Conspiracy Theories Surrounding Israel's Unemployment Rates Are Wrong

Israeli unemployment is low. So why is the treasury’s confirmation of this fact greeted with such suspicion?

Jobless men at the employment office in Wadi Joz, in Jerusalem, on February 10, 2016.
Emil Salman

Israel is truly remarkable in this maladaptive custom: We hail every bad statistic about the state and deplore every good one. But things have reached an extreme if a research body that publishes positive findings is greeted by absolute suspicion and by conspiracy theories about hidden motives. The conventional wisdom seems to be that if a finding about Israel is positive, the researchers must be as objective as the editors of Pravda, the infamous Soviet mouthpiece which reported only good news about Mother Russia.

The conspiracy theorists aren’t necessarily wrong. We can assume that some research institutions and government organizations do massage the data to serve their interests. But we can also assume that in this area Israel is no worse than other democracies, where statistics are sometimes putty in the hand.

Israeli conspiracy theories are unique in that they only attach to positive findings. It happened this week. When the Finance Ministry’s Chief Economist Department published a long-term analysis showing that Israeli unemployment levels were at a historic low by every standard, including among women, it was immediately excoriated as Pravdaesque. There was a secret agenda, critics said: to raise the retirement age for women.

Indeed, the Finance Ministry openly supports raising the retirement age for women, as does the Bank of Israel. The Organization for Economic Cooperation and Development has also recommended in its reports that Israel take this step.

Despite the unqualified support of the leading economic institutions for raising women’s retirement age, the Finance Ministry appointed a committee to study the topic. Uncharacteristically, the panel included representatives from women’s and social-justice organizations, which traditionally oppose raising the retirement age for women. That should put paid to any theory suggesting that the Finance Ministry already made up its mind on the matter.

In any case, detailed discussion of a conspiracy to hike women’s retirement is irrelevant to the Chief Economist Department. It’s focused on fighting a different popular common conspiracy theory, according to which unemployment exceeds the reported figure. (As we said, no one suspects that the real unemployment rate is lower than the reported rate). It was to counter this theory that the department published its research, which also examined how unemployment would look if its definition was changed. To do that, the Chief Economist Department played with five different definitions of unemployment, one of which was set by the OECD (and not by Israel’s Central Bureau of Statistics).

The Chief Economist broadened the definition to include people who have given up looking for jobs but who would be happy to return to the workforce, countering the argument that jobless figures are skewed because they ignore the long-term unemployed who have given up the search. The Chief Economist expanded the definition to include part-time workers who would prefer full-time employment, countering the claim that unemployment figures are skewed by ignoring people who are forced to work part-time because they couldn’t find full-time positions. In addition, in an effort to account for any possible bias, the Chief Economist examined different breakdowns of the duration of the job hunt.

The aim of the report was to uncover distortions in the international definition of unemployment, to determine Israel’s “true” unemployment rate, after accounting for these flaws.

As noted, the OECD sets the definition of unemployment, so any discussion of true or untrue unemployment is moot. The entire world uses this “distorted” definition, so Israel should use it too. But to counter the various claims and conspiracy theories, the Chief Economist asked how unemployment in Israel would look after correcting for the inherent distortions in the international definition.

Women won’t be hurt

The conclusion of the Chief Economist Department’s examination of all five definitions of unemployment was definitive: By any definition, unemployment in Israel is declining and is at a historic low. Moreover, it is below the OECD average. The perception that Israeli unemployment is low because many people settle for part-time work is wrong.

The proportion of involuntary part-time employees is higher in Israel than in other developed nations. This is especially true for women. When these people are included in the definition of unemployment, Israel’s unemployment rate does surpass that of the United States. (By all other definitions, Israel’s is lower.) Yet even by that expanded definition, Israel’s unemployment rate is significantly below the OECD average.

Finally, the Chief Economist looked at the definition of unemployment by age group. By whatever breakdown of unemployment one looks at, the situation of older women is better than that of younger ones, even when including women who have to do part-time work because they can’t find full-time work, or women who have given up on finding work: Unemployment is lower for older women than for younger women.

That factoid supports what the Finance Ministry, the Bank of Israel and the OECD have been saying all along, that women would be better off if their retirement age was raised. But it doesn’t support the conspiracy theory. There is no sign that the data in the Chief Economist’s study was cherry-picked or skewed, and no reason to suspect that it was. The fact is that the Chief Economist made a startling conclusion: There are grounds for not raising the retirement age — for men, that is.

There is evidence that the proportion of men on the margins of the labor force, or involuntarily working part-time, increases with age. The evidence shows that ageism is alive and kicking in the Israeli labor force — for men, not women. That should make the retirement-age committee think carefully, but not about opposing any increase of the retirement age for women.

The Chief Economist’s study was also attacked on the grounds that the good unemployment figures ignore the problem of low wages in Israel. That complaint is true, it’s just totally irrelevant. The Chief Economist Department did not set out to determine that the Israeli labor market is perfect. All it set out to do was to examine whether our employment situation is as good as the statistics say, even when studied by rigid criteria. Altogether, it is; and it’s time we learned how to take good news too.