How to Jumpstart the Economy and Create Jobs in the Wake of COVID-19, According to Six Experts

Israeli experts lay out their plans for coping with the labor market crisis

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A protest by self-employed people in Tel Aviv. Signs read: "No bread? Eat shit," "Hope is lost" and "Sir, release the money."
A protest by self-employed people in Tel Aviv. Signs read: "No bread? Eat shit," "Hope is lost" and "Sir, release the money."
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Sivan Klingbail
sivan-klingbail
Sivan Klingbail

‘Invest only in creating employment’

“The coronavirus revealed the weakness of the government’s management at all levels: in health, in politics, even in the state coffers,” says Zvi Ziv, the former CEO of Bank Hapoalim who is currently involved in the financial renewal and social activity. “What we are seeing in the realm of employment is the empty box of vocational training. We’re in trouble there even without the coronavirus.”

In Ziv’s view, “The government should spend money only on what contributes to employment, and not offer handouts.” It’s in private consumption that the current crisis has wrought the greatest damage, he avers. “People need to go back to work and make money they will be able to spend,” he says.

Zvi Ziv.
Zvi Ziv.Credit: Ilya Melnikov

In contrast, simply distributing money, as the prime minister suggested doing in the form of a universal grant, is a bad idea. “About 60 percent of Israel’s GNP originates in private consumption – 6 billion shekels isn’t even one day of consumption,” Ziv notes.

The challenge facing the state, he continues, is to get those who lost their jobs back to work as quickly as possible. And the way to go about this is to make the payment of unemployment insurance contingent on recipients undergoing skills training, such as in computer use, English and so on. At present, not only does the state not require anyone to undergo such courses, it actually “fines” those who attend state-run programs of that sort while receiving unemployment insurance, by deducting 30 percent from their payments.

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The state needs to map the professions that are understaffed now – as well as those that will be needed in the coming five to 10 years, Ziv is convinced. “Nursing, preschool teachers, X-ray technicians – someone needs to see the whole picture and have an understanding of how to organize skills and other training programs. The employment market must be managed at the macro level,” he says.

At the same time, responsibility also devolves on the unemployed themselves: “If the jobless don’t grasp the fact that no one is looking after them other than by bribing them with furlough pay, if they don’t pull themselves up by their bootstraps and don’t return to the labor market – they are liable to find themselves without money and without a job for another year,” he warns.

Ziv expects the state to create mechanisms that will facilitate a return to work, such as the possibility of receiving partial unemployment insurance together with a salary.

Idit Biton
Idit Biton.Credit: David Bachar

‘Create models for specialization’

“What’s important now is not to allow people to be at home without work – people want to work,” says Idit Biton, director of the Boost Academy, a school that offers training for the jobs of the future; it is part of the Pilat Group of human resources assessment and job placement. “There is no reason not to take advantage of this period for work that will advance and assist us.”

In Biton’s view, the state can create employment opportunities by integrating people into jobs it has an interest in promoting – “from cleaning and construction to programming government websites and state apps.” She also sees potential in encouraging volunteer work: “Nonprofits are crying out for working hands. Volunteering in the community could be a quid pro quo for unemployment insurance – people would be required to give something of themselves in return for the money they receive.”

Naturally, Biton, too, believes that the key lies in skills and other training. “It’s true that in a period like this employment opportunities are in shorter supply, but that does not diminish the need for quality training. When we emerge from the crisis, we will have to move thousands of people into the labor market immediately and into the new jobs that will be created,” she explains. “Without appropriate training, that process will take longer and make it difficult for the state to keep the pace.”

The state, she adds, can and should supply projects on a national scale that will provide concrete employment opportunities and allow peoplle who have undergone training to acquire on-the-job experience and knowledge – and this will also benefit the state.

“The state will then profit from managed projects and also from progress made in certain realms of work that have been on hold for many years,” she says.

Another possibility is to make it possible for employers to offer low-paid internships.

“At present,” Biton says, “employers are limited by the minimum wage. That sometimes hinders them from employing people in entry-level positions who could learn on the job. In the first half-year, the employer needs to invest many hours in training such workers. However, the possibility of offering a subsistence scholarship instead of a salary per se, for further specialization, will enable employers to hire junior staff for half a year, at the end of which a significant salary will be set for a two-year period at least.

“Models need to be created that reward companies for employing personnel who are learning a new profession. In that way, the companies will be able to open their gates to those with little experience and to create greater diversity among employees,” she says.

Skills and vocational training that develop individuals’ capabilities “is crucial. Not everyone is capable of learning everything, but it is our responsibility to ensure that [people in] certain professions that are disappearing will not remain without a meaningful employment solution in the near future. The needs of the world of the future are well known. For example, we know that there will be a significant demand for trained personnel in the nursing profession in the years ahead. Training geared to that profession will serve the state even in the short term.”

