Professional Documents
Culture Documents
ISRAEL
-A Position Paper-
Yitzhak Gal
Yoav Stern
Barak Greenapple
May 2010
Authorities in Israel are in disagreement over the issue of employing Palestinian workers in Israel. On
the one hand, there are those who contend that Palestinian workers will drive Israeli workers into
unemployment. Others say that Israelis in any event do not work in the occupations that the
Palestinians are employed in, and the latter will only replace the foreign workers who have become
part of the Israeli labor market, as is par for the course in the OECD countries.
A dispute also exists within the Israeli government regarding the employment of Palestinian workers
in Israel. Some of the government ministries would prefer that Israel employ Palestinians over foreign
workers, due to the implicit political, public relations and economic benefits of a measure that will be
interpreted as granting alleviation to the Palestinians. Others, particularly in the Ministry of Finance
and at the Bank of Israel, view the Palestinian workers as they view the foreign workers -- namely as a
threat to the employment of Israeli citizens, particularly those from the weaker strata.
Our position is that a practical distinction should be drawn between Palestinian and foreign workers:
unlike the foreign workers, the Palestinian workers will return to their homes at the end of their work
day, where the money they earn in Israel will stimulate the Palestinian economy, which is tightly
interwoven with the Israeli economy.
The issue of Palestinian workers in Israel raises fundamental questions: Does the employment of
Palestinian workers actually portend widespread damage to the Israeli economy? Or might the
employment of a calculated number of Palestinians benefit the Israeli economy and the broader
national interest?
This document researches the needs of the Israeli economy as they pertain to the employment of
Palestinian workers. The focus is primarily on two areas: construction and agriculture. Our
recommendation is to permit 25,000 additional Palestinian workers to work in Israel over a graduated
timeframe of 2 years, and in total to allow 50,000 Palestinian workers to enter and work in Israel.
These workers will constitute 2% of the Israeli labor market and 7% of the total employed
Palestinians, plausible ratios for both economies.
We are dealing with a specific measure with far reaching economic implications and the potential to
immediately ameliorate the condition of scores of thousands of Palestinian families. There are those
who would argue that our recommendation dovetails with the policy of "economic peace" that Prime
Minister Binyamin Netanyahu enunciated, particularly during the election period. Our position in this
regard is clear: economic peace cannot be sustained on its own; it can only be achieved alongside a
political process which effectively realizes the “two states for two nations” solution. Only a genuine
political agreement can guarantee both true stability and security. At the same, it will bring economic
growth to Israel as well as a boost to the Palestinian economy, allowing it to solidly stand on its own
feet.
This paper has already been circulated among Israel’s key decision makers and presented by its
authors to the relevant governmental ministries. It is our hope that the analysis and recommendations
provided herein will serve as valuable and constructive inputs for the Israeli inter-ministerial
committee which is currently debating this very issue.
I would like to express my thanks first and foremost to the Embassy of the Netherlands in Israel for
supporting the production of this document. I would also like to thank the Danish embassy, since our
need to address this important topic was stimulated by another project in which they assisted us. I also
want to thank the report's authors and the team in the Business and Economics Department of the
Peres Center for Peace, who are leading and realizing many projects that promote the construction of
economic and commercial relations between Israel and the Palestinians. I fully hope that you will find
this document both interesting and useful.
Cordially,
The Advantages to the Palestinian Economy and the Welfare of the Palestinian Population
The overall effect of employing 25,000 additional Palestinian workers in Israel can be very
significant, most notably in a growth in the GDP on a scale of 5%. Such growth reflects a
direct and indirect reduction of unemployment on a scale of over 5% (in addition to the
workers who will move from part-time employment with very low wages to full-time
employment at a higher salary level -- something that is not reflected in the unemployment
statistics but makes an additional contribution to the GDP).
Table of Contents..................................................................................................................8
Interviews ...........................................................................................................................22
Background Data: The Palestinian Labor Market
And Palestinian Workers in Israel
3
The analysis in this chapter is based primarily on data from the Palestinian Central Bureau of Statistics –
hereafter PCBS.
4
Source: PCBS Ongoing Workforce Survey, Second Quarter, 2009, Table 1.
5
The participation rate in the workforce = the percentage of the total population at the work age that is looking
for work. The rise in the rate of participation derives to a large extent from a higher rate of women obtaining
academic education and seeking to integrate in the labor market. According to the aforementioned workforce
survey, the participation rate of women with higher education (13 years of study and over) approaches 50% --
fivefold the average rate of participation of women with an education of 0-12 years of study. The total
participation rate of those with higher education (women and men) is about 60%, in comparison with about
40% on average amongst those with an education of up to 12 years of study.
