Palestine Economic Policy Research Institute Palestinian Employment In Israel: 1967-1997 A Review Leila Farsakh August 1998 Copyright © 1998 Palestine Economic Policy Research Institute (MAS) P.O. Box 19111, Jerusalem and P.O. Box 303, Ramallah Tel: ++972-2-2987053/4, Fax: ++972-2-2987055, e-mail: [email protected] Board of Trustees: George Abed, Hani Abu Dayyeh, Edmond Asfour, Kamal Hassouneh/Treasurer, Nadia Hijab, Taher Kanaan/Chairman, Anis F. Kassim/Secretary General and Counsel General, Nabeel I. Kassis/Deputy Chairman, Maher El-Masri, Hassan Abu-Libdeh, Mariam Mar'i, Ahmad Qurie, Yusif Sayigh The Palestine Economic Policy Research Institute, or Ma'had Abhath As-Syasat Al-Iqtisadiyah Al-Filistini (MAS), is an autonomous think tank founded in 1994 that engages in applied economic and socio-economic research and provides expert analysis of policies and strategies critical to the development of the Palestinian economy. During the transition to statehood, MAS’ mission is to support Palestinian policy makers, institutions, and organizations working on economic development and reconstruction by providing in-depth analysis of policy options that will enhance the decision-making process. MAS also seeks to cooperate closely with scholars and research groups who share similar interests and goals. Current research activities at MAS focuses on economic and socio-economic issues that are critical in the building phase of Palestinian public institutions, and include policy studies in trade and industry, public finance, monetary policy, labor and human resources, social security and welfare, and monitoring of economic and social indicators. List of Publications Studies: The Competitiveness of Palestinian Industry Compared to Jordanian Industry, 1996 (out of print) Employment Generation Schemes in the West Bank and Gaza Strip, 1996 A Preliminary Evaluation of the Tax System in the West Bank and Gaza Strip, 1996 Trade Relations Between Palestine and Israel: Free Trade Area or Customs Union? 1996 The Palestinian Banking System: Reality and Potential, 1996 Toward a Vision of Palestinian Economic Development, 1996 Informal Social Support System (non-institutionalized) in the West Bank and Gaza Strip, 1997 The Palestinian Tourism Sector: Present State and Future Prospects, 1997 Living Standards in the West Bank and Gaza Strip, 1997 Social Support Institutions in the West Bank and Gaza Strip, 1997 (in Arabic) Opportunities and Potentials for Palestinian Industrialization, 1997 The Workplace as a Source of Pension Benefits and Health Insurance in the WB and GS, 1997 The Impact of the Peace Process on the Textile and Garment Industry in Palestine, 1997 Palestine and Israel: Subcontracting Relations in the Garment Industry, 1997. Tanning and Natural Leather-Based Industries in the West Bank and Gaza Strip, 1998 Informal Finance and Lending NGOs in the West Bank and Gaza Strip, August 1998 First Reading in PCBS Statistical Reports Series: The Industrial Survey-1994: Main Results, Report No. 1, 1997 Services Survey-1994: Main Results, Report No. 1, 1997 National Accounts-1994: Preliminary Estimates, 1997 Discussion Papers: Trade Policy Options for the West Bank and Gaza Strip, 1997 Health in Palestine: Potential and Challenges, 1997 Infrastructure in the West Bank and Gaza Strip: Institutions and Growth, 1997 MAS Economic Monitor: Issue Number 1, June 1997 Issue Number 2, December 1997 Issue Number 3, June 1998 MAS Social Monitor: Issue Number 1, January 1998 To order publications and to enquire about past publications: Contact the Administrative and Finance Director at the above address. Palestine Economic Policy Research Institute Palestinian Employment In Israel: 1967-97 A Review Leila Farsakh August 1998 Palestinian Employment In Israel: 1967-97 Author: Leila Farsakh, Associate Researcher at MAS Palestine Economic Policy Research Institute (MAS) Jerusalem and Ramallah August, 1998 1998 MAS Abstract Since the occupation of the West Bank and Gaza Strip (WBGS) in 1967, Israel has been an important employment outlet and source of income for the Palestinian people. The Israeli labor market absorbed nearly a third of the WBGS labor force between 1975-1990 and the income generated by these workers contributed to a quarter of the WBGS GNP. Since 1993, restrictions on Palestinian access to Israel have contributed to the rise in unemployment and to the fall in per capita income. In view of the important role played by the Israeli labor market, this study sets itself the task of reviewing the trends and causes of the flow of Palestinian labor to Israel over the course of the past thirty years. It reveals that during this period Palestinians working in Israel have increased in age and have become more educated and skilled. The number of workers