Analysis |

Israel Has Alleviated the Sting of COVID Joblessness Without Trying to Cure It

Avi Waksman
Avi Waksman
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Israelis wearing face masks shop at a local market in Netanya during Israel's second lockdown, October 21, 2020.
Israelis wearing face masks shop at a local market in Netanya during Israel's second lockdown, October 21, 2020. Credit: Moti Milrod
Avi Waksman
Avi Waksman

It’s too early to tell whether Israel has succeeded in breaking the chain of COVID-19 transmission, but there can be little doubt that it has failed to break the epidemic of widespread unemployment.

In May and June, when the first coronavirus wave was receding, officials were optimistic that the economy could weather the crisis. Back then, we could still hope that the country would gradually return to its normal level of economic activity and that most of those who had lost their jobs – more than a quarter of the labor force – would be returning to them.

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In fact, the jobless rate declined over the next months to as low as 11.5%, according to the Central Bureau of Statistics’ broadest definition. That includes tens of thousands of Israelis who had stopped looking for work because they knew there wasn’t any, as well as hundreds of thousands of workers put on unpaid leave.

But as the period of unpaid leave stretches on, the odds of those on unpaid leave ever returning to their old jobs is growing narrower. At some point, to continue saying they are on unpaid leave will amount to a fiction.

With the second coronavirus lockdown, the unemployment rate quickly soared to 19.1 percent in the second half of September, according to CBS figures. The partial return of economic activity after the High Holy Days is supposed to bring down the rate starting in the second half of October. Last week, for the first time in a long time, the National Employment Service was getting thousands of notifications a day of people returning to their old jobs, numbers that were exceeding those registering as job seekers.

However, this time it looks like the improvement in the labor market will be slower than last spring. The government has vowed not to make the same mistake it did after the first lockdown and hurry to allow many sectors of the economy to reopen for business before it was clear that the coronavirus was really in retreat. A slower reopening means a slower jobs recovery.

Finance Minister Yisrael Katz, Jerusalem, July 19, 2020.Credit: Emil Salman

The Bank of Israel took that into account in its latest forecast, issued on Thursday. Its most optimistic outlook sees fourth-quarter unemployment at 16.7%, and the rate remaining at an elevated 7.8 percent a year from now. Its pessimistic scenario sees the rates at 20.2 percent and 13.9 percent, respectively.

Shortly after Finance Minister Yisrael Katz took office last spring, Prime Minister Benjamin Netanyahu told him he has three tasks: Jobs, jobs and jobs. Even if Katz had put into place an effective program, the second lockdown would have undone his work.

The grant offered to employers to encourage them to retain workers, the one Katz was so proud of last spring, has been a failure. Another one, to revive the moribund worker retraining system, fell victim to treasury hostility and turf battles with the labor and welfare ministries.

Instead of being offered training to adapt them to the changing job market, the unemployed are being paid benefits until next June. Even programs, such as “The 500 Project,” to employ hundreds of people cleaning up and fixing up nature reserves and other public spaces, seemed designed to deter participation. The 500 Project workers are being employed by a private contract, not by the Nature and Parks Authority.

In lieu of his ability to actually create jobs, Katz has portrayed himself as someone whose mercy and generosity provide the jobless with grants. Last week, he boasted that since the start of the coronavirus crisis, the government has paid out 16 billion shekels ($4.7 billion) in jobless benefits. Now he is saying that anyone who has been unemployed for at least 100 days will get a one-time grant of up to 2,500 shekels.

The two critical pieces of the government’s employment policy are problematic. The first, paying unemployment benefits to workers put on unpaid leave, was made hastily after a tense weekend meeting last March. The second, extending jobless benefits till next June, was made over the objections of economists who said it would deter people from trying to find work.

Perhaps establishing the safety net was unavoidable in the midst of a crisis. Nevertheless, the negative impact will haunt the labor market at least over the next several months and maybe longer. (There’s good reason to believe that Katz will be hesitant to let the benefits expire next June.) The solutions that the government has proposed to solve this problem seem to be too modest.

Many employers who have notified workers that they can return to their jobs say some have told them they would rather keep collecting unemployment.

Going to work has become more difficult at a time when young children are often not going to school due to lockdowns. If the school system doesn’t return to a full schedule soon, many parents won’t be in a position to return to work. That goes a long way toward explaining why during the second lockdown, women, who invariably assume most of the burden of childcare, account for 63 percent of those registered with the Employment Service. All the work that has been done to bring more women into the labor force threatens to be undone.

Even those Israelis who are ready to return to work face a market where the jobs available offer pay and conditions inferior to what they had previously. Katz’s solution is a program offering a four-month grant to workers agreeing to take lower-paid employment. But will it be enough to make taking a job preferable to staying on the dole till June?

Then there is the question about the youngest workers in Israel, who are losing valuable time they need to start on their careers and gather workplace experience. When they return to the labor market, they’ll be at a disadvantage to older, experienced job-seekers. Older workers, especially those in sectors that remain fully or partially paralyzed by the lockdown, also face bleak employment prospects for some time to come.

In the fact of an extended crisis, what Israel needs is a Roosevelt-style New Deal, an ambitious program to generate employment. Unfortunately, nothing like that seems to be in the offing – just grants and allowances designed to mitigate the pain of joblessness without solving it.

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