“We have to get used to living in the shadow of the coronavirus. We’ve sen countries ending the lockdown only to see the rate of morbidity rising again.” So said Prof. Itamar Grotto, the Health Ministry’s deputy director general, on Channel 13 news shortly after seder night last week.
Like much of the world, Israel is now weighing a “strategic exit” from lockdown with the goal of returning the economy to full activity. But even the most optimistic scenarios don’t see everything returning to the pre-pandemic normal. What was, won’t be, at least until a vaccine for the COVID-19 is found.
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Today, a little more than 25% of employed Israelis are receiving jobless benefits. Of those, 88% weren’t laid off but put on unpaid leave, with the understanding they would be called back when the crisis ends. But the state Employment Service predicts that about a fifth of those on unpaid leave will not end up returning to their old jobs but instead enter the rolls of the unemployed.
Before March 11, the country’s unemployment rate was less than 4% and the number receiving benefits was about 160,000. The Employment Service believes that even after the coronavirus crisis is over, Israel’s jobless rate will double to 8%.
The International Labor Organization last week revised its global unemployment estimates, stating that today there are about 200 million jobless around the world, versus just 25 million jobless at the start of the crisis. Israel’s Employment Service estimates that about 250,000 Israeli workers are at risk of permanently losing their jobs.
The ILO warned that many business sectors will struggle to fully recover so long as social distancing and other measures are in place to fight the coronavirus. Thus, globally, 1 billion people are at risk of losing all or part of their income.
Naturally, workers in tourism and retailing are the most vulnerable sectors, but the ILO says that industrial workers ars equally at risk.
That may come as a surprise since even in the midst of the pandemic, factories have continued to operate, albeit often at less than full capacity. According to Israel’s Central Bureau of Statistics, the number of factory workers continuing at their jobs was 52.4% at the end of March, the highest of any sector of the economy. About 21% were on unpaid leave.
But industry executives are not optimistic. Global supply chains have been disrupted by the coronavirus and the global recession now setting in is expected to hurt demand. An end-of-March survey by the statistics bureau found that 52% of industrial companies reported that they would not be able to hold on for more than a month under current conditions, 32% not more than three months and 5% not more than six months. Only 10% believed they could manage for a year.
What would that mean for workers? The statistics bureau said that in 2018, the latest year for which figures are available, Israeli industry employed about 425,000 people. The Manufacturers Association trade group estimates that today 80,000 of them are at risk of losing their jobs.
The manufacturers face problems producing while the supply chain is so unreliable and credit so tight. Some 62% told the Manufacturers Association in a survey that they were having trouble with their credit lines and 60% trouble getting new loans. Close to 50% said sourcing raw materials was a problem or that prices had risen, which would raise their production costs as much as 15%. Nearly 70% said they planned to downsize their payrolls by ordering unpaid leave or forced vacations.
Even before the coronavirus struck, Israeli retailers were being hit hard by the rise of online shopping, mainly via overseas sites like eBay and Amazon. Now, with most stores ordered closed for a month or more and an expected drop in demand from recession-bound consumers, retailers will be forced to make deep cost cuts. That is especially the case for fashion retailers. Most of the sector’s workers are unskilled, so their prospects of finding employment elsewhere are slim.
Retailing is a major employer. According to the Federation of Israeli Chambers of Commerce, the wholesale and retail sector encompasses about 370,000 paid employees and 36,000 self-employed in some 95,000 businesses. The statistics bureau says that 42% of employees have been put on unpaid leave, the highest among all the industry sectors surveyed.
The future doesn’t look bright. The bureau’s survey found that more than a third of retail businesses said their turnover had fallen by at least 76%. Of those surveyed, 58% said their businesses couldn’t survive more than a month under current circumstances. Only 9% said they could survive for six months or more.
In the restaurant sector, approximately 190,000 Israelis were employed before the outbreak of the virus, according to the Israel Restaurants and Bars Association. They were the first businesses ordered shut down and are likely to be the last to get approval to reopen.
In China, local Starbucks restaurants were allowed to reopen, but it is far from a return to business as usual. Visitors must be equipped with an app that shows their health status and temperature. Only one person can sit at a table. Many restaurants and cafés will find it difficult to operate under such strictures and, in any case, the inclination to eat out is likely to decline due to the post-coronavirus recession.
The restaurant industry is looking at scenarios where it can resume limited business in May or June. That would mean fewer diners, little or no profits and, of course, fewer workers. The main business will be takeout, so there won’t be much need for waiters. In any case, the restaurant association estimates that half of all restaurants will choose not to reopen under such conditions.
Like many workers in the retail sector, many of those who will be laid off are young, unskilled workers new to the labor force.
Similarly, the aviation and travel industry is facing a bleak summer season. All around the world, governments have ordered aircraft to stay grounded and it will be many months before activity returns to normal. China is allowing planes to land but only on condition that passengers enter a two-week quarantine at a government compound.
In Israel, where for reasons that are not clear people entering the country are free to get into cabs and go where they please, there’s been a renewed increase in contagions brought in from overseas. Other countries are unlikely to pursue that policy, which means air travel will be paralyzed for months to come.
Optimists talk about flights renewing in September, but others say it could take a year to 18 months, and even then no one is sure that flying will return to its pre-coronavirus levels. Meanwhile, airlines are converting their aircraft from passenger to cargo use, but that will mean they won’t need the same level of staffing on the ground or on the flight.
The Israeli aviation sector is not employment heavy – the airlines employ directly some 8,000 people (6,200 of them at El Al Airlines and the rest at Israir and Arkia). Another 6,000 work for the Israel Airports Authority.
On the other hand, the tourism industry employs another 40,000, according to the statistics bureau. Another 21,000 work in travel agencies and for tour organizers, while yet another 100,000 provide various tourism-related services.
At the start of the crisis, industry officials thought the loss of incoming tourism would be compensated by local tourism. Israelis who couldn’t fly abroad would holiday at a hotel at home. But the social-distancing directives have deterred domestic tourism, too, and they are not expected to be lifted for many months.
The impact of the coronavirus won’t just hurt those with jobs, but those who were just entering the job market. Right now, according to the statistics bureau, the number of layoffs in high-tech has been just 2.8% while only 11% have been put on unpaid leave. One reason for those low levels is that close to half of Israel’s tech workforce has been working from home, the highest for any sector of the economy.
However, after the Passover holiday, Israel’s high-tech industry is expected to begin a round of layoffs just as the government had invested resources over the past year in retraining younger workers for the industry to help solve a chronic labor shortage and upgrade skills. Now those new workers are expected to feel the brunt of the layoffs.