6
The source for the data up to 1994 is the Israeli Central Bureau of Statistics; from 1994 onwards it is the
PCBS -- various tables as well as the Current Workforce Survey, second-quarter 2009, table 1.
7
The calculation is made by employing the "broad definition" that also considers as unemployed a person who
previously searched for work but "gave up" and stopped looking for work on an active basis. According to
the more restrictive definition (the definition employed by the International Labor Organization that
considers only someone who continued to look for work on an active basis as unemployed) the
unemployment rate in the West Bank declined in mid-2009 to about 16%. Source: PCBS -- various tables as
well as the current workforce survey, second-quarter 2009, table 2.
The Employment of Palestinian Workers in Israel
Quantities and Development
During the years prior to the establishment of the Palestinian Authority, the work of
Palestinian laborers in Israel exerted enormous influence over the Palestinian economy and
employment.
For a period of about 20 years, from the mid-1970s until 1993, work in Israel constituted a
third of all Palestinian employment. Between the years 1990-1992, for example, the number
of Palestinian workers in Israel ranged between 100,000-115,000, compared to a total of
about 200,000 employees within the areas of the West Bank and Gaza.8
During the early years of the Palestinian Authority, the number of Palestinian workers in
Israel declined significantly (particularly in the years of the severe terror attacks of 1995-96).
Towards the close of 1990s, however, a sharp rise was recorded, and in the years 1999-2000
(until the eruption of the intifada at the end of September 2000) the number again rose to over
100,000.
At the end of the year 2000, the employment of Palestinian workers in Israel (with the
exception of those from East Jerusalem) was almost completely terminated. In recent years,
with the improvement in security conditions in the West Bank, the employment of Palestinian
workers from the West Bank in Israel was renewed. The picture, as of mid-2009, is as
follows:
• According to Israeli data, the total number of Palestinian workers employed in Israel
and in Israeli communities in the West Bank is 48,000, of whom 26,000 are employed
inside Israel and the rest in Israeli communities in the West Bank (including Israeli
industrial zones in the West Bank).9
• The Israeli data is corroborated by data from a Palestinian Authority labor survey,
which attests that as of mid-2009, there were 49,000 Palestinian workers in Israel and
Israeli communities in the West Bank.10
• The aforementioned workers (all from the West Bank) constitute 9% of all Palestinian
employees who are residents of the West Bank, and about 6% of the total number of
Palestinian employees (including Gaza).
If we were to exclude the Palestinian workers in Israeli communities in the West Bank, work
in Israel proper accounted for about 5% of total employment of Palestinians living in the West
Bank and about 3% of total Palestinian employment (including Gaza).
According to Israeli estimates, the number of illegal Palestinian workers working in Israel is
not high. According to the report of the Inter-Ministerial Committee on the Topic of Non-
Israeli workers from 2007 (The Eckstein Commission), the total number of illegal Palestinian
workers is estimated at only 7,000, compared to 102,000 illegal foreign workers.11
A PCBS survey of the Palestinian workforce living in the West Bank districts informs us that,
except for a few districts that send an unusually large number of workers to Israeli
8
Source: calculated according to the Israeli Central Bureau of Statistics data.
9
The State of Israel, Report to the Conference of Donor Countries to the Palestinian Authority, September
2009
10
Source: PCBS -- the Current Workforce Survey, second-quarter 2009, table 30, excluding East Jerusalem
residents who appear on a separate line in the table.
11
Report of the Commission for Shaping Policy with Regards to Non-Israeli Workers, September 2007, p. 31,
table 4-a.
communities and industrial zones located within the West Bank territories (specifically, the
Jericho district – which includes the Jordan Valley – as well as the Salfit and Kalkilya
districts), employment in Israel is divided relatively equally among Palestinian workers from
all the West Bank regions. 12
Nearly 60% of the Palestinian workers who work in Israel are employed in the construction
industry; a quarter of them are employed in agriculture; about 10% work in industry; and the
rest are employed in other sectors. 13
This per diem wage is higher by 70% than the per diem wage for workers in the area of the
West Bank and higher by 130% than the average wage in Gaza (87 shekels per diem and 64
shekels per diem respectively).
Comment: The aforementioned salary, as reported by the Palestinian Central Bureau of
Statistics, reflects incomplete reporting. As mentioned below, the employment terms in Israel
for a legal Palestinian worker are identical in terms of labor laws, to those for an Israeli
worker. Therefore, the Israeli employer is obligated to pay a minimum wage that currently
totals about 178 shekels per diem. The minimum monthly wage of day workers, calculated on
the basis of 20 workdays a month as reported in Palestinian statistics, is nearly 3600 shekels.
