Self-employed Israelis, Small Business Owners Bear Brunt of COVID Crisis, Study Shows

Tali Heruti-Sover.
Tali Heruti-Sover
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Mannequins, wearing T-shirts with the words in Hebrew, 'Bibi abandoned us,' hang in front of closed shops during a protest against restrictions on businesses, Tel Aviv, January 5, 2021.
Mannequins, wearing T-shirts with the words in Hebrew, 'Bibi abandoned us,' hang in front of closed shops during a protest against restrictions on businesses, Tel Aviv, January 5, 2021. Credit: CORINNA KERN/ REUTERS
Tali Heruti-Sover.
Tali Heruti-Sover

Israel’s self-employed and small- and medium-sized business owners are feeling the impact of the coronavirus crisis more so than salaried workers, according to a survey conducted by researchers at the Israel Democracy Institute.

The survey, titled “The State of the Workforce During the Coronavirus Period,” was conducted in the beginning of December, before the third lockdown was called at the end of the month, and then intensified in the second week of January. The survey is considered a representative sample of the self-employed in Israel and is a continuation of a survey conducted in June 2020 among the same respondents.

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The change between June and December is worrying. For instance, 8% of respondents stated in December that they’d shuttered their business permanently due to the pandemic, versus 5.4% in June.

Before the pandemic began, there were some 500,000 businesses in Israel. Since then, 40,000 have closed for good.

Many more businesses shut down temporarily, and in this regard, things looked bleaker in December as well, with 26% of business owners reporting that they needed to stop working temporarily, versus 20% in June.

On average, Israeli businesses that are not in sectors permitted to work throughout the lockdowns, were closed for a total of seven months since March 2020. Some 30% of business owners reported being closed eight months in total, and 26% reported being closed nine or 10 months since March.

The survey found that salaried employees were much better off than the self-employed. For example, in the beginning of December, some 74% of the self-employed reported that they’d worked in the past month, versus 87% of salaried employees. Only 24% of the self-employed reported working as usual throughout December, versus 68% of salaried employees.

Customers at a restaurant in Tel Aviv, May 27, 2020. The subjects have no connection to the content of the article.Credit: Moti Milrod

Some 45% of the self-employed reported working part time, versus 13% of the salaried workers. In June, only 42% of the self-employed were working part time. The assumption is that this is not by choice.

The earnings of the self-employed dropped even further over the past six months. They reported that their income had dropped by 47% on average as of December, versus 44% as of June.

Some 75% of the self-employed reported in December that their incomes had decreased, versus 65% as of June. Some 18% of the self-employed reported getting no revenue at all from their business, versus 13% in June. In comparison, only 2% of salaried employees reported in December that they had no revenue. Some 19% of the self-employed reported no change in their income as of December, versus 66% of salaried workers.

“The research reveals the gap in income security between the self-employed and salaried workers. The self-employed sustained a considerably sharper hit to employment and revenue than salaried workers,” said Dafna Aviram-Nitzan, head of the IDI’s Center for Governance and Economy. “The coronavirus pandemic illustrates how most salaried workers have relative job stability, while the self-employed are more vulnerable in terms of their revenue as well as their employment.”

This further illustrates the need for a safety net for the self-employed to help them better get through crises, she said.

A restaurant takes orders in Tel Aviv's Levinsky Market, January 12, 2021. The subjects have no connection to the content of the article.Credit: Hadas Parush

Self-employed women were doing slightly better than men as of early December; Some 22% of self-employed women reported having to close their businesses temporarily or permanently, versus 28% of self-employed men.

The self-employed living in central parts of Israel were much better off than their peers in outlying areas: Some 30% of those in more outlying parts of the country had closed shop, versus 19% in the center. Likewise 31% of self-employed people with a high school education or less had shut down, versus 19% of people with academic degrees.

As of the beginning of December, some 60% of the country’s self-employed had submitted a request for some form of government assistance, and 36% applied for more than one type of assistance.

This seems encouraging, as most people who applied for assistance received it. For instance, 48% of the self-employed applied for a grant to aid business owners whose revenues fell, and 91% received it, while another 45% applied for help with expenses and 78% received it.

Some 81% received the money within a week of submitting the request.

However, respondents reported that the grants totaled on average 36% of their income from their business. Business owners reported receiving on average 21,800 shekels in aid since the crisis began. The median aid paid was 15,000 shekels ($4,600).

The respondents reported receiving on average 11,600 shekels to in aid to cover expenses, which comes to 37% of their businesses’ fixed expenses on average. Some 9% were granted a full or partial exemption from municipal taxes; another 75% reported that they applied but were denied.

While businesses keep shutting down as the crisis stretches out, Tax Authority figures paint a less than clear picture: In 2019 some 75,900 businesses officially closed, while only 63,300 shut down in 2020. Sector sources explain that the government grants are actually keeping businesses afloat that otherwise would have closed.

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