The Economy Is Reopening, but Many Israelis on Unpaid Leave Refuse to Return to Their Old Jobs

Israeli employers struggle to fill jobs as generous unemployment benefits create a disincentive to work

Adi Dovrat-Meseritz
Netanel Gams
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Tel Aviv's Dizengoff Square during the third coronavirus lockdown, two weeks ago.
Tel Aviv's Dizengoff Square during the third coronavirus lockdown, two weeks ago.Credit: Hadas Parush
Adi Dovrat-Meseritz
Netanel Gams

Yossi, a 40-year-old from Atlit, has been unemployed for about a year, a victim of the economic downturn caused by the pandemic. But he has no complaints about COVID ruining his life; on the contrary, it’s enabled him to fulfill a dream. For employers, however, it’s been a nightmare.

Until last March, Yossi worked in a packaging-goods factory, but orders dried up and they put him on unpaid leave. Later, the factory itself closed altogether, exactly a week after his wife gave birth to their third child.

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“I planned to stay at home for three or four months, but in July my wife and I saw on TV that the prime minister, Benjamin Netanyahu, was extending jobless benefits until July 2021, with no strings attached,” he said. “My wife knew that for a long time I had been looking to enter a new profession. She asked me what I wanted to do for the coming year because there’s no reason I need to get a job. So, I registered for the master’s degree I had always dreamed of but no way of doing. I even got a scholarship as an unemployed person whose wife is on maternity leave.”

Yehudit, a 38-year-old from Jerusalem, has been on unpaid leave for a year and isn’t hurrying to find work. Until the onset of the crisis, she was working in tourism and her employer has yet to resume business. Yehudit acknowledges that her work experience and education would enable her to find a job in another field, but she prefers not to bother.

“I have children ages three and six, so it’s more comfortable for me to be at home,” she said. “There were the lockdowns and quarantines we had to go through and my husband was working as usual, so it was better that I didn’t work. It doesn’t make sense financially – working, I netted 8,000 shekels [$6,630 a month] net and today I’m getting 6,000 in unemployment benefits, but I was able to take the two kids out of their afternoon program, so that makes up the difference.”

Neither Yossi nor Yehudit are worried about what happens when the extended unemployment benefits program runs out in July. “I’ll be able to use my degree to get a better job,” said Yossi. Said Yehudit: “No matter what, my old job is waiting for me. True, it will be hard to return to work after so much time has passed, but I’m sure I’ll get used to it.”

Yossi’s and Yehudit’s experience of the past year points up the problems that the government’s strategy to deal with the surge in COVID-related unemployment has created. By awarding benefits to people on unpaid leave, rather than the unemployed by the traditional standard, it has created strong disincentives against returning to work even as the economy reopens. That is especially the case for the lowest-paid workers.

A woman shops inside a store that reopened its doors, Petah Tikva.Credit: CORINNA KERN/ REUTERS

Off the books

The result is that many employers are struggling to fill job openings despite that Israel’s broad unemployment rate, which includes people on unpaid leave, remains high in the double digits. In some cases, they hire workers off the books so that employees can collect benefits and a salary.

Amid growing complaints by employers, the National Employment Service in February enabled employers to report workers who refused to come back to their old jobs. The service will investigate the complaint and if found valid a worker could be deprived of benefits for 90 days from the date it was filed.

But an examination by TheMarker found that the system isn’t working according to plan. In the two weeks since it was launched, the Employment Service has received only 21 complaints and no sanctions have been taken against any offenders.

“We talked with the workers cited and found no instances where denying the benefits was justified,” a spokesman said. “We didn’t think there would be a huge number of employer complaints because we didn’t think that it’s a widespread phenomenon. We’re not surprised.”

The Central Bureau of Statistics says otherwise. A survey it conducted found that 11.9% of businesses said they haven’t taken back employees from unpaid leave because the latter aren’t interested. In big businesses employing 250 people or more the rate is an even higher at 17%.

Israel has more than 620,000 unemployed, 420,000 of whom are on unpaid leave. To date, the government has paid out some 28 billion shekels in jobless benefits.

Beer Sheva restaurateur, Ilan Zagdon.Credit: Ilan Zagdon

Employers who spoke to TheMarker complained that the model the government and Employment Service has been using to grapple with COVID unemployment is unsuited to the reality.

“Restaurant owners very much want to reopen on Sunday, but Finance Minister Yisrael Katz would rather pay our workers to do nothing. He’s paying them so they will vote for him in the election,” asserted Ilan Zagdon, a Beer Sheva restaurateur who has been one of the business leaders fighting against the government’s employment program.

“Hundreds of restaurats won’t open on Sunday because of a shortage of workers, including my restaurant. The Employment Service’s mechanism isn’t logical. Restaurateurs who are trying to bring back their workers can’t even get their phone calls answered,” Zagdon said.

In his part of the country, restaurant workers typically get paid 10% to 30% more than the minimum wage, but jobless benefits for people on unpaid leave are 70% higher than what they were earning before the coronavirus struck.

Yaacov Braun, owner of the Ha’tsrif cafe in Beer Sheva, wants to open on Sunday, as the latest easing of lockdown rules will allow, but he doubts he will be able to pull it off. “More than half my employees were students and when they transitioned to remote learning they left the area. It’s already been several weeks that I’ve been advertising for new staff, but there’s been no response,” he said.

Apparel retailers are encountering the same problem. “The government’s unpaid leave mechanism is political – no one wants to upset the voters, said Shachar Turjeman, chairman of the Brill Group and a retailers trade association.

Women walk by as others shop at a shoe store, Jerusalem.Credit: AMMAR AWAD/ REUTERS

“The politicians don’t have the courage to make the right decisions – they want us to do the dirty work and inform on our employees. They have some nerve.

The system was supposed to create a safety net for workers who couldn’t return to work, but that is no longer relevant, said Turjeman. “The economy has returned to near-normal activity. Right now, the public’s money is simply being thrown away and contributing to a generation of young people who aren’t used to working. It’s hurting their ability to save for the future,” he said.

Business sectors that continued to operate during the pandemic, and even thrived, also report difficulties in hiring, Zvi Baida, vice president for customers and service at Shufersal, Israel’s biggest grocery chain, said his biggest challenge was recruiting staff for stores in the center of the country. It was a problem before the onset of the pandemic, but now it’s worse, he added.

“At the beginning, we interviewed workers from other business sectors, such as events and tourism, and sent them to stores,” said Baida.

“But that stopped when they realized they could get unemployment pay until June. We’ve organized transportation for workers living far away to ensure we could continue to provide good service at our stores. It raises costs, but we have to do it.”

Paying the price

Arnon Bar-David, the chairman of the Histadrut labor federation, said that “every worker who refuses to return to their place of work even after they’re offered a chance to resume work under the same conditions and pay as before, needs to understand that they are paying a personal price.”

“Right now, that price is being paid by Israeli society, but not for long. The Histadrut won’t lend a hand, certainly at a time when the economy is trying to recover. The right to unemployment benefits was expanded during the crisis …. Today, millions of citizens have been vaccinated and everyone has to contribute to repairing the economy.”

No decision has been made by the government about what will happen when the extended benefits expire after June. Katz and Meir Shpigler, the director of the National Insurance Institute, have developed a plan to encourage workers to return to their jobs with financial incentives, but it has drawn criticism for being a waste of money and politically motivated.

The Finance Ministry budget division, meanwhile, remains uncertain about what direction the economy will take in the next few months. Among the options it is to consider a program of differential unemployment benefits based on what business sectors and labor demand. Some sectors would enjoy a further extension of jobless allowances.

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