Israel's Weakest Workers Are Most Likely to Be on Leave or Laid Off During Coronavirus

Those laid off or put on unpaid leave earn on average one-third less than Israel’s average wage according to chief economist

Sivan Klingbail
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Education staff protest in Tel Aviv, April 30, 2020.
Education staff protest in Tel Aviv, April 30, 2020.Credit: Meged Gozny
Sivan Klingbail

The workers hurt by the coronavirus crisis are among Israel’s lowest earners, and reintegrating them into the workforce will probably be a challenge, the Finance Ministry’s chief economist said Wednesday.

Those laid off or put on unpaid leave earn on average one-third less than Israel’s average wage, according to the chief economist, Shira Greenberg.

The average salary of the newly out-of-work is 6,342 shekels ($1,806) a month, versus the average Israeli salary of 10,481 shekels as of last year.

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As these are Israel’s least skilled workers to begin with, it is expected to be difficult to bring them back into the workforce.

Greenberg and her colleagues cross-analyzed data from the Israel Employment Service, the National Insurance Institute and the tax authority. They found that in all industries and companies that put workers on unpaid leave or fired them due to the crisis, the workers earned lower-than-average salaries for their sector.

The higher the average salaries for the industry, the more blatant the disparity between the average salary and that of the employees laid off or on leave.

For instance, in the information service sector, the average salary is 23,400 shekels a month, while the average salary of the 9% of workers fired or put on leave is 11,200 shekels a month.

In programming and computer consulting the average salary is 21,400 shekels a month, while that of those fired or on leave, some 9% of all workers, is 11,800 shekels.

In the financial sector, where 16% of workers were sent home, the average salary is more than 19,000 shekels a month, but for those dismissed, it’s 7,900 shekels.

The chief economist’s office presumes salary is a reflection of productivity for private sector workers, which suggests that the dismissed workers are the least productive in their sectors.

A man sits inside his money exchange shop in Jerusalem on April 21, 2020.Credit: MENAHEM KAHANA/AFP

Thus the businesses probably kept their most productive workers, meaning the impact on their operations is less severe.

On the other hand, the reintegration of the dismissed workers into the workforce will probably be a challenge; sources in the chief economist’s office fear that it will be a particularly significant one.

More than 1 million workers have registered as unemployed or on unpaid leave with the National Insurance Institute since the coronavirus pandemic began. Of them, 88% are on unpaid leave. According to the NII, some 105,700 businesses reduced the size of their payroll in March and the first week of April.

Six industries account for half of the unemployed – education (65,000 people), food services (64,400), household services (64,400), retail (61,500), industry (50,100) and wholesale trade (49,000).

Regarding the education system, many of the laid-off employees are not actually government employees but rather part of the informal education system – those who worked for nonprofit groups, provided services to schools or ran after-school activities. These people were put on unpaid leave or lost their work the moment the school system shut down.

The impact on Israel’s smallest businesses is also notable. Some 54% of the newly unemployed work at the country’s smallest businesses or are self-employed. Around 27% of the unemployed worked at companies with annual turnover under 5 million shekels a year.

Only 11% of the unemployed came from Israel’s largest companies, those with annual turnover topping 100 million shekels.

However, the size of the business does not affect the average salary of the unemployed.

The high number of unemployed from small businesses reflects the importance of supporting these businesses.

Businesses with annual turnover of up to 20 million shekels employed 1.26 million people before the crisis began. Of them, 309,300 are now unemployed.

Before the crisis, Israel’s unemployment rate was at a record low of 3.7%.

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