The Israeli Labor Market in the Wake of Covid-19: An Overview

The Israeli Labor Market in the Wake of Covid-19: An Overview

The coronavirus pandemic, and the social distancing measures adopted to contain it, constituted one of the greatest shocks ever sustained by the Israeli labor market as well as by labor markets the world over. The crisis peaked in 2020, while 2021 saw a gradual economic recovery as people adjusted to the new labor market reality. This chapter looks at what happened in the Israeli economy in terms of employment levels and number of work hours in various economic sectors, presenting the differences by gender, population sector, and geographic district. It also analyzes the ability to work from home by occupation and economic sector, and shows the pandemic’s effects on investment in higher education and vocational training.

Unemployment, employment, and wages

• In the wake of the pandemic, Israel’s unemployment rate, which had previously been measured as the percentage of non-employed job seekers out of the total civilian labor force, was redefined to encompass two additional groups: workers placed on furlough, and non-employed persons who left the labor force due to Covid-19. In accordance with this expanded definition, Israel’s unemployment rate surged from 3.8% to 35% in April 2020.
• The damage caused by the pandemic to the employment market was not evenly spread over labor force participants; rather, it disproportionately affected specific types of workers – generally those with less education and lower incomes. One interesting effect of the pandemic-driven unemployment and loss of work was a rise in the average wage in the Israeli economy. This increase may be attributed to the fact that many workers placed on furlough earned wages that were lower, on average, than those of workers who continued to work. In recognition of this phenomenon, the government froze the average wage index for National Insurance purposes in December 2020.
  

Employment by economic sector

Most economic sectors saw worker numbers drop during the crisis. However, the pandemic’s unique features manifested in a differential impact on various sectors.

• The tourism and food service sectors were hit hardest.
• Although the big retailers thrived, the retail sector as a whole showed an 8% decline in job numbers between the end of 2019 and the end of 2020, with stagnation in 2021.
• In white-collar sectors such as administrative and support services, professional services, real estate, information and communication, there was almost no drop in employment numbers.
• Job numbers rose in the human health and social activities fields. There was also a rise in the number of those employed in public sectors, such as local and public administration and infrastructure supply.

To conclude, we may say that the tourism and food service sectors suffered the greatest damage with their collapse in March 2020; the construction sector also experienced a substantial drop in employment during 2021; in the trade and transport sectors, the crisis manifested in the absence of expected seasonal increases; while the fields of healthcare, social and welfare services, local and public administration, and infrastructure supply showed no significant impact over time.

The pandemic’s effect on the labor market is evident not only in the share of workers whose employment ceased, but also in average work hours. The research shows that, until summer 2021, the average number of weekly work hours per worker grew in nearly all economic sectors – meaning that the negative impact on production in these sectors was smaller than the negative impact on job positions.

Employment by sector, gender, and geographic district

• Women’s employment rates have remained stable since their initial drop in the spring of 2020.
• However, a modest downward trend has persisted in Arab Israeli women’s employment, along with a rapid recovery and upturn in Haredi (ultra-Orthodox Jewish) women’s employment.
• Men’s employment rates show continuous erosion throughout the pandemic among Haredim, and even more so in the Arab Israeli sector (although the third quarter of 2021 witnessed a trend reversal, with Arab Israel men’s employment – like Arab Israeli women’s employment – starting to rise).
• In the Tel Aviv and Central Districts there was a modest downturn that reached a nadir of 4%-5% below 2019 levels in late 2020. By summer 2021 the decline had moderated to 1%-2% less than 2019. A similar trend was observed in the Haifa district.
• The Jerusalem and Southern Districts saw declines of 7% and 9%, respectively, which had moderated to 4% by October 2021.
• The Northern District was hardest hit in terms of employment rates: between December 2019 and May 2021 employment dropped by 13%, though by October 2021 the decline had moderated to 4%.
  

Working from home

The year 2021 started with a lockdown. Working from home was then at a peak of 26% of the labor force; the rest of the year witnessed a moderate decline in working-from-home percentages over time.

• In terms of economic sector, working-from-home rates in the public sector declined more steeply than in the private and third sectors; in March 2021 the share stood at less than 10%.
• In terms of economic sector, all “tangible” production and service sectors displayed much lower working-from-home rates than the economy as a whole. Volatility in these sectors was low as well.
• In the “intangible” production and service sectors the reverse was true: most of these sectors showed working-from-home rates that were much higher than the average.
• An analysis by occupation indicates that that those employed in occupations requiring academic training had the highest remote-work volumes.

Higher education and vocational training

• There was a surge in the number of new bachelor’s and master’s degree students – over 15 and 14 percentage points, respectively, above the averages for the preceding eight years.
• Despite the rise in unemployment – a nearly ten-fold increase per the expanded definition – the number of those participating in vocational training programs climbed by only 13%; some programs even showed a decline.