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THE EMPLOYMENT OF PALESTINIAN WORKERS IN

ISRAEL

-A Position Paper-

The Peres Center for Peace


Business and Economics Department

Yitzhak Gal
Yoav Stern
Barak Greenapple

Paper code: Res 01-10/802

May 2010
Authorities in Israel are in disagreement over the issue of employing Palestinian workers in Israel. On
the one hand, there are those who contend that Palestinian workers will drive Israeli workers into
unemployment. Others say that Israelis in any event do not work in the occupations that the
Palestinians are employed in, and the latter will only replace the foreign workers who have become
part of the Israeli labor market, as is par for the course in the OECD countries.
A dispute also exists within the Israeli government regarding the employment of Palestinian workers
in Israel. Some of the government ministries would prefer that Israel employ Palestinians over foreign
workers, due to the implicit political, public relations and economic benefits of a measure that will be
interpreted as granting alleviation to the Palestinians. Others, particularly in the Ministry of Finance
and at the Bank of Israel, view the Palestinian workers as they view the foreign workers -- namely as a
threat to the employment of Israeli citizens, particularly those from the weaker strata.
Our position is that a practical distinction should be drawn between Palestinian and foreign workers:
unlike the foreign workers, the Palestinian workers will return to their homes at the end of their work
day, where the money they earn in Israel will stimulate the Palestinian economy, which is tightly
interwoven with the Israeli economy.
The issue of Palestinian workers in Israel raises fundamental questions: Does the employment of
Palestinian workers actually portend widespread damage to the Israeli economy? Or might the
employment of a calculated number of Palestinians benefit the Israeli economy and the broader
national interest?
This document researches the needs of the Israeli economy as they pertain to the employment of
Palestinian workers. The focus is primarily on two areas: construction and agriculture. Our
recommendation is to permit 25,000 additional Palestinian workers to work in Israel over a graduated
timeframe of 2 years, and in total to allow 50,000 Palestinian workers to enter and work in Israel.
These workers will constitute 2% of the Israeli labor market and 7% of the total employed
Palestinians, plausible ratios for both economies.
We are dealing with a specific measure with far reaching economic implications and the potential to
immediately ameliorate the condition of scores of thousands of Palestinian families. There are those
who would argue that our recommendation dovetails with the policy of "economic peace" that Prime
Minister Binyamin Netanyahu enunciated, particularly during the election period. Our position in this
regard is clear: economic peace cannot be sustained on its own; it can only be achieved alongside a
political process which effectively realizes the “two states for two nations” solution. Only a genuine
political agreement can guarantee both true stability and security. At the same, it will bring economic
growth to Israel as well as a boost to the Palestinian economy, allowing it to solidly stand on its own
feet.
This paper has already been circulated among Israel’s key decision makers and presented by its
authors to the relevant governmental ministries. It is our hope that the analysis and recommendations
provided herein will serve as valuable and constructive inputs for the Israeli inter-ministerial
committee which is currently debating this very issue.
I would like to express my thanks first and foremost to the Embassy of the Netherlands in Israel for
supporting the production of this document. I would also like to thank the Danish embassy, since our
need to address this important topic was stimulated by another project in which they assisted us. I also
want to thank the report's authors and the team in the Business and Economics Department of the
Peres Center for Peace, who are leading and realizing many projects that promote the construction of
economic and commercial relations between Israel and the Palestinians. I fully hope that you will find
this document both interesting and useful.
Cordially,

Ron Pundak, CEO

Peres Center for Peace


A Position Paper on the Topic of Employing
Palestinian Workers in Israel
A calculated and focused increment to the number of Palestinian workers employed in Israel
will be a major contribution to the Israeli economy and simultaneously an important
contribution to the Palestinian economy.

The Main Points


There is a broad consensus that it would be improper (from both the Israeli and Palestinian
perspectives) to return to the high ratio of Palestinian workers in the Israeli economy that
prevailed on the eve of the second Intifada that erupted in the year 2000. Nevertheless, as we
shall see in this position paper, it will greatly benefit both parties to have a calculated and
focused increment to the number of Palestinian workers employed in Israel, primarily in two
branches: agriculture and construction.
We recommend the following measures for expanding the general framework of work permits
in Israel on a scale of about 25,000 Palestinian workers (an increment to the current number
of workers), in two stages, for two years:
• About 8000 permits would be issued immediately, as a response to the urgent needs of
the agricultural and construction sectors in Israel (as a substitute for importing foreign
workers).1
• 15,000-20,000 permits would be issued on a gradual basis over the course of the year
2010 and the year 2011, as a response to specific demands (primarily in the agricultural
and construction sectors). These Palestinian workers would gradually replace additional
foreign workers.
With the completion of these two measures, the total number of Palestinian workers (not
including Palestinian workers in the industrial zones and Israeli communities in the West
Bank) will rise from the current scale of 25,000 to 50,000.
The total proportion of the Palestinian workers in Israel will constitute 2% of those employed
in the Israeli economy, and about 7% of Palestinian employees (from the West Bank and the
Gaza Strip) -- plausible ratios for both economies.

