Israel's Main Labor Problem: 600,000 Jobseekers, 50,000 Jobs

Panel of top economic experts issues recommendations for government to tackle high unemployment, with 11 unemployed for every available position

Sami Peretz
Sami Peretz
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People wait at a branch of Israel's Employment Service, 2018.
People wait at a branch of Israel's Employment Service, 2018.Credit: Israel Employment Service
Sami Peretz
Sami Peretz

The main problem facing Israel’s labor market is that there are 600,000 jobseekers but only 50,000 available jobs, a team of Israel’s top economic experts stated this week.

The team includes former Bank of Israel Governor Karnit Flug, Prof. Yotam Margalit, and Prof. Dafna Aviram-Nitzan. They conducted their analysis on behalf of the Eli Hurvitz Conference on Economy and Society, being held this week.

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The team praises the government’s decision to extend unemployment pay eligibility through June 2021, and recommends leaving this option in place so long as Israel’s unemployment rate is above 10%.

However, it also notes that the generous safety net put in place due to the coronavirus crisis does indeed negatively impact people’s desire to find work, even if this is a secondary issue right now. To address this issue, the team recommends limiting the right to unemployment pay for people who indirectly reject job offers.

The main issue is the scarcity of available jobs for Israel’s 600,000 unemployed, the team notes. As of September, there were only 54,000 available jobs. This works out to 11 unemployed for every available position.

The team also recommends enabling a flexible form of unpaid leave that would offer income supplements to people offered work at a salary significantly lower to what they received before the pandemic.

To handle Israel’s high unemployment rate, the team offers a list of steps including basic skills training for the unemployed, namely in digital skills and language skills – English classes for all, and Hebrew classes for unemployed Arabs.

For the formerly self-employed, the team recommends a range of job and career training options that would enable them to enter new fields. For people working in certain fields that have vanished during the pandemic, the team recommends conditioning government aid on participating in a career-training course.

They call on the government to immediately adapt its career training programs to include fields that are expected to grow, such as renewable energy and recycling. They also suggest adapting the German model of flexible unpaid leave that enables career training with employers – three days of work and two days of classes, with a salary for study days paid by the the government.

Regarding work from home, the team recommends encouraging it through subsidies including grants and investments in technology that enables working and receiving services remotely. The team stated that the goal should be having workers work from home at least one day a week even once the pandemic passes. This would both increase labor productivity and reduce road congestion and pollution.

Working from home requires basic conditions such as a desk, a computer and an internet connection, which gives workers from better-off backgrounds an advantage, the team notes. Therefore, the government, which is the country’s largest employer, needs to set regulations to ensure that it’s not just Israel’s wealthiest who can work from home.

Steps need to be taken in order to ensure that ultra-Orthodox and Arab citizens can find work. Israel’s ultra-Orthodox population was the hardest hit in terms of job losses.

The Finance Ministry’s chief economist, Shira Greenberg, published on behalf of the conference two forecasts for Israel’s unemployment rate as of the end of 2021. The optimistic forecast puts unemployment at 7.2%, while the pessimistic one puts it at 10.2%.

The gap stems from concerns that the pandemic will have long-term implications on the labor market as jobs disappear –  due to efficiency measures or shuttered businesses - and ruptured connections between employers and employees due to extended periods of unpaid leave. This could be expressed not just by the unemployment rate but also by a drop in workforce participation and a drop in salary and productivity for laid-off workers, even if they eventually return to work.

The Finance Ministry is concerned that an international comparison shows that Israel has fewer available jobs relative to the number of unemployed, indicating that many jobs are gone for good and that employers are hesitant to hire.