The Unemployment Figures Netanyahu Forgot to Mention

A single statistic can't portray the true state of the economy. Focusing on it is like a person who returns from a month-long cruise and crows: "Wow, my home electricity bill went down!"

The Prime Minister's Office recently sent an e-mail to all newspapers to remind the public of things Israel should be proud of. The e-mail was titled, "Unemployment Figures as of September 2012."

A glance at the enclosed presentation indicated that the state of the Israeli economy was excellent.

While Spanish unemployment is not less than 25%, in Greece 23%, Ireland 14.9% and the average for the euro bloc is 11.3%, here in Israel unemployment is at the other end of the scale at only 6.5%, just slightly higher than that of mighty Germany, where unemployment is 5.5%.

It goes without saying that this is a fine number, 6.5%.

But making a single number the object of reverence and joy - especially since it is a figure that changes every month - is like a person who returns from a month-long Caribbean cruise and tells himself: "Wow, my home electricity bill went down!" But the big picture is something else entirely; the

This chirpy tourist, and the government, shouldn't fixate on meaningless minutiae. Joblessness figures move by the month. They need to look at the big picture.

So let us examine other statistics that the government would prefer we ignore.

Take for example the rate of participation in the labor force, a figure no less important than the unemployment rate.

Figures from the Organization for Economic Cooperation and Development at the end of the first quarter of 2012 show that workforce participation is 79% in Switzerland, 78% in Iceland, 75% in Norway, 73% in Germany and 70% in Japan.

Israel is in the rear with 66%.

Which countries have an even lower participation rate than Israel? Poland, 60%; Ireland, 59%; and Hungary, 56%.

The workforce participation rate is critical. It is a fundamental characteristic of the Israeli labor market, much more so than the monthly unemployment rate. The explanation for Israel's low number is simple: Nations with the highest participation rates do not have large population sectors in which relatively few people work, such as Israel's Arabs and ultra-Orthodox.

According to the most recent figures from the Bank of Israel, which are in dispute, the 25% employment rate among Arab women (compared to almost 60% for Jewish women ) along with the 45% rate for Haredi men are the combined weight pulling down the Israeli labor market - and propping up the levels of various government allowances.

With Haredi men, the government is far from the goal it set for itself by 2020: 63% employment. The government has also found difficulty meeting its goals for integrating Arab men and women into the workforce. Stubbornly refusing to understand the realities of the Arab labor market, the government continues offering work to Arabs in the Jewish community while failing to provide incentives to employers who create jobs in the Arab sector, or in industrial areas sorely lacking in Arab industry.

True, unemployment is low, but when workforce participation is also low, there are hundreds of thousands of Israelis living in a cycle of poverty and needing income subsidies.

Too old to work?

As for employment of adults in the 55-to-64 age bracket, Israel's situation is pretty good compared to the OECD numbers. The average workforce participation rate among older people is 55% in OECD nations and 63% in Israel. But take note that the countries with the highest participation rates for this demographic - 78% for Iceland, 74% for New Zealand, 73% in Sweden and 70% in Norway - are still much higher.

Employment of older adults is critical in a world where life expectancy is steadily rising. At the rate older adults are leaving the workforce and not finding other jobs, we can expect much higher poverty rates among the elderly due to low pensions, even lower old age allowances and a lack of jobs.

Awareness of the problem is growing, which can be seen by a number of recent petitions to the High Court of Justice filed by academics nearing the mandatory retirement age of 67. The petitioners are demanding not to be forced into retirement from public sector jobs because of their age, which will also leave their employers - and the public - missing their knowledge and experience.

The demand to cancel the mandatory retirement age in Israel is gaining support, yet the movement to raise the retirement age for women has run into some resistance from women's organizations and female Knesset members who rallied against the bill to raise the retirement age - and have thus sentenced many women to years of living in poverty.

There are no incentives in Israel for employers to integrate older workers into the workplace, and therefore they have no motivation to do so. The idea that the world belongs to the young, and people over the age of 50 are no longer relevant and should go off and take care of their grandchildren, has also sentenced a large community to poverty. Who needs to support them? The state of course.

The working poor

Another important matter that the Prime Minister's Office is not very quick to mention is the high number of contract workers. Israel has the highest rate in the entire world of contract workers - 5% to 10% of the workforce. This compares to only 1.6% in Germany, 2% in the United States, and 1% in Norway.

Contract workers are poor virtually by definition. The vast majority of such workers - not including those in information technology, who receive good salaries in general - make only minimum wage. Many are exploited, do not receive monthly pay slips and certainly do not accumulate the social benefits they deserve.

If you ask the Prime Minister's Office, these are people who work and reduce the unemployment rate, but in fact they are the working poor, and their numbers are rising constantly as the cost of living climbs.

It would be appropriate for the Finance Ministry, Central Bureau of Statistics and Prime Minister's Office also to publish the number of working poor at the same time they publish the unemployment data. These numbers would show better than any other the true picture of the economy, and it is not flattering.

Labor market volatility

Another crucial figure to pay attention to over time is the volatility of the job market - in other words, how much a worker can depend on keeping his or her job over the long term. This means looking at the unemployment data over a number of years - and measuring the stability of the job market. Prof. Momi Dahan, head of the School of Public Policy and Government at Hebrew University in Jerusalem, has created an index that represents the variations in the Israeli economy over time that are not represented in the unemployment statistics for a single year. Dahan found that the risk of an Israeli losing his livelihood over time due to macroeconomic conditions is much higher than in the United States, and over twice that in Europe. Something for our leaders to remember when they are rejoicing over the unemployment figures.

Such joy over partial monthly unemployment figures is premature. True, there were no great waves of layoffs that were forecast in some headlines, but if we insist on looking at the long term, and not just a month at a time, the big picture tells us there is plenty to worry about.