Taub Center researchers Michael Debowy, Prof. Gil Epstein, and Prof. Avi Weiss describe the developments in the labor market following the COVID-19 pandemic: a consistent increase in the number of employees in the economy’s various sectors, low rates of unemployment, the setting of new records in labor force participation rates among women, and an increase in employment rates in the periphery, alongside a slowdown in the high tech sector. They also describe encouraging developments in higher education.
The rate of unemployment in Israel (until the war) was lower than it has ever been; the achievements in wages during the past year surpassed those in other high-income countries
Between January and September 2023, the broad rate of unemployment stood at 4% on average. This is lower than the average level over the same period in 2022 (5.1%) and significantly lower than the average level in 2021 (11.3%). This period was characterized by a tight labor market, as it was the previous year, and the rates of employment were not affected by risk factors such as global inflation, the raising of the interest rate by the Bank of Israel, and political shocks caused by the planned judicial reform.
Although the low rate of unemployment, both in historical terms and relative to other countries, is encouraging in terms of the workforce potential, in actuality the economy is not approaching full use of its potential workforce and it is possible to increase both the labor force participation rate and the employment rate. At the beginning of 2023, the rate of employment in the 25–54 age group was similar to the OECD average, but 6–8 percentage points less than in countries such as Slovenia, Czechia, Hungary, the Netherlands, Iceland, and Switzerland. The rate of employment is less impressive than the rate of unemployment in view of the relatively low overall labor force participation rate (82.1% in Israel vs 81.9% in the 25–64 age group in the OECD in 2022), which varies across population groups in Israel.
In 2022, wage achievements during the pandemic and the recovery from it were eroded, due to, among other things, the sharp increase in prices at the end of the pandemic period and the outbreak of the Russia-Ukraine war. During the first half of 2023, the trend reversed and wages again rose. Overall, monthly wages in real terms were about 1% higher between January and September 2023 than during the same period in the previous year and about 9% higher than in the same period in 2019.
In most high-income countries wages were eroded during the pandemic and following it, and in particular over the past year. Thus, the average wage in the OECD countries fell by 2% between 2019 and 2022 and by 4% between 2022 and 2023. Israel is the only one of these countries in which the real hourly wage rose both between 2019 and 2022 and during the past year.
The warnings of a crisis in the high tech sector are not baseless given the slowdown in hiring and the sharp increase in layoffs
The study indicates an increase in the number of employees in most industries in Israel during the first nine months of 2023. Of about 153,000 new jobs during the sample period, about 20,000 were in wholesale and retail commerce and vehicle repair; about 27,500 in education; about 20,000 in transportation, warehousing, postal, and courier services; about 18,000 in information and communication; and about 13,000 in food and accommodation services. There were declines in the number of employees primarily in electricity production, gas, steam, and air conditioning (about 1,900 employees).
The rate of growth in the high tech sector slowed in the second and third quarters of 2023, which is in line with global trends. However, while the trend was moderate in other countries, there was a particularly steep decline in hiring in Israel (although the large well-established companies continued to expand). While the drop in the number of workers in parts of the Israeli high tech sector may lead to increased efficiency, it is not expected to benefit Israeli workers, and it can be assumed that the first to suffer will be those from a relatively weak socioeconomic background, those with a lower-quality formal education, graduates of the colleges, and members of the Arab community.
Between April 2022 and February 2023, there was a sharp increase in the number of jobseekers in high tech – 74% as opposed to only 10% in other sectors. During that period, the number of jobseekers from high tech who had been let go from their jobs almost doubled, while the number among jobseekers in other industries grew by only 15%. These data provide further evidence of the accelerated drop in employment in the high tech industries, although there may be other factors involved, such as slower growth in the supply of high tech jobs relative to demand.
Although the rates of employment in the periphery have increased, geographic disparities remain unchanged
During the past two years, there has been a relatively consistent increase in the employment of Arab and Haredi (ultra-Orthodox Jewish) men, which brought their employment rates up to 76% and 56%, respectively in the second quarter of 2023. This is an impressive accomplishment relative to the lows reached at the beginning of 2021 – 61% and 50%, respectively.
Among women in Israel, the rates of employment reached historic highs in 2023 for the second year in a row. During the first half of 2023, Jewish non-Haredi women maintained a high employment rate of about 83%; the rate of employment among Haredi women was 79%‒82% and among Arab women it reached an all-time high of 45%.
Individuals in the 67–74 age group were harmed less in employment terms from the pandemic but their recovery from it was slower. During the first half of 2023, the rate of employment in this population had not yet returned to its 2019 level, due to, among other things, the rise in the average age in this group.
During the first half of 2023, and for the first time since the onset of the pandemic, the level of employment in the periphery exceeded its 2019 level. Between January and May, the employment rate in the Jerusalem region was 1 percentage point higher than during the same period in 2019. An identical pattern was observed in the North, while in the South, the employment rate remained similar to its 2022 level and somewhat lower than its 2019 level. Similarly, the disparity in employment between Jerusalem and the North on the one hand and the Center and Tel Aviv on the other hand returned to its pre-pandemic level while the disparity between the South on the one hand and Center and Tel Aviv on the other was similar to its level in 2022.
The developments in higher education: the number of Arab students grew as did the share of students in technology majors
In the 2021/2022 academic year, the share of undergraduate students remained much higher than forecasts of the downward trend of the past decade and even reached its highest level since 2014. The annual rate of increase in the share of students remained positive in that year.
The number of Arab undergraduate, graduate, and PhD students grew by 5%, 9%, and 3% respectively, relative to the previous academic year. In contrast, the number of Jewish and other students did not grow significantly and, in some cases, it even declined. Between the 2011/2012 and 2021/2022 academic years, the number of Arab undergraduate students grew by 85%, the number of Arab master’s degree students grew by 141%, and the number of Arab doctoral students grew by 113%.
Between the 2014/2015 and 2021/2022 academic years, the proportion of students studying mathematics, statistics, and computer science grew significantly — among Jews and others by 29% and among Arabs by 23%. In contrast, there was a significant decline in students in the social sciences, humanities, education, and art — 15% among Jews and others and 21% among Arabs.
The Taub Center researchers also examined the number of students by study major and gender. The findings point to a clear tendency among men to study mathematics, statistics, computer science, engineering, and architecture: in the 2021/2022 academic year, 40% of male students chose these study majors in contrast to only 15% of female students. It was also found that 30% of the male students and 40% of the female students studied computer science or business administration that year; 4% of male students and 12% of female students were studying medicine or paramedical professions; and 11% of male students and 19% of female students were studying humanities, education, or art. In law, the natural sciences, and agriculture, the proportions of male and female students were relatively similar.
Prof. Gil Epstein, one of the study’s authors, sums up as follows: “The developments in the labor market during the first three quarters of the year are positive overall. We saw an increase in the employment rate and a drop in the unemployment rate, employment among Haredi and Arab men increased, and that of women in all population groups continued to grow. Even in the periphery, employment increased —and, in some places, it surpassed its 2019 level. Nevertheless, it is important to note the slowdown in the high tech sector, which is seen in a drop in hiring and an increase in the number of layoffs. In higher education, the situation is still positive and the number of students has grown consistently. In particular, the proportion of students in the technology fields continued to grow, and particularly among women and Arabs. It is hoped that the high tech sector will recover quickly and will be capable of absorbing the students who have chosen these professions.”
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