The Labor Market in Israel in 2024 in the Shadow of War

This chapter of the State of the Nation Report 2024 reviews the status of the labor market after more than a year of war. Taub Center researchers Michael Debowy, Prof. Gil S. Epstein, and Prof. Avi Weiss present unemployment and wage data compared to previous years and other countries, as well as the industries and sectors most affected by reservist mobilization. Additionally, the researchers offer forecasts regarding the future of Israel’s labor market.

Increased unemployment at the outset of the war and a rise in real wages for employees 
At the outbreak of the war, the broad unemployment rate surged by nearly 6 percentage points, with the total number of unemployed and those temporarily absent from work reaching 9.6% in October 2023 — a level not seen since March 2021. However, it significantly declined at the start of the new year. Nevertheless, the rate of non-participants in the labor market who gave up searching for work or stopped working due to layoffs or business closures over the past two years rose compared to previous years. In the first half of 2024, it averaged 1.3% (compared to 0.8% in the same period last year).

The researchers point out that Israel’s low unemployment rate does not necessarily indicate high employment levels from an international perspective. Compared to other countries, Israel stands out positively in the employment of women of working age but negatively in the employment of men (in part due to sectoral disparities). Consequently, the gender employment gap in Israel for ages 15–64 is one-fifth the OECD average, standing at less than 3 percentage points.

The research presents the change in the number of employed persons by economic sector through June 2024, compared to the same quarter in 2022 and 2023. Between the first halves of 2023 and 2024, the total number of jobs in the economy grew by only about 33,000 positions, compared to an increase of about 165,000 during the same periods in each of the two previous years. However, an examination of changes in employment by sector reveals increases in some sectors and decreases in others. The sectors with the largest increases were health, welfare, and social services (an increase of 34,000 employed persons) and education (22,000). In contrast, the largest declines occurred in hospitality and food services (a decrease of 19,000 employees) and information and communication services (15,000, excluding high-tech services). The researchers note that the number of employees in high-tech industries increased by less than 2,000, compared to about 14,000 during equivalent periods in each of the two preceding years.

Regarding wages, real wages for employees rose significantly. From January to May 2024, the average monthly wage of employees was about 3% higher than in the same period of the previous year and about 12% higher in real terms than in the corresponding period in 2019. This follows zero annual change between the equivalent periods in the previous two years (2022–2023 and 2021–2022).

By economic sector, there were notable wage declines among employees in education and in health, welfare, and social services (the sectors with the most significant employment growth, as noted above), as well as in local administration, public administration, security, and national insurance. From January to May 2024, the highest average monthly wages were recorded in the high-tech services sector (NIS 33,400), high-tech industries (NIS 29,800), and finance (NIS 24,700). The lowest average wages were found in hospitality and food services (NIS 6,200), other services (NIS 6,600), and arts, entertainment, and recreation (NIS 7,600). Wage distribution and inequality across sectors remained similar to their levels in the past two years.

Increase in women’s employment and decline in employment among Haredi and Arab men 
In the course of 2023, employment rates among Arab and Haredi men rose impressively, but this trend halted and reversed following the outbreak of the war (for Arab men, the reversal began in the second half of 2023, prior to the war). In the second quarter of 2024, employment rates among Arab and Haredi men stood at 74% and 54%, respectively, compared to 87% among non-Haredi Jewish men. Simultaneously, the average work hours of Jewish men declined; in the first half of 2024, non-Haredi and Haredi Jews worked on average 7% and 5% fewer hours, respectively, than in the same periods of the previous two years. In contrast, Arab men’s weekly work hours remained stable, averaging 39 hours in the first half of 2024, compared to 38 hours for non-Haredi Jews and 32 for working Haredi Jews.

Over the past two years, high employment levels among Jewish women have been maintained. In the second quarter of 2024, employment rates for non-Haredi Jewish women stood at 83%, and for Haredi women at 80%. Arab women showed particularly encouraging results. Unlike men in this sector, women experienced a consistent rise in employment rates, reaching 46% this year — the highest ever for the third consecutive year. Weekly work hours for Arab women rose by 4% compared to the previous two years, with an average of 31 hours in the first half of 2024, compared to 33 for non-Haredi Jewish women and 26 for Haredi women.

In the broader picture, during the war, the upward trend in employment rates for women across nearly all sectors continued almost uninterrupted, while employment among Haredi and Arab men declined. While these sectoral findings are promising, the decline in Arab and Haredi employment is concerning, given the well-known challenges these populations face in the labor market. Additionally, the war exacerbated inter-sectoral tensions, particularly concerning Arab citizens of Israel and issues of equality in contributing to the national effort.

The high-tech sector stands out in reservist mobilization of non-Haredi Jewish men
Work absences due to reserve duty peaked in December 2023, with 3.4% of employed individuals in the workforce (nearly 150,000 workers) called up. The study examines the rate of reserve duty-related absences from the labor market in the last quarter of 2023 — the start of the war — by sector. The highest rate was observed in the infrastructure sectors, where nearly one in six workers was absent due to reserve duty. In the management and support sectors and high-tech, about one-tenth of workers were called up.

This war saw an unprecedented mobilization of 60,000 women for reserve duty, constituting 20% of all reservists. The study finds that the highest proportion of mobilized women — about 2% — was in the finance, real estate, communication, and professional services sectors (which also had above-average mobilization rates for men) and in trade, tourism, and logistics (where male mobilization rates were relatively low). Conversely, the highest mobilization rate among men — 12% — was recorded in high-tech sectors, while the mobilization rate for women in these sectors was roughly at the gender average. The lowest mobilization rates for both women and men were observed in the public administration, defense, education, and health sectors.