The Advantages for Israel


The first advantage from Israel's vantage point is a major step towards the Israeli
government’s recently declared policy to reduce the number of foreign workers in the Israeli
economy and reap the inherent social and economic benefits. Granting work permits to
Palestinian workers in the amount proposed above will help replace a substantial portion of
the foreign workers in agriculture and construction within two years. Since we are dealing
with particularly arduous labor (as detailed below) that Israeli workers are not prepared to do,
1
In the industrial and hospitality sectors the number of legal foreign workers is very low in any case, and an
appreciable number of them are experts. Therefore, we do not refer to these sectors in this position paper. We
also do not refer to the area of care giving. This area apparently is the only one where in the foreseeable
future there is no substitute for foreign workers
the replacement will be exclusively confined to foreign workers.
The substitution of Palestinians for foreign workers will also allow the rapid and effective
implementation of the recommendations of the Inter-Ministerial Committee for Promoting the
Employment of Israelis and Reducing the Number of Foreign Workers in Agriculture (the
"Eckstein Commission", in its updated report from January 2010).
The committee recommends creating a new policy for the employment of workers who are
not Israelis, in accordance with the framework and the employment plans that are prevalent in
the Organisation for Economic Co-operation and Development (OECD) countries. These
plans facilitate the introduction of foreign workers for brief periods, in accordance with
seasonal and specific needs, while guaranteeing the transience of the foreign worker's
sojourn.
An OECD policy paper recommends that the developing countries set employment
policies and plans that contend in a focused manner with the specific needs of the local
economy in those sectors where low skilled foreign workers are needed, while putting
into operation supervisory and enforcement mechanisms to prevent competition with
local workers and to guarantee the transience of the foreign worker's sojourn.
Employing Palestinian workers in Israel coincides optimally with this approach and with the
policy recommended by the Eckstein Commission. Rapid and complete replacement of
foreign workers by Palestinians would result in timely progress on the framework proposed
by the Eckstein Commission. 2

Avoiding Harm to the Employment of Israeli Workers


One must seriously consider the argument that Palestinian workers may supplant Israeli
workers in various branches. Nevertheless, the manpower shortage in construction and
agriculture attests to the fact that Israeli workers cannot fill the shortage in these sectors.
According to the OECD criteria, it is of paramount importance to prevent harm to Israeli
workers in specific sectors, such as Arab-Israeli workers employed in agriculture.
Furthermore, the ability to preserve Israeli interests is immeasurably higher when Palestinian
rather than foreign workers are employed, because Israeli authorities are able to immediately
end the employment of Palestinian workers.
Additionally, the measure that we propose provides specific important advantages for the
construction and agricultural sectors in Israel, as detailed below.

Advantages for the Construction Sector


• A solution to the pressing needs of the sector: 5000 workers will be added on an
immediate basis to the wet building works (scaffolding, iron rods, plastering, flooring) -
- labor that Israelis are not prepared to do, even for particularly high wages.
• Stability for the manpower roster and restored security for contractors can lead to
substantial growth in the sector's activity, as well as to increased activity in
supplementary branches (building materials, services, etc.).
• The presence of Palestinian workers will facilitate a reduction in the average time
2
See the Eckstein Commission's Report for the Agricultural Area, January 2010 (source number 2 in the list of
sources): the commission's recommendations (pp.10, 25), the multi-year outline proposed for reducing the
number of foreign workers (pp.12, 15) as well as a description of employment plans in the OECD countries
(pp. 21-23).
required to build an apartment in Israel. The current time to completion is 24 months, as
opposed to 12.4 months in 1991.
We propose allowing 5000 to 8000 additional permits for the construction sector, to be
granted on a gradual basis over the years 2010 and 2011. Some of these workers will replace
foreign workers and some will constitute a net increase in the number of workers employed
by the sector.
Every net addition of 1000 workers in the wet works can create a marginal benefit on the
scale of 100,000,000 shekels to the product of the building sector, as well as a large increase
in supplementary jobs in the professions in which Israelis are employed.
A total net increment of 10,000 Palestinian workers for the wet works over the course of the
years 2010-2011 is expected to contribute one billion shekels to the Israeli GDP -- an
increment of 1.5% -- as well as adding nearly 10,000 jobs for Israeli workers.