When one adds to this the social allotments mandated by Israeli law, the wage cost to the
employer exceeds 4000 shekels a month (the minimum wage for a monthly worker is 3850
shekels per month, and the total cost to the employer exceeds 4500 shekels).
The employment of legal Palestinian workers in Israel has been regulated for 20 years by a
highly formalized and efficient system that classifies and approves Palestinian workers for
work permits in Israel. The system is currently operated within the framework of the Ministry
of Industry Trade and Labor, in full cooperation and coordination with the defense system.
As noted above, from the standpoint of labor laws, the terms of employment in Israel for a
legal Palestinian worker are identical to the terms for an Israeli worker (minimum wage,
Social Security, pension, sick days, paid vacation, etc.). His employment is regulated vis-à-vis
the employer via the Support Unit for Foreign Workers in the Ministry of Industry Trade and
Labor and he is entitled to the protection of the Histadrut, the General Workers Association
(in return for a labor organization tax that is deducted from the salary of legal Palestinian
workers).
This classification and handling apparatus monitors the employment of Palestinian workers
and ensures that licensed Palestinian workers are employed according to both the binding
12
Source: PCBS -- the Current Workforce Survey, second-quarter 2009, table 20.
13
The Eckstein Commission Report, ibid., as well as data updates from the Association of Contractors.
14
Source: PCBS -- the Current Workforce Survey, second-quarter 2009, tables 33,36. This data coincides with
the scale from the Israeli data, as reported by the employers to the Support Unit for Foreign Workers in the
Ministry of Industry Trade and Labor, while deducting the allotments mandated by law.
labor laws and the accepted yardsticks in the international system, including full compliance
with OECD demands.
The three crossing points that see the bulk of Palestinian worker traffic (Gilboa, Shaar
Ephraim and Tarkumiya) are organized and experienced, and currently handle the daily
passage of Palestinian workers efficiently and professionally. An analysis comparing the data
of workers currently passing through these crossing points to the points’ capacity shows that
without making any adjustments, they can serve an additional 5000+ workers per day; with
relatively slight adjustments, yet another 5000 additional workers could cross at these points
(see below).
15
Various documents of the Association of Contractors and Builders in Israel during the course of 2008 and
2009.
16
Based on interviews as detailed in the appendix and on an analysis of agricultural output and export data.
flexibility to the manpower roster will provide the farmers with the requisite security to
increase production and agricultural export.. Within a few years it will facilitate a boost in
agricultural exports of 100-200 billion additional dollars per annum and a similar
increase in the agricultural product (an addition of about 0.5% to the Israeli GDP).
The replacement of foreign workers with Palestinians will also permit the rapid and effective
implementation of the Inter-Ministerial Committee's recommendations for encouraging the
employment of Israelis and reducing the number of foreign workers (the Eckstein
Commission, in its updated reports from January 2000 dealing with the agricultural sector).
The commission recommends a new policy for employing workers who are not Israelis,
according to the framework and employment plans that prevail in the OECD countries. These
plans facilitate the introduction of foreign workers for brief periods, in accordance with
seasonal and specific needs, while guaranteeing the transience of the foreign worker's
sojourn.
The OECD policy document recommends that the developed countries set an
employment policy and plans that contend in a focused manner with the specific needs
of the local economy in areas where low-skilled foreign workers are required, while
operating control and enforcement mechanisms to prevent competition with local
workers.
The framework for the employment of Palestinian workers in Israel will optimally dovetail
with this approach and with the policy proposed by the Eckstein Commission.17
The Optimal Solution from Israel's Perspective: A Calculated and Focused Increment of
Palestinian Workers to the Construction and Agricultural Sectors
Considering the entirety of the analysis and the aspects discussed above, we recommend
increasing the number of work permits in Israel by the amount of 25,000 Palestinian workers
(from the areas of the West Bank) in two stages:
• About 8000 work permits would be granted on an immediate basis as a response to the
urgent needs of the agricultural and construction sectors in Israel.
• 15,000-20,000 additional permits would be granted on a gradual basis over the
remainder of 2010 and in 2011 as a response to specific demands in the agricultural and
construction sectors. These Palestinian workers will gradually replace foreign workers.
With the completion of these two measures, the total number of Palestinian workers in Israel
(not including Palestinian workers in the industrial zones and the Israeli settlements in the
West Bank) will increase from the current amount of 25,000 to 50,000.
