In some cases, the services affected by strikes in Israel are so important that they are considered off limits to strikers in other countries. The public-sector strike that took place last May, for example, twice shut down Israel’s only major airport for up to a day, even though the International Labor Organization has ruled that vital services such as air travel cannot be shut down during a strike.¹² Similarly, employees of the Israel Electric Corporation cut off power to various parts of the country during strikes in both 1991 and 1994,¹³ and employees of Mekorot, the company that supplies water to virtually the entire country, turned off the taps to a number of localities on a rotating basis during a strike in 1999.¹⁴ Both of these instances go well beyond a strike in which workers simply refuse to provide a service: In these cases, the employees took action to halt the supply of a vital resource that otherwise would have continued flowing. Furthermore, both actions carried a potential risk to human health. The water strike, for example, took place during the heat of August, when the risks of fires and dehydration are at their peak. And according to experts in the field, the workers’ decision to turn the taps on and off also caused damage to the nation’s water supply.¹⁵

While many Israelis sense that something is amiss with the country’s culture of strikes, they probably are unaware of the problem’s true dimensions. The grim reality is that Israel is hit more frequently by strikes, and suffers more intensely because of them, than any other Western countryׁand the disparity is only intensifying with time.

 

The damage caused by strikes is extremely difficult to calculate. What is clear, however, is that it goes far beyond the work hours lost by the strikers themselves. During the strike last spring, for instance, the Manufacturers’ Association estimated that shipping delays in both the import of raw materials and the export of finished goods prevented factories from working at normal capacity, causing some 5,000 workers to lose their jobs.¹⁶ Even if some of these workers were eventually rehired, their lost income had a direct impact on consumer spending and investment, and therefore on economic growth as a whole. The same is true for the self-employed whose businesses are adversely affected. Truckers, for example, are forcibly idled every time there is a ports or customs strikeׁlost work time that only rarely can be made up after the strike ends. Furthermore, since contracts often require manufacturers to pay a stiff fine for late delivery, a strike that delays production forces factories either to put workers on overtime to complete the contract or to pay the penalty, both of which entail substantial costs.

This ripple effect makes strikes extremely costly. The May 2003 strike, for instance, cost the Israeli economy some $90 million a day even by the most conservative estimate.¹⁷ The Finance Ministry estimates that partial public-sector strikes (comprising some 60 percent of the public sector, but excluding essential services) generally cost about $55 million a day, while a full strike, which also encompasses essential industries such as ports and banks, costs between $145 million and $300 million a day.¹⁸ Indeed, at a conservative estimate, strikes cost the economy an annual average of some $675 million, or 0.64 percent of gross domestic product, between 1997 and 2001. Since average GDP growth during these years was about 2.9 percent,¹⁹ this means that strikes reduced economic growth by about a fifth during this periodׁand the real figure is probably even higher.²⁰

Strikes also cause indirect damage that is no less severe, even though the effects may not be felt until long after the unions go back to work. One example was the decision of the European Mediterranean Trade Association (EMTA), which controls more than 90 percent of shipping to and from Israel, to impose a“congestion surcharge” on all such shipping in response to a lengthy ports strike in 2001. Until this charge was rescinded, both exporters and importersׁwho together make up the majority of Israel’s economic activityׁhad to pay an additional 7 percent on every shipment.²¹

An indirect cost that is harder to quantify is the loss of export contracts. For most overseas customers, reliability is as important as quality and price. And while many would probably forgive strike-related delays if they were a rare occurrence, in Israel labor sanctions disrupt the flow of goods with grinding regularity. During the May 2003 strike, for instance, two companies reported suffering order cancellations totaling hundreds of thousands of dollars.²² Those orders were presumably transferred to foreign competitors, and unless the customers are dissatisfied with the new suppliers, the contracts are likely to be permanently lost.

