One Million Israelis Will Be Permanently Out of Work Before Passover, Official Says

A wave of layoffs amid the coronavirus outbreak is expected to hit the most vulnerable particularly hard – women, people with disabilities, workers near retirement age, and those in deeply affected industries

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Shuttered shops in Jerusalem, March 15, 2020.
Shuttered shops in Jerusalem, March 15, 2020.Credit: Ohad Zwigenberg

Should the coronavirus pandemic continue beyond the end of the Passover holiday in mid-April, many of the 20% of Israel’s workers who found themselves on unpaid leave amid the economic shutdown may become permanently out of work. Tens of thousands more people will become underemployed. These are the findings of an economic analysis by Gal Zohar, head of research and policy at Israel’s Employment Bureau.

As of 5 P.M. on Sunday, there are 781,608 new people registered as unemployed, 90% of them on unpaid leave.

Currently there are 939,459 people registered as unemployed in Israel, including those who were out of work before the coronavirus crisis began.

Unemployment is at an unprecedented 22.6 percent.

Employment Bureau director general Rami Garor stated that the trend of skyrocketing unemployment was continuing, and that by this rate, Israel would quickly have 1 million unemployed well before the Passover holiday.

These figures do not include the 140,000 people past pension age who were also laid off or put on leave, and are not eligible for unemployment pay (following the government decision on Friday, they will be receiving a stipend from the National Insurance Institute).

Likewise the figures do not include another 500,000 self-employed people who are also out of work or underemployed now.

Based on past experience, the employment bureau is preparing for a drawn-out crisis. In the economically advanced OECD nations, the unemployment rate remained high for years after crises officially ended. Companies that entered crises in not-so-good financial states and with large workforces – such as Israel’s cellular service companies or tourism service companies – are likely to take advantage of the crisis by laying workers off.

Hit the hardest

The wave of layoffs is expected to touch all layers of society but particularly the most vulnerable – women, people with disabilities, workers near retirement age, and people in the most deeply affected industries, such as tourism.

Aside from manufacturing, in most other industries the chances of finding work will worsen, according to the employment bureau’s deputy director of research, Ofir Pinto. Unskilled laborers will be worst off.

The self-employed are also likely to be particularly hard hit. Previous economic crises led to increases in the number of self-employed, but this time around the situation is different because the limitations on movement are particularly problematic for many self-employed people.

When will it end?

It’s also not clear at what point the shutdown and the ensuing economic crisis will start to reverse. The authorities keep saying “after Passover,” which ends April 15, but there’s no reason to think this is correct. No one can really say that the health threat will end along with the holiday, and no small number of forecasts predict that economic activity will be limited through at least mid-May.

So why do the authorities keep citing “until after Passover”? Beyond the human need for a schedule with clear dates, it stems from the agreement that the Finance Ministry wages director struck with the Histadrut labor federation, putting state employees on unpaid leave through April 16, the end of the holiday. What will happen when that agreement ends? When it was signed, Finance Ministry officials had hoped that the return to routine could begin at that time, but as the days pass, an understanding is sinking in that the crisis will last much longer.

If anyone is looking for a sign that other players in the economy are starting to understand that the crisis won’t be over by mid-April, evidence of this can be seen in the decision by one of Israel’s largest accounting firms, Ernst and Young, to put 1,900 workers on unpaid leave. Companies putting workers on unpaid leave commit to do so for at least 30 days; otherwise the employees aren’t eligible for unemployment pay. In other words, one of Israel’s largest accounting firms sees it unlikely that the country will return to work as usual anytime before the end of April.

'Optimistic' scenarios

Last Tuesday, the head of research at the Bank of Israel, Prof. Michel Strawczynski, released several forecasts for COVID-19’s damage to the economy. The forecasts weren’t based on an economic shutdown through the end of Passover, but rather several weeks longer – through the end of April, and the end of May.

The Knesset Finance Committee session held on Thursday, led by its new chairman, MK Oded Forer (Yisrael Beiteinu), presented several scenarios for economic damage, drafted by the Finance Ministry. They included both partial and full economic shutdowns, for between five and 12 weeks. Finance Ministry director general Shay Babad said that even under the more moderate scenario of only a partial, five-week shutdown – meaning more or less until after Passover – the GDP would be expected to take a 5% hit.

Thus, even under the most “optimistic” scenario analyzed by the Finance Ministry, the GDP is expected to contract. Should that happen, it would be the first year of negative GDP growth since 2002, during the height of the second intifada. That year, however, Israel had negative GDP growth of only 0.2% – much less than is currently being forecast. The moderate scenario puts total GDP contraction at 2%, after factoring in the lost 3% growth that had initially been forecast for 2020 before the virus hit. The total loss is forecast at 3.8% should a partial shutdown continue for eight weeks, and 5.6% should there be a partial shutdown for 12 weeks.

The National Insurance Institute will be paying some 7 billion shekels ($1.96 billion) in March and April to cover unemployment pay for people who were put on leave or fired since the beginning of March, the NII estimated Friday.

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