Biton believes that it is important to come up with alternative employment models. “The coronavirus era is jeopardizing the country’s small and medium businesses. Many salaried people found themselves unemployed overnight. Alternative models will make it possible for people to work in more than one job throughout their lives, to take responsibility for managing their possibilities of earning a livelihood and to be more flexible in their employment.”

For example, one model, worthy of support, could involve creation of an enterprise that “brings together talented people who have lost their jobs and helps them establish a startup in their area of specialization; or creation of cooperatives, enabling workers to band together in joint projects that supply services in Israel and internationally. Other possibilities are developing centers and workspaces where people can meet and learn, with assistance provided that leads to creation of specific projects and jobs.”

Alternative models, Biton says, “are suitable for salaried employees as well as for the self-employed. They allow every person to find the mix that will enable him to earn a living and engage in his areas of interest.”

Omer Moav. “Training is needed, but first, jobs have to be created.”
Omer Moav. “Training is needed, but first, jobs have to be created.”Credit: Michelle Tennison

‘The bureaucracy has to go’

“It is impossible to ignore the overall picture and not understand that we are in a deep crisis, in which there will be people unemployed and that therefore money will need to be paid out. But it’s important to understand that we are in a long-term crisis,” says Omer Moav, who teaches at the Tiomkin School of Economics at the Interdisciplinary Center, Herzliya, and at the University of Warwick.

The plans the government has put forward so far encourage unemployment, the professor says: “Its current plan to extend unemployment insurance eligibility until June 2021 and compensate businesses for up to 20 million shekels [$5.8 million] are consistent in that they create an incentive for workers not to work and for employers to fire employees.”

Moav believes that the current mechanism should be reordered, to enable unemployment insurance to be paid even to part-time or low-paid workers, which would create an incentive for employment. This is contrary to the present state of affairs, in which people on welfare are may lose income if they go to work. It is also crucial not to give employers incentives to reduce their activity, as the current plan does, by aiding only those whose business has suffered.

Moav, too, thinks that investment is needed in vocational and skills training and in communications infrastructures. However, in his view the businesses themselves are the key. “Training is needed, but first jobs have to be created,” he says. That entails “booting out the bureaucracy” to allow the business sector to operate more smoothly and to enable entrepreneurs to establish new businesses.

At the same time, Moav adds, the Encouragement of Capital Investments Law should be annulled, because “under that law, some companies pay higher taxes so that other companies can pay lower taxes – with no logic.”

Marian Tehawkho.
Marian Tehawkho.Credit: Oren Shalev

‘Boost the human capital of the enfeebled’

“We need to take into account that the damage suffered by the different population groups is asymmetrical,” says Marian Tehawkho, director of the program for economic policy in the Arab community at the Aaron Institute for Economic Policy, at the Interdisciplinary Center, Herzliya.

“The group most seriously harmed by the crisis, also in terms of unemployment rates and furloughs, is the weak population: those who lack a high-school education, whose human capital, productivity, salary and socioeconomic situation are poor,” she says. “These are also the populations that will have a hard time reintegrating into the workforce, which will not be what it was.”

As Dr. Tehawkho sees it, in the absence of an economic policy that will take this situation into account and invest in the human capital of the weaker population groups – the gaps will grow, with dire long-term social and economic consequences.

“There is a population here 70 percent of whom leave high school without matriculating, among whom only one in 10 who do complete high school go on to obtain an undergraduate degree, with a Third World skills level and 50 percent of whom live below the poverty line. And what is the government offering them? Unemployment insurance for a year and 750 shekels [$217] to waste,” she says.

“There are people in Israel who live in poverty, with crime, [and in environments] lacking infrastructures,” Tehawkho continues. “Fully 40 percent of the households in the Arab communities don’t have an internet connection, and a quarter of the Arab population doesn’t even have a computer at home. More than 80 percent of them lack the basic digital capabilities to cope with the new world of work or to be able to work from home. How will those people find work in a world where there are 50 to 100 candidates for every job opening?”

According to Tehawkho, the crisis is also liable to have an adverse effect on Israel’s Arab college and university students – whose dropout rate was 40 percent even before the pandemic. Online learning could exacerbate the situation and leave them behind because of language difficulties, problems in getting help and inferior infrastructures in their communities. She also warns about deterioration in Arab primary and secondary schools.

“Even without conducting research or doing a survey, it can be said with great certainty that during the past few months, Arab pupils didn’t learn anything,” she notes.

Given the fact that the crisis will accelerate digital learning in schools, it is essential to train teachers, ensure that every child has a computer, provide internet infrastructure and also improve cooperation and communication with parents. Otherwise, the already large disparities in the education system will become even greater.

Tehawkho also emphasizes the urgent need to invest in basic areas such as Hebrew instruction in the Arab schools, in digital literacy and in training people for jobs for which there will be a demand in the future labor market.

