One study Joshua Angrist, one of the recipients of this year’s Nobel Prize in economics, is most proud of is the one he conducted on the economics of Palestinian labor. Angrist, who once taught at the Hebrew University of Jerusalem, noticed a paradox in the Palestinian labor market: A plasterer working in Israel makes more than someone with a graduate degree in chemistry, in the territories. The result is a negative return on higher education. In other words, it simply doesn’t pay for Palestinians to invest in getting an education, since it only harms them.
The reality described by Angrist back in the early 1990s has not changed. The average monthly salary in areas controlled by the Palestinian Authority is 2,500 shekels (about $790). And that’s during months in which the PA actually pays its employees full salaries (in recent years, due to the tax-withholding policy imposed by the Netanyahu government on the PA, the latter has for much of the time paid its employees only 75% of their monthly wages). In contrast, the average monthly wages of Palestinian laborers performing manual work in Israel proper range between 5,500 and 6,000 shekels, including people in part-time jobs. The better qualified workers among them easily cross the 10,000-shekel threshold.
It’s unclear whether this distorted reality – in which it’s better to be a plasterer than a physician – promotes terror against Israel and upsets a relatively calm security situation. What is clear, in any event, is that it leads to a deterioration in the Palestinian economy and to a halt in the development of the Palestinian people at the level of construction workers. It is therefore obvious why Palestinians strive to get jobs in Israel and why they’re willing to do just about anything to that end, including committing to pay illegal fees in order to obtain permits allowing them to work there. Israel is aware of this, but does little to stop it.
An attempt to correct the injustice
Some 110,000 Palestinian laborers from the West Bank enter Israel every day to work there legally. They’ve all been approved by the Shin Bet security service and by the police – in contrast to illegal laborers who cannot obtain permits for employment in Israel. The majority of legal workers, around 80,000, are employed in construction; the rest work in agriculture, industry, tourism and other service sectors.
Over the last year, the state launched a comprehensive reform in the employment of Palestinian construction workers, in an attempt to correct the grave injustice that prevailed for decades, by which a Palestinian laborer was tethered to his Israeli employer. In practice, the significance of that binding relationship was that the laborer had the status of an asset, which employers could use as they wished.
Up to the beginning of the present year, the permit to work in Israel belonged to the Israeli employer: The latter received a permit to employ Palestinians from the Population and Immigration Authority. Also there were lists drawn up of names of laborers who could work solely for the employer they were registered with, with no possibility of switching to another one. This led to the laborers’ complete dependence on the employers, opening the door to exploitation and a violation of the law.
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This situation engendered something else, too: an industry of trading in work permits. Israeli employers discovered that their right to employ laborers was worth a lot of money to Palestinians, and they started to exploit this. They began to seek surplus quotas from the Population and Immigration Authority, and traded their surpluses, allowing the people in question to work for other employers – in exchange for money. In fact, there is some evidence suggesting the existence of many fictitious Israeli employers: contractors who have received permits for employing Palestinians but who have sold the permits to others. The sale is done through middlemen, who are the connecting link between the laborer, the official employer and the actual employer.
A study conducted by Haggay Etkes, formerly of the Bank of Israel, and Wifag Adnan, a researcher at NYU in Abu Dhabi, as well as research by the International Labor Organization, estimate that the going monthly cost of such a permit ranges from 2,000 to 3,000 shekels, amounting to one-third of the laborer’s wages total wages. Estimates are that at least one-third of that amount is profit made by the seller, with the rest reflecting actual expenses.
Apparently one-third of Palestinian laborers purchase a work permit from a broker, as part of an industry with an estimated annual turnover of over 1.2 billion shekels (in 2019), bringing in net profits of 430 million shekels. The Kav LaOved nonprofit organization which protects the rights of Palestinian workers estimates that 80% of the profits remain in Israel, with 20% pocketed by the Palestinian brokers.
All this money is unreported, obviously, which should supposedly have driven this whole industry underground. But it hasn’t. An updated study by Etkes on behalf of the Institute for National Security Studies features photos of stands in Ramallah manned by people who arrange work permits in Israel. There are also Facebook pages, involved in the same effort. The PA was supposed to have clamped down on these transactions, but if there is any enforcement, it’s not noticeable.
The situation in Israel is not any better. Even though this industry apparently involves hundreds of millions in unreported shekels – which probably also helps to fuel some of the criminal activity rife in Arab communities – the Israel Tax Authority shows no interest in stopping it and is not enforcing the law. The state has done very little to eradicate this phenomenon despite petitions by Kav LaOved to the High Court of Justice and critical reports by the state comptroller. This was the case up until to last year, when Maj. Gen. Ghassan Aliyan, Coordinator of Government Activities in the Territories, aka COGAT, managed to push through a reform, on the Israeli side.
After decades, the above-mentioned tethering of employees to employers was severed. A work permit is now given to the Palestinian laborer, regardless of who is employing him. Every worker has 60 days in which to find an Israeli employer; there is even a website designed to match up Israeli employers and Palestinian workers, without middlemen.
Aliyan’s office has even reported that there are even employers complaining about workers who dare to quit their job. The Messiah has come! Or not. An updated check by Etkes and Adnan has revealed that the illegal trade in work permits has not ceased, even though ostensibly Palestinian laborers no longer need the services of intermediaries to link them up with a specific Israeli employer.
Some of the explanations for this involve teething problems – the website matching up workers and prospective employers has only been working for a few months and some Palestinians are still unaware of it. Also part of the problem is that the ostensibly permanent arrangement whereby workers are bound to employers has so far only been terminated in the construction business, whereas in agriculture, industry and tourism, workers are still tied to specific employers. Other explanations for the lacunae are even more troubling.
For its part, Kav LaOved reports that Palestinians continue to pay brokers’ fees for the right to be included in the quota of those permitted to work in Israel – a quota determined by COGAT according to nontransparent criteria. Moreover, the permits are for full-time work, whereas a big portion of Israeli employers prefer to take on Palestinians as day laborers, which again creates an opportunity for illegal transactions in permits.
Overall, there is currently no law enforcement when it comes to overseeing this illegal industry – not In Israel and not in territories under PA jurisdiction. There is good reason for this. There are too many well-connected people making good money from this, finding it convenient to trade in permits and to employ Palestinians on a daily basis, in a totally unsupervised manner. Since the ones most affected by this are Palestinian workers, among the weakest links in their society, there is no one to raise the alarm and push state or other officials into taking action.
The state has taken an important step, carrying out a reform by freeing construction workers of their debilitating ties to Israeli employers, but when it’s come to implementing the reform over the last year, the state has mainly been dragging its feet. The result is copious amounts of unreported revenues, likely providing fuel for crime organizations, in addition to a serious infringement of the human rights of Palestinian laborers – and quite possibly also to an increase in disturbances against Israel in the territories. Israel continues to reap these bitter fruits – all a result of its own negligence.