grew steadily up until 1992, reaching a peak of 116,000. The Israeli labor market absorbed 40% of Gaza Strip workers between 1975-1992 and 30% of West Bank laborers. After 1993, however, access to the Israeli labor market become more difficult, particularly for Gaza Strip workers. In May 1996, the number of workers reached an unprecedented low of 36,000, which amounted to less than 10% of the Palestinian labor force. They were mostly from the West Bank. Within the limits of the studies and data available, this review shows that the inability of the WBGS domestic economy to generate sufficient jobs to absorb the growing labor force has been the main factor pushing Palestinians to seek employment in Israel. Domestic unemployment has been an important push factor and the free access to the Israeli labor market up until the late 1980s enabled the Palestinian economy to deplete its pool of surplus labor. In addition, higher wages in Israel have acted as a pulling factor, particularly in the early 1970s and after 1993. However, the wage premium for work in Israel between 1975-87 was small and at times negative. The Israeli policy of border closures and restrictions on the movement of labor after 1993 mean that the Palestinian economy can no longer rely on Israel as a secure employment outlet. The Palestinian economy needs to generate its own local jobs to absorb the growing population. Nevertheless, the labor link to Israel remains important, albeit at a reduced level and in new forms. Further research is needed to examine the future prospects for Palestinian employment both in Israel and in the local economy. New policies are required to protect the rights of Palestinian workers in Israel and to enhance the possibilities of local employment generation. i Acknowledgments This study has been prepared by the Palestine Economic Policy Research Institute (MAS) as part of its research program on Labor and Human Resources. Special thanks are due to Radwan Shaban who initiated the idea of this review and followed up with comments and guidance. Thanks are also due to Numan Kanafani, Osama Hamed, Omar Abdel Raziq and Ibrahim Dakkak for their valuable comments on an earlier draft of this manuscript. ii Foreword The Israeli labor market has been an important employment outlet for the Palestinian labor force. It has absorbed relatively unskilled workers from the West Bank and Gaza Strip, which impacted on the standards of living and income distribution in the country. However, since the early 1990s, access to this market has become increasingly restricted, causing great upheaval in the Palestinian economy. This study, prepared and published within MAS’ research program on Labor and Human Resources in Palestine, reviews the causes and pattern of Palestinian employment in Israel. It explores how the characteristics of Palestinian workers have changed over the past thirty years and identifies the push and pull factors that explain labor flows. It also identifies the constraints imposed on future Palestinian employment in Israel. As this is the most comprehensive study to date to have examined and reviewed the available literature on this issue, it is particularly valuable to all those interested in Palestinian employment and its future prospects in Israel. The study also presents a set of recommendations that we trust will be found valuable to any policy maker concerned with tackling present and future employment challenges in Palestine. Nabeel Kassis Director iii List of Abbreviations Fafo Norwegian Institute for Applied Social Science GS Gaza Strip ICBS Israeli Central Bureau of Statistics ILO International Labor Organization JSGAS Judea, Samaria and Gaza Area Statistics LFPR Labor Force Participation Rate LDC Less Developed Countries LFS Labor Force Survey (conducted by PCBS) MAS Palestine Economic Policy Research Institute NIS New Israeli Shekel PCBS Palestinian Central Bureau of Statistics PHRIC Palestine Human Rights Information Center PNA Palestinian National Authority SAI Statistical Abstract of Israel TLFS Territories Labor Force Survey (conducted by ICBS) US United States UNCTAD United Nations Conference on Trade and Development WB West Bank WBGS West Bank and Gaza Strip (excluding East Jerusalem up to 1993 and including it after 1995 unless stated otherwise) iv Table of Contents ___________________________________________________________________________ 1. Introduction 1 2. Nature of Labor Data Available 3 2.1 Methodology 3 2.2 Data Problems 4 2.2.1 Accuracy of Measurement 4 2.2.2 Data Consistency: 5 2.2.3 PCBS contribution 5 2.3 Definitions 6 2.3.1 Who is included in the labor force: 6 2.3.2 The employment concept: 6 2.3.3 Unemployment: 8 2.3.4 Occupations: 8 2.3.5 Wages: 8 2.3.6 Missed Categories: 8 2.4 Migration Data