid - 2000s. the creation of financial