Their total ratio will be about 2% of all employees in the Israeli economy and about 7% of all
employed Palestinians -- reasonable ratios for both economies.
The proposed gradual and calculated approach and the individual approach of the system
handling work permits for Palestinian workers will facilitate an individual response to specific
conditions that might endanger the employment of Israelis. In such cases the specific
employer will not be granted a work permit for Palestinian workers unless the system has
been persuaded that there is no practical possibility to recruit Israeli workers for the sought
after job.
In Summation
The Palestinian workers would serve as an almost complete substitute for foreign workers in
the agricultural and construction sectors (as they were in the past, prior to the year 2000).
Over the years 2010 and 2011, granting work permits in the amount proposed above will
facilitate the replacement by Palestinian workers of some of the foreign workers who are still
working in agriculture and construction.
Furthermore, the proposed addition of Palestinian workers to the construction and agricultural
sectors in Israel will end the bottlenecks that impair the normal activity of these two sectors;
will enable a GDP growth of 2%; and will mean the addition of 10,000 supplementary jobs
for Israelis.
This measure will also yield great advantages for the Palestinian economy and for the welfare
of Palestinians residents of the West Bank. It also dovetails with an Israeli policy that strives
to promote economic peace and to improve the welfare and quality of life of the Palestinians
in the West Bank.
Furthermore, an Israeli decision to substantially increase the number of work permits for
Palestinian workers in Israel will be gratefully received and acknowledged by the
international community in general, will improve Israel's international image, and will aid
Israel's public relations needs, which is especially needed in its relations with the Palestinian
Authority, discussions with the OECD, etc.
List of Sources
Professor Zvi Eckstein, Chairman, The Eckstein Commission Report-The Inter-Ministerial Committee
for Shaping Policy with Regards to Non-Israeli Workers, September 2007
Professor Zvi Eckstein, Chairman, Report of the Inter-Ministerial Committee for Promoting the
Employment of Israelis and Reducing the Number of Foreign Workers in Agriculture, January 2010.
The Foreign Ministry of the State of Israel, The Government of Israel' s Report to the Coordinating
Committee of Donor Countries to the Palestinian Authority, September 2009
PCBS (Palestine Central Bureau of Statistics), www.pcbs.gov.ps : Labor Statistics, various tables;
National Accounts Statistics; Labor Force Survey April – June 2009
Central Bureau of Statistics, The State of Israel: National Accounts -- various tables
The Association of Builders and Contractors in Israel, The Construction and Infrastructure Branch:
Survey of 2008 and Forecast for 2009 -- 2011, March 2009, as well as various memoranda 2008-2009
The Peres Center for Peace, Assembled Data from a Tour of the Crossing Points, September 2009
The Ministry of Industry Trade and Labor, The Support Unit for Foreign Workers, Assembled
Employer Allocations and Deductions from Workers' Salaries by Sectors -- For Workers in the
Autonomy, 01/08 Update.
The Knesset Research and Information Center, Employment Policy in the Construction Sector and Its
Repercussions on Work and Workers in the Sector, January 2009
World Bank & IMF, Economic Monitoring Note and Macro Economic & Fiscal Assessment, April
2009
World Bank, A Palestinian State in Two Years: Institutions For Economic Revival, September 2009
Interviews
Name Body Position
Zvi Alon The Plants Production and Marketing Chairperson
Board
Gadi Horowitz The Plants Production and Marketing Director of the Fruit Sector
Board
Yizhak Association of Contractors and Builders Deputy CEO and Director of the
Gurevich in Israel Economics and Finance Departments
Shmuel Zuriel Israel Hotel Association CEO
Yoav Bachar Israel Hotel Association Deputy CEO for Human Resources
Eli Paz The Ministry of Industry Trade and Senior CEO for Emergency Situations
Labor
Dan Catarivas Manufacturers Association of Israel Director of the Division for Foreign Trade
and International Relations
Michal The Ministry of Finance Director of the CEO's Staff
Finkelstein
Michal Zuk The Ministry of Finance Budget Division
Adi Ashenazi The Ministry for Regional Cooperation Head of the Economics and Research
Division
Yishai Soreq The Ministry for the Development of Head of the Regional Frameworks
the Negev and the Galilee Division
Yael Ravia- The Foreign Ministry Head of the Middle East Economy unit
Zadok of Foreign Affairs
Saeeb Bamiya Former Deputy Minister of economics in the Palestinian Authority and senior
economic advisor to Palestinian bodies and executives