50 and Fired: Growing Problem of Older Unemployed in Israel

Long before they are ready to retire, many Israelis find themselves out of a job and no prospect of getting a new one

An old couple in the Southern Israeli city of Arad
Ilan Assayag

If you’re a man working in high-tech, financial services, the media or agriculture, or if you live in the greater Tel Aviv area or have low job skills, the odds of your remaining employed after age 50 are relatively low. The result is that you lose years of accumulated pension rights and, if you take into account the increase in life expectancy, the financial consequences can be catastrophic.

The consequences come into sharp focus in research conducted by Prof. Yotam Margalit of the Israel Democracy Institute.

The proportion of working-age Israelis (25-64) actually in the labor market is 80.2%, higher than the average for Organization for Economic Cooperation and Development member state. But for those over age 50 the labor force participation rate is significantly lower. “While the rate for people ages 35-44 is 85%, the number declines to 69% for those ages 55-64 and plunges to 16% for those over age 65,” says Margalit.

“On the one hand, the labor force participation rates is higher than in the past – there’s been a rise in the rate among groups in Israeli society that hadn’t been a part of the labor market,” he says, referring to Israeli Arabs and ultra-Orthodox Jews. “On the other hand, there’s real problem that is shared by Israel and other developed economies of people exiting the labor market before they reach retirement age. There’s a group of 50-plus people that suffer a real employment problem and the forecasts say it’s going to get worse.”

Margalit, who is also a professor of economics at Tel Aviv University, specializes in the impact of automation of the job market. He leads a group at IDI exploring the issue of employment for older people. It’s part of a larger study of the future of the labor market.

Working less.

The research, which is being conducted together with Gabriel Gordon and Yarden Kedar, is the product of two years of work and will be discussed at the Eli Hurwitz Conference on Economy and Society on December 17-18 in Jerusalem, an annual conclave of businesspeople, policymakers and researchers.

One of the characteristics of the labor market of the future that the team identified is the growing drop-out rate of people in their 50s, long before they are eligible for a full pension. This is particularly worrying because it comes as Israel’s population is aging – the result of a drop in fertility rates and longer life expectancies.

Automation and computerization, which are gaining momentum as artificial intelligence is applied to more and more sectors, are expected to make many job categories obsolete. People will have to constantly acquire new and updated skills to remain employable, an especially challenging problem for older workers.

Longer life expectancies mean people have to keep working longer to accumulate enough pension rights to last them for the rest of their lives. People who exit the job market early will find themselves short of the minimum.

“Even now, people who leave the employment market find their situation is bad – a drop of a third in standard of living for a man who quits and 25% for women who do. That’s without considering health and psychological factors that affect people who stop working,” says Margalit.

To gain greater insight into nonworkers over 50, the researchers looked at people actively looking for work. The Central Bureau of Statistics found that only 23% of left their previous place of employment voluntarily. A clear majority was laid off due to cutbacks. Some 38% had a high school education or less, but an even larger share (47%) had an academic degree and 13% had a doctorate.

Many were almost certainly facing several financial difficulties because only 38% of job seekers reporting having a spouse who was working full-time.

“Even if you take into account that many have a spouse who’s retired and gets a pension, you’re still taking about a large number of households where there’s one unemployed adult and severe financial distress,” the researchers write in their study.

Men have it worse

They also looked into where over-50s were employed when they were age 45-50 to figure out what job categories were likely to lead to unemployment later. The answer: Women tend to stay in the job market longer than men; college graduates more than high school and technical school graduates; and residents of Greater Tel Aviv more than those living elsewhere. “That shows that those living in the center of the country have an advantage, because there are more job opportunities,” says Margalit.

Those with the fewest job skills tend to find themselves unemployed after 50, perhaps because they had been engaged in physical labor they can no longer do or perhaps because in low-skill jobs experience doesn’t give them any advantage over younger workers, says Margalit.

That has long been the case for that class of workers. What has changed is that workers at the top of the employment ladder are also losing their jobs after 50. “In the current decade even high-tech and financial services workers – people who are relatively well-educated – are leaving the job market earlier,” Margalit says.

The other big problem facing older workers is their skill level. Compared to their OECD peers, Israelis’ workplace skills are relatively poor, but they are poorest among older workers, which makes them more vulnerable to job cuts. The next generation of 50-plus workers – those now aged 40-49 – faces the same problem.

“The situation is only a little bit better than those who are 50-plus and many of them have a low level of skills,” he says, which means the problem of 50-plus joblessness will only deepen in the years ahead.

Margalit describes government policy toward the problem as “reactive” in that it only deals with it after 50-plusers have already lost their jobs. “In a lot of cases, by then it’s already too late because after someone has been laid off it’s much harder to find a new job. Over 50s are often less attractive as hires. Once they are unemployed, they are labeled in a way that makes it difficult for them to reintegrate. After a while some give up and stop looking for a new job. So the approach needs to change to preventive active policies.”

The government should create programs designed for people still at their jobs, targeting those in job categories with the highest risk. The goal is to preserve the jobs they already have, which will save the state the costs of unemployment benefits and welfare. It would also give a boost to the overall economy, Margalit says.

Practically, that means encouraging older workers to get retraining and/or beef up their skills via subsidies and tax breaks. Counterintuitively, he suggests gradually raising the retirement age for women, which is now 62 (versus 67 for men). “The research is unequivocal: The [official] retirement age affects a workers’ decision to retire early than any other factor. Gradually increasing its will contribute to raising [women’s] labor force participation rate immediately.”