Israel's Proposal for Long Weekend Could Cost Economy NIS 14 Billion, Say Manufacturers

Ora Coren
Ora Coren
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Ora Coren
Ora Coren

The longer weekend being proposed by Silvan Shalom, minster for Negev and Galilee development, would cost the economy nearly NIS 14 billion annually in lost output and higher costs, the Manufacturers Association concludes in a report released on Thursday.

The report comes shortly before a committee chaired by Eugene Kandel, the National Economic Council chairman, is expected to publish its conclusions. Media reports have said Prime Minister Benjamin Netanyahu supports a gradual implementation of a long weekend, but sources close to the issue say he has yet to make a final decision and may oppose the plan.

Proposed more than a year ago, the core of the proposal involves making Sundays a weekend day, putting Israel in line with nearly all of the economically advanced world. In exchange for the lost work hours, Friday would become a half-day of work and for the other four days of the week, work hours would be extended.

Shalom and other advocates say that the Saturday-Sunday weekend would give Israelis more shopping and leisure hours, boosting the economy while putting local business hours more in alignment with those abroad, helping exporters and high-tech companies. More than three-quarters of the world's population and all of the economically developed world's population have adopted Saturday and Sunday as their days of rest.

The Manufacturers Association's study, which was directed by its chief economist Ruby Ginel, estimated that consumer spending would grow as a result of the longer weekend by NIS 4 billion to NIS 5 billion a year, but that the business sector stood to lose NIS 18.4 billion annually. That loss would amount to 2.9% of gross domestic product.

The biggest losers would be the country's manufacturers, who would lose some NIS 6.2 billion in output, with the rest of the deficit coming from other parts of the private sector. On the other side of the ledger, the benefit to the economy would come from an 0.5% increase in consumer spending, equal to 0.9% of GDP.

The biggest loss suffered by business would come from higher wage costs when factories that work around the clock in two or three shifts would require special permission to employ workers, and inevitably have to pay extra to convince them to work on a day when their friends and family are off.

That bonus would typically be 60% of base salary, as is the case now for legally mandated days of rest, although less than the Shabbat bonus, the report said. Other plants would be forced to absorb the costs of shutting down and restarting production line equipment. The report estimated that this cost alone would reach NIS 4.3 billion annually.

Slumping productivity

Manufacturers would also likely see lower productivity from their workers in the final hours of the longer workday, the report said. The rule of thumb is that productivity declines at the end of the day by about 10% from the hourly average, especially in the case of people working on factory production lines. The cost to the economy from that would be about NIS 460 million annually, the report estimated.

Likewise, the short Friday workday is likely to see lower factory productivity as is typical of Shabbat and holiday eves, when productivity slumps 10%, costing NIS 1.5 billion

Non-manufacturing businesses would also suffer losses amounting to NIS 12.1 billion a year, the association said.

Most of that would be due to higher wages that employers in places such as hospitals, hotels, technical support centers and other workplaces that operate 24 hours a day would have to pay. That pay supplement would likely work out to some NIS 5 billion annually, the association estimated.

Another NIS 850 million would be lost to the non-manufacturing business sector from lower productivity due to longer workdays, it said.

While a day off on Sunday would give people extra leisure hours, much of that would be offset by the half-day of work on Friday. That would cost the economy some NIS 6.3 billion a year, the report warned.

The big gain for the economy would come from increased spending by consumers on leisure activities. Spending on tourism, hotels and restaurants, which amounts to 2% of GDP, would increase by NIS 3 billion, to NIS 4 billion a year, assuming that spending on such services grew by 30%.

For retailers, the benefits of a long weekend are likely to be marginal, the association said. Most consumers would simply exchange Friday for Sunday as their main shopping day, it asserted, forecasting a net gain for the retail sector at between NIS 700 million and NIS 900 million.

Women working at an Israeli factory. The percentage of women in the workforce has been steadily increasing as more older women delay retirement. Credit: Yaron Kaminsky