Warning to Netanyahu: Israel's Middle Class Is Getting Angry

Israel could be on the precipice of a social explosion as the resurgent coronavirus finally hits the middle class in the pocket

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Closed optics store
Closed optics store, June 28, 2020Credit: Rami Shllush

It’s been nine years since Israel’s social justice protests faded away with the summer of 2011 and that’s no surprise. The cost of living, in particular housing, remains high, but that pain was easily offset by economic growth, rising wages and full employment. Benjamin Netanyahu, the symbol of everything the protest leaders wanted to change, has been re-elected three times since then.

But that era of quiescence may be approaching its end. The coronavirus and the lockdown have delivered an economic shock comparable to the Great Depression. Unemployment in Israel rose from around 4% at the start of the year to more than 21% at the end of June. Whole sectors of the economy have been paralyzed and many small businesses, not to mention a handful of big ones like El Al Airlines, face doom.

The most pessimistic forecast, by the Organization for Economic Cooperation and Development, is that Israel’s economy will shrink by 8.3% this year. That forecast assumes a second coronavirus wave, which is exactly what we are facing right now. Moreover, beyond the raw economic numbers, there’s a psychological factor: The lockdowns and social-distancing measures extract a heavy emotional and mental cost that is already manifesting in boredom, frustration and at its worst, in rising rates of domestic violence.

All this might be tolerable if there was a horizon, as it seemed to be when the first wave of coronavirus came and went in the space of a few weeks. Now the second wave has begun, portending a prolonged period of economic and social constraints while we wait and hope for a vaccine to be developed and mass produced.

This is already a dangerous brew of economic and psychological distress, but add in the government’s perceived mismanagement of the crisis and the cauldron looks ready to boil over. I say “perceived” because, to be fair, a good part of the blame for the resurgence of COVID-19 lies with a public that wanted to return to normalcy and ignored basic precautions like wearing a mask.

The government can’t go back to the first-wave total lockdown: The public wouldn’t tolerate it. Coping with the resurgence of the pandemic will require a more sophisticated strategy that seems beyond the capabilities of the Health Ministry to lead.

So why aren’t Israelis taking the streets already? One reason certainly is that the trauma hasn’t been fully internalized. The government did a reasonably good job of managing the first wave and it has only become clearly evident in recent days how badly it’s mishandled the second wave.

Sheltered, so far

But probably the main reason protests haven’t erupted is that the middle class has been spared the worst of the fallout. It’s those at the bottom who have been it hardest.

Whatever social activists like to think, it’s not the poor and downtrodden who rise up when times are bad, it’s the middle class.

One piece of evidence for the lockdown inequality is credit card spending. You would naturally assume that with more than a fifth of the workforce unemployed that consumer spending in Israel would be way down from pre-coronavirus levels. It’s not.

The Bank of Israel found that immediately after the most draconian of the lockdown measures were lifted in mid-May, credit card purchases soared to as much as 30% higher than at the start of the year when most people had never even heard of the coronavirus and unemployment was at a historic low.

That post-lockdown surge was probably due to pent-up demand by newly liberated coronavirus shut-ins. But even today spending is at about the same level as it was at the start of the year, even though the jobless rate is six times higher.

That has happened because the middle class has been spared the worst of the layoffs and unpaid leave, a fact documented by the Bank of Israel. If you worked as a hotel chambermaid or a store clerk, your job has been suspended, if not eliminated; if you work in high-tech or are a civil servant, you’ve continued working at full salary at home.

More equality may be on its way. Israel’s high-tech industry is hurting and companies are starting to lay off workers. Amdocs, for instance, is planning to let go 200 to 300 employees in Israel alone. In the state-owned sector, Israel Aerospace wants to cut 900 jobs.

Throughout the coronavirus crisis, low-income Israelis have been more fearful of their economic future than high-income Israelis, according to periodic polls taken by the Israel Democracy Institute. But the gap has narrowed considerably in recent weeks – from 27% of high-income earners versus 61% for low-income earners at the start of May to 48% to 66% at the end of June.

Predicting when mass protests will erupt is a fool’s errand, but the situation should make politicians, not the least Benjamin Netanyahu, anxious. Even if it’s for the sake of saving their own political skins, they would do well to forget about annexation and fantasies of fourth elections and get down to the work of managing the crisis.

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