Four-day Workweek Faces Hurdles in Israel, Too

Economists say GDP and household income would be hit, not to mention the Haredim and Israeli Arabs

Israelis at work.
Tomer Appelbaum

Could Israel shift to a four-day workweek? It’s unlikely, experts say, even as the idea keeps popping up abroad.

Microsoft Japan recently launched a pilot program of a four-day workweek and reported a productivity increase of 40%. In November, U.S. hamburger chain Shake Shack announced that it was cutting its workweek to four days as part of a trial to fight employee burnout, which the World Health Organization declared an illness in 2019.

Last week, Finland’s new prime minister, Sanna Marin, said she would propose a bill to cut the whole country’s workweek to four days, though she backtracked a few days later. Still, the idea lingers.

In 2018, the average workweek in OECD countries was 36.8 hours; for Israel, a member of the group, the number was 40.6 hours. Occasionally the idea of shortening the workweek emerges, as Israel ranks fourth from the bottom in the OECD in leisure hours – hours that are neither sleep nor work.

The Carmel Market in Tel Aviv.
Ofer Vaknin

For Israelis, this figure is a mere 13.5 hours a week on average. Also, Israel ranks seventh in the percentage of people who work 50 hours or more, at 15.4% of all workers.

Israeli policy makers have taken modest steps to reduce the workload. In April 2018, the workweek was cut to 42 hours from 43 with no reduction in salary, though for many employees who receive salaries bases on global standards, this had no impact. Another proposal that never came to fruition would have given Israelis six long weekends a year.

Prof. Zvi Eckstein of the Interdisciplinary Center Herzliya is pessimistic about cutting Israelis’ work hours given the state of the economy. “As an economist I say unequivocally: Legislation aimed at cutting the number of workdays would significantly cut GDP and household income, and would mainly hurt people with incomes below the median,” he says.

A significant portion of Israel’s economic growth – 75% – comes from increases in work hours, in the employment rate and in the workforce participation rate, all of which are approaching the OECD average. But productivity is still significantly below that of leading OECD nations.

“Output per hour of labor is increasing more slowly in Israel than in developed countries,” Eckstein says.

A need to invest in human capital

Israel’s output per labor hour is 44% below that of leading OECD nations, according to the Interdisciplinary Center Herzliya. Eckstein says this is because Israel’s business sector doesn’t invest much in mechanization or employees. Also, Israeli workers are less skilled than many of their OECD peers, according to the PIAAC, an international test of workers’ reading, math and computer skills.

Also, the public sector doesn’t really invest in human capital, and due to Israel’s stressed roads and train service, Israelis waste time every day just getting to work.

“In all countries where productivity is relatively low, we find that people work longer hours on average,” Eckstein says. “What’s happening here is similar to what’s happening in most of the developed world, but we’re lagging.”

Dafna Aviram-Nitzan of the Israel Democracy Institute’s Center for Governance and the Economy agrees with Eckstein.

“As a private individual I’d welcome a shorter workweek,” she says. “But if the business sector wants to cut work hours, it must produce more during the other hours, and we’re so far from this; our output is 25% less than the OECD average.”

Aviram-Nitzan studied the issue in her previous post as the Manufacturers Association’s research chief. There was a proposal to shorten the workweek to 4.5 days, and employers really wanted it to happen, she says. So she built models and simulations, but there was no way to get around a 9.5-hour workday and shifts around the clock. Hours were missing and production would take a hit.

If production levels couldn’t be maintained in fewer working hours, employees would have to work on days of rest, thus employers would be paying them 200% for that time.

“Who would compensate employers for this?” Aviram-Nitzan asks, noting that small companies in particular wouldn’t be able to handle the burden.

“It’s true that work hours could be cut, but we have low employee skill levels,” she says. “The Israeli economy has a long way to go before it will be ready for this. If we don’t train all workers to use advanced technology, we won’t increase hourly output.”

An Israeli plant for making strawberry candy.
Eyal Toueg

The ultra-Orthodox and Israeli Arabs

A shortened workweek would also mean reduced public services, or more expensive public services, Aviram-Nitzan notes. The 200% pay would translate into higher taxes on a business sector facing lower output.

The public sector is Israel’s largest employer, at one-third of all workers, she says. “How will the government finance this?” she adds. “After all, the idea is to let workers keep their current salaries and just work a day less. There’s also the question of whether people want a day with fewer services.”

Such a program would most badly hurt communities with historically low income and workforce participation – ultra-Orthodox Jews and Israeli Arabs, Aviram-Nitzan says. “The stronger workers will make sure that they’re getting the same pay for 10% less work, but 70% of workers are in the private sector, and if they create less revenue, their salaries will be cut.”

Eckstein notes that Israel has a long-term goal of increasing both work hours and salaries for ultra-Orthodox and Arab citizens. Per hour, the average ultra-Orthodox woman earns close to what the average non-ultra-Orthodox Jewish woman earns, but her take-home pay is significantly lower because she tends to work fewer hours, and not by choice.

“If we limit work hours, we’ll be hurting those women, and it’s the same for Arab society,” Eckstein says. “These are the weak groups.”

A shorter workweek would make it impossible to meet the government’s goals for 2030 such as increasing workforce participation past 80% and increasing salaries.

On the other hand, Prof. Tal Shavit, a former dean at the School of Business Administration at the College of Management, notes that Israel’s long workweek hasn’t increased productivity. “How is it that we’re working so many hours but productivity hasn’t increased?

Our output isn’t high,” he says. “This means we need to find another way to increase output.”

Shavit forecasts that in the workforce of the future – which is starting to take form now – not everyone will be able to have 100% employment. People who work less than full-time invest in hobbies – and hobbies often become a career and an additional source of income, he says.

“A wise, controlled transition to a four-day workweek will let people grow their small businesses and thus boost economic growth,” Shavit says, adding that an increase in work hours doesn’t directly translate into higher output.

Also, a four-day workweek doesn’t mean the entire country would be shut down the same day, but it would mean less time stuck in traffic. Even illness rates would decline 10%, he forecasts.

The equation isn’t purely an economic one, cautions Oren Appel, the owner of the firm Plus Consulting. “The discussion on shortening the workweek is part of a broader discussion,” he says.

“Is the organization’s only goal to maximize profit? And what’s the price of such a policy? …. My dispute with the economists is that their simulations are done under laboratory conditions without taking into account factors such as burnout, traffic jams and Israel’s pro-family culture.”