For the better part of a year, Israel has endured a cycle of public-sector labor unrest that at times has threatened to paralyze the entire economy. The conflict between the government and the Histadrut labor federation, prompted by a series of Finance Ministry proposals over the course of the year to reform the pension system and restructure government agencies, first erupted in thirteen days of severe labor sanctions that began on April 30, 2003. At the time, the bulk of the public sector—which numbers 700,000 employees, or one-third of the country’s labor force—ceased to provide the public with services: Government offices were closed, as were the nation’s ports; garbage piled up in the streets; even Ben-Gurion Airport, which handles almost all of Israel’s commercial air traffic, was twice shut down for up to a day.

In the fall, further Finance Ministry proposals along the same lines sparked a narrower but much lengthier wave of unrest, during which civil servants closed all government offices to the public for more than three months, while deliberate slowdowns by customs workers severely impeded imports of raw materials and exports of finished goods. At several points during this latter strike, the Histadrut sought to up the ante by instructing workers to prepare for the deployment of what Israelis call the labor federation’s “doomsday weapon” a general public-sector strike of unlimited duration, which would encompass not only the civil service, but also banks, ports, utilities, and other essential industries.

It is hard to overstate the significance of a general strike. The May 2003 strike cost Israel an estimated $1.3 billion in direct damages, or 1.2 percent of gross domestic product (GDP), yet even that fell short of what a full-blown general strike would have caused.¹ A similar disaster was averted in November only by an eleventh-hour restraining order issued by Israel’s National Labor Court. In early January 2004, following one hundred days of sanctions, the Finance Ministry and the Histadrut reached a compromise that ended the civil servants’ strike and enabled them to go back to work. But the agreement left many fundamental issues unresolved, and within a month, a new public-sector strike had broken outׁthis time among municipal workers.

While so intense a storm of labor unrest has not been seen in Israel for many years, last year’s events were symptomatic of a long-term trend. Strikes and slowdowns in Israel have increased sharply over the last two decadesׁa period during which they declined dramatically in other Western countries. As a result, Israel has emerged as far and away the most strike-ridden economy in the West, imperiling its ability to compete in an increasingly integrated economic environment.

Strikes cause hundreds of millions of dollarsof direct damage to Israel’s economy every year. But the true costs are undoubtedly even greater. By rendering Israeli products more expensive and making delivery times unreliable—two factors that significantly reduce Israeli companies’ international competitiveness—strikes create a major drain on an economy in which exports account for more than one-third of the GDP.² And perhaps even more importantly, they have managed to force successive governments to back down on reforms that would have increased public-sector efficiency and led to major savings for the entire country.

While sustaining a burden of this magnitude would be difficult for any nation, for Israel—already saddled by an ongoing terrorist war and the international recession in the high-tech sector—the consequences are especially acute. Yet unlike these other difficulties, the problem of strikes is largely within the government’s ability to solve.A reduced public sector, appropriate legislation limiting the right to strike and, above all, greater governmental determination in the face of strikes could restore labor’s role to its proper dimensions, just as they have in many other Western countries.

This does not mean that either the government or private-sector employers should be allowed free rein in the way they treat their workers: Unions play a crucial role in maintaining the balance of power between employers and workers through collective bargaining. Nevertheless, the power of Israeli unions has expanded beyond any justifiable measure, to the point that they defy court rulings and even the Knesset itselfׁa development that has resulted in incalculable damage to the country’s economy and its way of life.

 

From 1997 through 2001, Israel lost an average of 1.9 million workdays to strikes each year. To appreciate the enormity of this figure, consider that over the last decade, the United States averaged approximately 5.2 million strike days per year, fewer than three times as many as Israelׁeven though America’s population is 48 times larger. In 2001 alone, the most recent year for which comparative statistics were available at the time of writing, the Jewish state lost 2.0 million workdays to strikesׁtwo-thirds more than the 1.2 million workdays the United States lost that year.³

That a country of 6 million could outpace the world’s largest economy in workdays lost to strikes illustrates both the severity and the uniqueness of Israel’s problem. Indeed, compared with other Western countries, Israel is in a class all its own. From 1997 to 2001, two of the West’s most strike-ridden economies, Canada and Spain, lost an annual average, respectively, of 170 and 143 workdays per thousand workers to strikes. In the United States and most European countries, the figure was below 75. Israel, in contrast, lost an average of 889 workdays per thousand workers during this period, a rate more than 12 times higher than that of most countries in Europe.⁴

Strikes also affect a much wider segment of the workforce in Israel than in other countries. In 2000 and 2001, 1 out of every 6 Israeli employees was involved in a strike, compared to 1 out of 9 in Spain, 1 out of 50 in Ireland, and 1 out of 140 in Great Britain.⁵ In other words, strikes in Israel are not localized events concentrated in a particular company or industry, but tend to hit a broad swath of the economy every year. And while it is true that general strikes, in which the entire public sector is shut down, are relatively rare,“rolling”strikes, in which one government agency after another declares a work dispute on a different pretext, are common. In early 1999, for instance, the Interior Ministry, Labor and Social Affairs Ministry, and National Insurance Institute all went on strike within the space of two and a half months.⁶ Likewise, in the fall of 2001, the list of public-sector bodies on strike included the ports, the Customs Agency, the airport, the Labor Ministry, the Land Registry, and the National Insurance Institute, as well as the university professors.⁷ According to Labor Ministry statistics, the public sector accounted for 96 percent of all workdays lost to strikes from 1997 to 2001.⁸ Thus, even though strikes against privately owned businesses are virtually nonexistent, Israel’s public-sector workers strike so often and for so long that they have made Israel the most strike-ridden economy in the industrialized world.

This problem is not new, but it has become far more severe in recent years: The number of workdays lost to strikes in Israel in 1997-2001 was more than double that of 1985-1989. Competing Western nations, by contrast, have managed to reduce labor unrest significantly over the last two decades through a combination of economic restructuring and legislation.

There was a time when Israel was one of the least strike-plagued countries in the West: From 1965 to 1974, Israel had fewer strike days per thousand workers than the United States, Great Britain, Italy, Canada, Australia, Denmark, Belgium, and Franceׁand often by large margins. The United States, for instance, averaged more than five times as many strike days per thousand workers as Israel did during that decade.⁹ But as the chart on page 63 shows, the last two decades have witnessed a remarkable decrease in strikes throughout the industrialized West. In light of this, Israel’s swing in the opposite direction is all the more disturbing.

Strikes in Israel also tend to be more painful than those in other countries, since they generally occur in essential services such as health care, education, transportation, utilities, and sanitation. Indeed, in strikes of essential servicesׁwhich in Israel are provided almost entirely by the public sector¹⁰ׁtiny Israel has become an unparalleled world leader. From 1997 to 2000, Israel lost an average of 1.80 million workdays a year in essential services (including education and public administration). This compares to 1.28 million in Canada, 1.21 million in the United States, 275,000 in Italy, 201,000 in Great Britain, 71,000 in Japan, and even fewer in other European countries, with Germany at the bottom of the list with a mere 7,360 lost workdays.¹¹