Job fair sign
A job fair sign. Photo by Bloomberg
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Emil Salman
East Jerusalemites at the Wadi Joz employment bureau this week. Photo by Emil Salman

Israel's unemployment rate is likely to push above 8% in the next several months as the government moves ahead with austerity plans, economists said after the Central Bureau of Statistics reported on Tuesday that joblessness inched up in the second quarter.

The statistics bureau reported that joblessness rose to 7% in the second quarter from 6.9% in the first three months of the year. For June alone, unemployment climbed to 7.2% from 7.1% the month before.

"Growth in unemployment has been consistent for several months. Surveys of company expectations that we have conducted every quarter were not showing any good news even before the latest budget cutbacks," said Ruby Ginel, chief economist at the Manufacturers Association.

"The government's steps are hard on the business sector and add to its costs," he said, pointing to the one-percentage-point increase in the employers tax to 25% and higher payments to the National Insurance Institute starting next January.

All this would discourage businesses from taking on new employees, Ginel said.

The statistics bureau said, however, that the percentage of the working-age population in the labor force grew to 63.6% in the second quarter from 62.8% in the first. On the other hand, the number of people who said they were working part-time because they could not find full-time work rose 5.6% to 106,000.

Ephraim Ziloni, the head of the economics division at the Histadrut labor federation, said the first workers who will be hurt by the new measure will be those with the least skills and education.

"These workers will be let go because of the decline in business activity, with the luckiest being able to continue working part-time," Ziloni said, adding that the government's cutbacks in spending for professional training will also fan unemployment.

"If the government needs to impose taxes, it should find taxes that don't come at the expense of manufacturing and growth," he said. "For example, there's no reason why the capital gains tax shouldn't be imposed at a single rate of 25% as it is today. The bourse tax should be higher on bigger gains and lower on small ones."