Scarred Economy Poses Netanyahu’s Main Challenge as Crisis Fades

Scarred Economy Poses Netanyahu’s Main Challenge as Crisis Fades

Top contenders to run Israel after next week’s election have shared few details of how they plan to tackle widespread unemployment that will be the economy’s biggest post-election challenge, raising questions about how nearly a fifth of the workforce will find jobs.

Israel’s jobless rate, including furloughed workers, soared during the coronavirus pandemic, peaking around 30% before settling back near 18%, even after the economy started reopening from its third lockdown six weeks ago.

Former Bank of Israel Governor Karnit Flug says the labor market has “done somewhat worse than many other countries,” and current policy makers have warned that unemployment could be prolonged despite a world-leading inoculation campaign.

Thousands of businesses folded during the health emergency, mostly hurting unskilled workers who were already struggling in a technology-fueled economy. As of Thursday morning, the country of 9.3 million people had about 500,000 job seekers in total.

“Their long-run prospects are not good in general,” said Dan Ben-David, president of the Shoresh Institution for Socioeconomic Research. “We’re going to pay a price for it if somebody doesn’t deal with these issues in a serious way, but they’re not being dealt with in the public discourse.”

Scarred Economy Poses Netanyahu’s Main Challenge as Crisis Fades

Israel goes to the ballot box for a fourth time in two years on March 23. Polls suggest there may be another inconclusive election, which would mean yet another caretaker government whose policy making will be hobbled.

Last year, Israel’s economy contracted 2.5%, less than the Finance Ministry’s 3.7% forecast, thanks to a high-tech sector that thrived during the crisis. That belies the impact on the labor force, however, because only about 10% of jobs are in technology.

It could also deepen inequality as highly paid tech workers flourish while unskilled workers sit at home. Income inequity in Israel is among the highest in the developed world, according to the latest data from 2019.

“The sectors that actually helped the economy to have a lower decline in GDP are not labor intensive,” Flug said. “Unemployment is the biggest challenge.”

Just before Covid-19, Israel’s unemployment was at 3.4%, the lowest in years. Now a key test looms as economic activity expands thanks to the rapid vaccination effort, and employers reopen businesses.

Official data indicate that the vast majority of job seekers now returning to work have been unemployed for less than half a year consecutively. Those who spend longer out of the workforce have much dimmer prospects.

Gil Tel-Nir, 43, lost his job as a travel agent and has been unemployed since last spring, aside from a few months as a security guard between lockdowns.

“It’s hard for me not to work,” Tel-Nir said. “I’m trying to be optimistic always, even in tough times, and I really, really hope that somehow a miracle will happen and I can find a job soon.”

Scarred Economy Poses Netanyahu’s Main Challenge as Crisis Fades

Social services like Latet, one of Israel’s largest food banks, have tried to make up the difference, adding an additional 12,000 families to permanent support on top of 60,000 pre-crisis, according to research and aid programs director Naama Yardeni. So far, Latet hasn’t seen any improvement in the population it works with, even as the economy reopens.

“It doesn’t seem like any of the parties seized this as the main issue that needs to be addressed,” Yardeni said.

The government also needs to navigate the issue of jobless benefits. Unemployment payments have been extended until June, and some people who’ve been laid off from low-paying jobs are in no hurry to go back.

Tal Dekel, the chief executive of TGL SP Industries, which produces rubber road wheels for Israeli tanks, said he had to cut about 15% of his staff during the pandemic as his civilian business shrank. While broad uncertainty is preventing him from rehiring, he is looking to bring on new workers for specific roles but is having trouble finding applicants.

“People prefer to stay at home,” he said.

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