Moreover, in an effort to avoid losing such contracts, Israeli companies are forced to protect themselves by maintaining large inventories of raw materials, or by keeping inventories of finished products overseas, both of which make their products more expensive and less competitive. The Manufacturers’ Association recently estimated these costs of ׂuncertainty and manufacturers’ lack of faith in orderly ports and customs services” at about $28 million a month, or more than $330 million every year.²³

The agreements that usually end these strikes constitute yet another long-term cost. Sometimes this damage is easily calculated, as when the issue of contention is a pay increase. For instance, when the government agreed in November 2001 to give 900 longshoremen a bonus of $9,000 each plus a 10-percent raise over the next three yearsׁonly ten months after they had received a 3.6-percent raise, and at a time when inflation was running under 1.5 percentׁtaxpayers had to shell out $8.1 million immediately, and then an additional $4.6 million each year thereafter. Given the frequency of strikes and the size of Israel’s public sector, it is not hard to see that such generous settlements can quickly add up. And because these raises are in public-sector industries, they must be paid for through higher taxes and fees that further increase the cost of doing business in Israelׁthereby further reducing the economy’s competitiveness.

Strikes have also frequently forced the government to back down on planned reforms aimed at making the public sector more efficientׁa cost that is much harder to measure. In 2001, for example, a lengthy ports strike forced the government to scrap a plan to introduce competition into the ports, which currently function as a monopoly. Such competition is badly needed: According to the Ports and Railways Authority, every year from 1994 to 1997, ships wasted an average of about 2,500 days waiting for loading or unloading in Haifa and Ashdod Ports, where “waste” is defined as the amount of time they waited in excess of what the authority considers a reasonable level of service.²⁴ This waste is due, among other things, to the fact that Israel’s ports are among the few in the world that work only one, or occasionally two, shifts a day instead of the usual three.²⁵ Since the average cost of a day’s wait, according to the authority, is about $10,000, and the shippers pass these costs on to the companies that use them, the slow pace of work at Israel’s ports cost the economy an average of almost $25 million per year during that period.²⁶ The government therefore decided in August 1999 that the new Jubilee Port in Ashdod, which is due to open in 2004, should be privatized, and its wharves licensed to several franchisees, thereby creating competition not just between Jubilee and the veteran ports, but among Jubilee’s various wharves as well. This is the system used by 85 of the world’s 100 major ports, with the 15 holdouts comprising mainly Third World countries, plus Israel.²⁷ But the strike forced the government to shelve this plan, and a reform that could have resulted in major savings was thus sacrificed to the interests of a relatively small group of workers.²⁸

The above figures illustrate the ongoing economic costs of strikes. Beyond these, however, there is the damage done to quality of life. At a minimum, strikes cause unpleasantness and inconvenience, such as the inability to renew a passport or mail a package. When sanitation workers refuse to collect the garbage, this creates a health hazard as well as an eyesore. For some people, however, the damage is far more acute. In November 2001, for instance, striking employees of the National Insurance Institute withheld monthly unemployment checks from 105,000 jobless people, leaving many of them with no income.²⁹ That same month, Labor Ministry employees refused to admit at-risk teenagers to shelters.³⁰ Even sanctions that seem comparatively harmless, such as a refusal by Interior Ministry workers to issue identity cards, can cause grave harm to certain individualsׁas in the case of a mother who was unable to get her baby treated for pneumonia in fall of 2003, because the three-month civil service strike prevented her from obtaining an identity card for the child, and without this card, she could not prove that the baby had health insurance.³¹ Nor are the inconveniences always merely temporary: Teachers’ strikes, for instance, which recur almost annually, seriously disrupt students’ learning schedules. And even when the lost days are later made up, the strikes send a negative message to Israeli youth about how seriously their teachers take their education.³²

These ongoing irritants have a cumulative effect, making life in Israelׁalready not an easy propositionׁeven more difficult. No one is immune to their effects: Factory owners and businessmen, low-income families and the unemployed all suffer alike. And it goes without saying that the situation has hardly contributed to a positive national image. Strikes have made Israel less attractiveׁto its own citizens, to potential investors, and to many Jews who might otherwise make Israel their home.