“This is a period in which a great many people are unemployed, and thus have time to do training,” she notes. “If they are being paid unemployment insurance anyway, why not require them to participate in those courses? It’s an investment whose fruits will be reaped in both the medium and the long. It will boost productivity and economic growth, and the higher taxes they will pay in the future will cover the costs of the investment. The longer people are out of the workforce, the lower their prospect of returning to it becomes.

“We’re in need of a structured plan to encourage employment, in order to avert a collapse of the local authorities, and investment to increase the employment and productivity rates of the weaker population groups in the short and long terms,” she continues. “This is needed to prevent the widening of the gaps and to reduce poverty and diminish the dependence of these groups on the state, but also to boost productivity and economic growth so that Israel will not lag behind other countries.”

It’s important to set goals according to various population groups and communities – women, men, Arabs, the ultra-Orthodox – and not simply to set general goals, Tehawkho stresses. Thus the crisis can be exploited to carry out reforms that would otherwise be impossible to implement or take a long time to put into practice.

Judith Bronicki. Says the state must foment a digitization revolution.
Judith Bronicki. Says the state must foment a digitization revolution. Credit: Tomer Appelbaum

‘Transform the status of professions’

According to Judith Bronicki, co-founder of Ormat Technologies, a member of the government-appointed Employment 2030 Committee and co-recipient (with her husband, Yehuda Bronicki) of the 2018 Israel Prize for Industry, “it’s necessary to separate what should have been done even before the coronavirus crisis, and what requires change in its wake.”

Israel, she says, should have carried out a substantive overhaul in vocational training even without regard to the present employment crisis.

Before the epidemic broke out, she relates, she thought that all employers should have been involved in pushing for training courses of various sorts, but now she is not sure that the employers themselves know where their personnel needs lie.

“The coronavirus ushered in the world of work of the future and made the discussion about skills and lifelong training more essential,” she says, but also adds that it’s not clear whether either the government or employers have internalized those changes yet.

Bronicki: “The government needs to become involved in occupational and skills training far more intensively. More joint frameworks of small and medium employers are needed, so they can conduct courses of a sort that only large employers are capable of today. There’s no point crying over all the things that should have been done but weren’t. We are in a situation where we need to quickly form groups of employers who, together with the government, will identify the needs for the short and medium term, and will realize what needs to be done and what sort of training is needed.”

One area in which governmental involvement is essential, Bronicki says, is in digital infrastructures. Although not every job can be done from home, it is essential to ensure that everyone who can work from home will be able to do so.

“At present there is a disparity between the quality of the infrastructures in the center of the country and the periphery, and between population groups. The state needs to foment a digitization revolution,” she says. “We knew even before the crisis that we are far from the level of the developed countries.”

The government also must be more involved in creating jobs, Bronicki notes. For example, if the state were to upgrade and transform the status of the nursing professions, the crisis could be leveraged to deal with the shortage of personnel today. This phenomenon is not confined only to the nursing profession. “Jobs can also be created by improving the status of various occupations in which people don’t want to work,” she notes.

Bronicki also recommends that the state spearhead projects that could generate a significant number of jobs while promoting Israel’s commitments under the Paris Agreement on dealing with climate change. For example, solar energy projects that will connect to the electricity grid or supply power for desalination facilities. “Legislation is needed to facilitate licensing and ease the other regulatory restrictions,” she explains. “That is explicitly the exploitation of a crisis for meaningful economic benefit.”

Orna Berry
Orna BerryCredit: Ofer Vaknin

‘Don’t throw money at those who have’

In the view of Orna Berry, an entrepreneur, scientist and senior figure in Israeli high-tech, the National Insurance Institute and the income tax authorities must immediately return the advance payments that they received from taxpayers – i.e., small business owners – for this year.

“If people are unemployed now, or if their business has collapsed, they will pay less tax for the rest of 2020 and also in 2021” than what they originally calculated, and paid in, Berry says. “It would be best for the offsets to be paid now.”

There is no reason not to do this, she adds: “We need to remember that these are people who don’t have money. Returning the payments these people made now will avert a situation in which people die of hunger and ensure that they are not evicted from their homes.”

One subject the government must deal with is data and information, Berry says. “In the long term, in order to know how to proceed and which policy to adopt, it’s crucial to possess data. Just as there are no data about the coronavirus, so there are no data about the Israeli labor market, either,” she says. Action cannot be taken without data. “If we want to deal with people, we need data; if we want to retrain people whose profession will not be viable for many months, we need data.”

Another essential issue, Berry observes, is to supplement the income of people who may have to switch to professions where the salary is lower than what they earned before the crisis. That will create an incentive to return to work.

“We must focus on small businesses and on vocational training,” she asserts, “and not disburse money to those who have it.”

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