LABOR FORCE

THE POPULATION OF ISRAEL 5755 / 1995

Employment

The share of the working-age population (15+) in the general population rose from 67.3% in 1984 to 70% in 1993, and the average labor-force participation rate increased from 50.2% to 52.1. Most of the labor-force growth originates in an increase in the number of women who hold or are looking for jobs (Table 13).

The labor force has become better educated in the past few years, not only because of a general increase in education levels among young people but also due to the entry of women into the labor force and the retirement of relatively poorly educated older men. The share of employed persons holding managerial, skilled-labor, and technicians’ positions rose from 20% in 1972 to 27% in 1982 and 31% in 1992.

The annual growth rate of employment in 1983-1989 was less than 2%; economic growth doubled this rate to 4% in 1989-1992. The number of persons employed increased from 1.36 million in 1984 to 1.7 million in 1993.

The share of wage-earners among the employed rose from 78 to 82% between 1984 and 1993. During these years, the proportion of persons employed in agriculture dropped from 5.3 to 3.4%; employment in trade increased from 11.7% to 14.4, and employment in banking and finance rose from 8.2% to 10.5%. The share of women in all these occupations rose from 37.5 to 44.6% during these years. The share of industrial and construction workers remained steady. Particularly impressive is the stable share of public-sector employees, resulting from government policy and an increase in the share of private providers of services – trade, tourism, business, and personal services. The average monthly wage per wage-earner rose by 9.1% from $917 in 1984 to $1,000 in 1993.

Unemployment

The 1984-1993 period was noted for slow economic growth, as manifested in two main indicators: high inflation in the first half of the ten-year period and high unemployment in the second half. In 1985, the Government adopted a new economic policy aimed at curbing inflation, and the rate of consumer price increases indeed plunged from 445% in 1984 to 185% in 1985, 20% in 1986, and 11% in 1993. This disinflation, however, triggered an economic recession and caused unemployment.

The immigration wave boosted the size of the labor force. Of the 155,000 immigrants who joined the labor force in 1992, 110,000 of them (70%) found jobs, although not always in their occupational fields. The economy was not entirely successful in utilizing the potential of the immigrants’ education and occupational credentials.

The unemployment rate, 5% in the early 1980s and 9% in 1989, peaked at 11.2% in 1992 and then reversed direction. Unemployment decreased to 10% in 1993 and has continued to decline since then.

Other factors helped aggravate unemployment. The Government’s stabilization policy in the war on inflation downsized the public economy, which had been a major creator of jobs. The increase in labor- force participation preceded the upturn in economic growth, i.e., the rate of new-job creation. Finally, mass immigration brought numerous jobseekers into the economy.

To fight unemployment, the rules of eligibility for unemployment compensation were toughened in 1991-1992 in order to prevent jobseekers from rejecting job offers. Notably, this measure mitigated unemployment on the fringes only, for the main problem is the shortage of suitable jobs.

The 1985 economic-stabilization policy included a decision to reduce the cost of labor by reducing employers’ National Insurance contributions, cutting the rate of payroll tax, providing hiring incentives, and introducing short-term job-creation programs in order to ease the plight of the unemployed.

The National Insurance system protects the jobless from unemployment- induced poverty and pressure by enabling them to adjust to changing market conditions and giving them time to seek work. The system is financed by compulsory contributions from employees and employers. Unemployment benefits are given to young people for five months and to those aged 45+ for seven months. The Unemployment Insurance Law provides for additional allowances in special cases and unemployment-ridden regions. The Government Employment Service locates jobs, refers the unemployed and new members of the labor force to them, and offers job consulting services. The vocational-training network sponsors training and continuing-education courses for adults and teenagers.

The Ministry of Labor and Social Affairs encourages people to move to development towns and, as an incentive, offers financial assistance for home purchase and moving expenses, income-tax reductions, free vocational training, and participation in child daycare. The Government also creates jobs in development areas and pockets of severe unemployment.

Vocational Training

The vocational-training network of the Ministry of Labor and Social Affairs offers occupational courses for persons aged 15+ who are not enrolled in school, unskilled adults, and recent immigrants, in an effort to enhance the labor force in the short and long terms and to train workers for fields that will be in demand in the future. To encourage participation in these courses, the Ministry has expanded its array of incentives. Extra unemployment compensation is given to people who enroll in the courses, and participants continue to receive benefits during their training period without forfeiting future eligibility for unemployment compensation. The Ministry of Labor and Social Affairs also offers partial compensation to employers who provide in-plant training. This provision has been inserted into the Encouragement of Capital Investments Law.

To help demobilized soldiers, the army authorities, the Ministry of Labor and Social Affairs, and the Manufacturers’ Association of Israel have introduced an in-plant training program of their own. Yet another program offers demobilized soldiers income maintenance if they take jobs in preferred occupations, i.e., agriculture, industry, construction, and tourism. The idea is to encourage young people to choose to work, even at a low starting wage, rather than to receive unemployment compensation.

      Table 13: Population Aged 15 and Over by Labor-Force          Characteristics and Gender, 1982, 1989, 1992                      (in Thousands and Pct.)                                             | Pct. average annual growth                       1982    1989    1992 | 1982-92  1982-89  1989-92  Population aged 15+ (thousands)            |                                            |                2,757.1   3,082.2   3,574.4 |   2.6     1.6     5.1  Civilian labor force (thousands)           |                                            | Total            1,366.7  1,603.3  1,857.8 |    3.1     2.3     5.1 Women              504.9    647.7    776.6 |    4.4     3.6     6.3 Men                861.4    956.0  1,080.9 |    2.3     1.5     4.2  Pct. of population in civilian labor force |                                            | Total              49.6      52.0     52.0 | Women              36.1      41.3     42.5 | Men                63.4      63.0     61.8 |  Employed persons (thousands)               |                                            | Total           1,298.3   1,460.8  1,650.2 |    2.4     1.7     4.2 Business sector   907.5   1,031.6  1,167.0 |    2.6     1.9     4.2 Public sector     390.8     429.2    483.2 |    2.1     1.3     4.0  Pct. of civilian labor force unemployed    |                                            | Total               5.0       8.9     11.2 | Women               6.0      10.3     13.9 | Men                 4.4       7.9      9.2 |  Pct. of unemployed                         | looking for work for                       | over half a year   14.0      25.2     33.2 |