Israel's Young at Start of Their Careers Bear Brunt of Coronavirus Jobs Crisis

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The Israeli Employment Bureau, June 3, 2018
The Israeli Employment Bureau, June 3, 2018Credit: The Israel Employment Bureau

M. is just starting out on her career, but she already has a stellar resume. She’s just completed her studies at Tel Aviv University and before that served in the army’s vaunted 8200 intelligence unit. While she was pursuing her degree, she worked at a consulting firm, and she already has a portfolio of technology projects she’s worked on.

Due to the coronavirus lockdown, the firm M. was working at put her on unpaid leave around Passover. She was about to sign with a new employer, but at the last minute she got a bad feeling about it and withdrew her application. Since then, things have been going slowly. Based on talks with prospective employers, M. has already concluded she will have to lower her salary expectations.

M. remains confident she’ll land on her feet, but the reality of Israel’s coronavirus labor market leaves little room for optimism. According to Zviran, which advises companies on pay and employee conditions, the labor market for young people without job experience is unusually challenging. Companies are still hiring, but the number of junior employees – young people embarking on their first jobs – has plummeted by between 4% and 22% depending on the kind of business.

“During the [economic] crises of 2002 and 2008, companies tended to let go experienced and high-cost staff and to hire younger and cheaper employees in their place. We’re not seeing that in the current crisis,” said managing partner Sarig Gafny. “For professional positions they are recruiting a lot fewer starting employees, who generally cost less. That’s the case in general and in research and development.”

Widespread joblessness by young people could have long-term implications for the economy. The experience of Europe in the wake of the 2008 financial crisis, when youth unemployment soared, shows that the lost early years of employment weigh on earnings for years afterwards.

A closed restaurant in Tel Aviv, July 2020. Credit: Tomer Appelbaum

Gafny bases his conclusions on a survey Zviran conducted among 250 companies that have a combined payroll of about 170,000 as of the end of June.

In fact, the business sectors Zviran surveyed are not at the forefront of the employment crisis, which has hit the travel and tourism industries as well as personal services, restaurants and entertainment the hardest.

The high-tech sector, which has emerged relatively unscathed by the pandemic, accounted for 64% of the employers polled. Pharma and life sciences made up 16% of the employers, consumer products 7% and the rest assorted other sectors. Nearly half were subsidiaries or affiliates of a foreign company and 40% of the international companies had headquarters in Israel.

Zviran found that junior employees accounted for just 17.4% of all hires in the middle of 2019, compared with 22.3% a year earlier – a drop of 22%. In R&D, the drop was even sharper – to 14.2% from 19.2% – or a decline of 26%. For junior employees deemed “professionals,” i.e., those with the training to make professional decisions on their own, the decline was the sharpest, to 11.2% from 18.7%, or a decline of 40%.

Regarding the overall labor market, 57% of the companies reported that they had imposed a full or partial hiring freeze due to the coronavirus. On the other hand, about 30% of the employers surveyed said that had put staff on unpaid leave, rather than laying them off, and in most cases, it was no more than 10% of their total workforce. Among those, 53% said they had taken back all their furloughed staff.

But, in a sign that the job market as a whole has become more favorable to employers, the number of employees voluntarily leaving their jobs has declined. The exception is the “hot segments” of the high-tech sector, where employers say the competition for talent remains strong, said Gafny.

Even before the coronavirus, high-tech companies were increasingly reluctant to hire inexperienced employees. That prompted the government’s Innovation Authority to launch several programs to incentivize companies to hire young people starting their careers.

Now, the challenge has become even greater. With the onset of the coronavirus, the National Employment Service warned that there was a disproportionate number of workers under age 34 who were being laid off or furloughed. “Today there are fewer cases of expanding businesses, so it means that fewer new jobs are being created,” said Gafny. “Fewer people are leaving their jobs to look for new jobs, so most of the hiring now is ‘musical chairs,’ people who are changing jobs inside one company or moving from one company to another. Under the circumstances, employers say, I can hire someone with knowledge and experience. I don’t need to hire someone who has to learn the job.”

Discussions with corporate personnel managers revealed that many were reluctant to let go of experienced workers during this period of uncertainty. Inexperienced junior employees take longer to bring results than older, experienced ones. That difference has been magnified by the growing number of remote workers.

“It’s more difficult to train new employees when you’re all working from home,” said Gafny, adding that fresh hires haven’t yet learned the company’s workplace culture and norms and acquiring all of that knowledge remotely is much more difficult.

The Zviran survey found that work-at-home is likely to remain an important feature of the job scene as long as the coronavirus crisis continues. Some 90% of the companies surveyed said that as of the end of June, they have not called all their staff back to the office full time. Most declined to predict when they would.

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