Kadima and the Labor Party, the two mainstays of the future government that will rule Israel in the years to come, have – so we are told – settled all outstanding issues but two in their coalition negotiations: The minimum wage and West Bank disengagement. They should split the difference between them, not only because this is what negotiators do, but because each of them is right on one of these issues and wrong on the other.

I am on the whole not a partisan of Labor Party head Amir Peretz’s desire to roll back the cuts in government welfare payments made by former minister of finance Benjamin Netanyahu in the days of Ariel Sharon; these helped to reduce Israel’s bloated public sector and to restore a stagnant economy to a reasonable level of growth. Like other western democracies, Israel has to find ways to fight poverty without subsidizing it, and raising already high taxes in order to increase child allowances to parents who insist on having large families they cannot afford, or unemployment stipends to able-bodied people who do not want to work, is not one of these.

But the Labor Party’s demand to raise Israel’s minimum wage from its pitifully low level of approximately $700 a month to a still insufficient $1,000 would not be subsidizing poverty; it would be doing something, though hardly enough, to encourage Israelis to work and to see to it that those who do work do not have to do so for slave wages. Israel is not India or China, in which $700 go a long way. It is a Western country with Western prices – in the most recent worldwide cost-of-living surveys, life in Tel Aviv, though cheaper than Tokyo, New York, Amsterdam, Prague, and Frankfurt, is more expensive than Glasgow, Athens, Brussels, Madrid, Los Angeles, and San Francisco. Imagine two working parents with two children trying to survive in San Francisco on $1,400 a month!

It is argued by Israel’s business community, as it always is by business communities everywhere, that raising the minimum wage will drive businesses into bankruptcy. Perhaps, in some cases, it will. But in a modern economy like Israel’s, a business that cannot afford to pay its workers $1,000 a month does not deserve to survive; in fact its survival helps to hold the economy back. It is an economic truism that economies that depend on cheap labor have little incentive to become more efficient or productive.

Ideally, of course, a successful market economy should not need minimum wage laws at all. Yet no western economy today works under ideal conditions, because each is competing in a globalized market. If an Israeli product cannot compete with a Chinese one because Israeli workers need to get paid more than Chinese workers, Israel should make another product; if Israeli farmers can only turn a profit growing cucumbers by employing Thai farm hands for wages no Israeli can work for, let Israel buy its cucumbers from Thailand.

Raising the minimum wage may in the short run increase Israel’s already high rate of unemployment. But it will not increase it as much as is feared. Many businesses will indeed cope by becoming more productive; others will stop hiring foreign workers because they now cost as much as Israelis and will hire local labor instead; and many Israelis who could have gotten hired in the past but didn’t want to be because unemployment insurance paid almost as much will now be prepared to go to work. Kadima should stop listening to the business lobby and let the Labor Party have its way on this one.

On the issue of disengagement, on the other hand, Labor is misguided. By insisting on the insertion of a clause calling for “unilateral withdrawal” from the West Bank into the next government’s statement of policies, it is not helping disengagement but undermining it.

Readers of this column know that I have consistently supported disengagement as the only realistic way of de-escalating the Israeli-Palestinian conflict and preserving Israel as a Jewish state without surrendering the territories that Israel needs to retain for its security and sense of historical purpose. But as I have also argued, no Israeli withdrawal from the West Bank can follow the model of the withdrawal from Gaza. The latter was truly unilateral; Israel pulled its settlers and army out of the Gaza Strip without getting anything in return from anyone. Such a scenario is simply not conceivable for the West Bank.

A West Bank withdrawal would involve 10 times as many settlers as the 8,000 evacuated from Gaza and would be 10 times more difficult in every way: political, logistic, economic, and emotional. Israel should not and cannot take such a step unless it has the at least tacit assurance of the United States and Europe that the borders it withdraws to will be accepted as its permanent ones. Otherwise, disengagement will simply not be worth the cost – which in any case may not be economically supportable without American and European help.

And yet if the new government of Israel announces in advance that it is going to withdraw from the West Bank anyway, what incentive do the United States and Europe have to be supportive? Why incur the anger of the Arab world by making promises to Israel that Israel is not even asking for? If the Labor Party were to have its way, the one strong bargaining card that Israel has in the matter of disengagement, the fact that it cannot leave the West Bank without certain international guarantees, would be discarded before the game began.

On this one, Labor should give in to Kadima. It would make for both a fair swap and a wise one.

Mr. Halkin is a contributing editor of The New York Sun.