Advantages for the Agricultural Sector


• A solution to the pressing needs of the agricultural sector: 3000 Palestinian workers
will be added on an immediate basis for the arduous work in hothouses and labor-
intensive field crops that Israeli workers are not prepared to do for an extended length
of time.
• Granting the proposed permits will check the constriction that has occurred over the
last couple of years in the very labor-intensive branches of agriculture (for example
the cultivation of certain species of flowers that has relocated to an appreciable degree
to Africa and other locations).
We recommend allowing approximately 5000-8000 additional workers entry into the
agricultural sector. Some will enter the sector as permanent workers who will replace foreign
workers, while others will be seasonal workers. The addition of these workers will happen on
a gradual basis over the years 2010-2011; this gradual addition will permit the stabilization of
the work roster in agriculture in accordance with the sector's needs, and do so in a way that
will both allow normal work over time and provide the sector with flexibility in accordance
with seasonal needs. Stability and flexibility for the work roster will provide farmers with the
security necessary to increase manufacture and agricultural export; allow them in a few years
to provide agricultural exports on a scale of 100 -- $200,000,000 per annum; and make
possible a similar increase in the agricultural product (an addition of about 0.5% to the Israeli
GDP).

The Security Aspect


• The system that deals with granting work permits to the Palestinian workers in Israel is
highly formalized and efficient, and has been in place for 20 years. This system is
operated today by the Ministry of Industry Trade and Labor, in conjunction and
cooperation with the security organizations.
• The track record of this system is excellent. Even in the peak years of the second
Intifada there was hardly a terrorist incident involving Palestinian workers who entered
Israel legally.
• The 3 primary crossing points for Palestinian workers (Gilboa, Shaar Ephraim and
Tarkumiya) are organized and experienced, and currently handle the crossing of
Palestinian workers efficiently and professionally. The calculated and gradual increase
in the number of Palestinian workers will allow the crossing points to prepare to
efficiently handle the larger number of workers who can be expected to pass through
them during the peak hours.

The Political Aspect


The measure proposed in this position paper offers tremendous advantages to the Palestinian
economy and the welfare of Palestinians resident in the West Bank. It also dovetails with the
current policy of the Israeli government headed by Binaymin Netanyahu, who previously
called for promoting the concept of an "economic peace". The proposed measure will lead to
an amelioration in the welfare and quality of life of West Bank residents; as such, it can be
expected to be well-received by the international community.

The Advantages to the Palestinian Economy and the Welfare of the Palestinian Population
The overall effect of employing 25,000 additional Palestinian workers in Israel can be very
significant, most notably in a growth in the GDP on a scale of 5%. Such growth reflects a
direct and indirect reduction of unemployment on a scale of over 5% (in addition to the
workers who will move from part-time employment with very low wages to full-time
employment at a higher salary level -- something that is not reflected in the unemployment
statistics but makes an additional contribution to the GDP).

The Expected Social Influence


The average salary of a Palestinian worker in Israel, according to Palestinian data as of mid-2009,
was 146 shekels per workday; the highest salary was recorded in the construction sector (an average of
155 shekels per day) and the lowest one in agriculture (96 shekels per day). The average number of
workdays for a Palestinian worker in Israel is 20 workdays a month, and therefore the average
monthly salary of a Palestinian worker in Israel is around 3000 shekels.
This per diem wage is higher by 70% than the per diem wage for a worker in the area of the
West Bank and is 130% higher than the average wage in Gaza (87 shekels per diem and 64
shekels per diem respectively).
According to this calculation, every additional Palestinian worker will bring in 36,000 shekels per
annum on average (almost double the annual average income of a Palestinian worker in the West
Bank). In many cases, this earning doubles the total family income of a household and jump starts
the economic capability of the entire extended family.
The employment of 25,000 additional workers in Israel will lead to a substantial rise in the per
capita income level and in the personal and family standard of living of over 250,000 people --
over 10% of the population of the West Bank (not including East Jerusalem), primarily from the
lower strata.
Comment: The aforementioned salary, as reported by the Palestinian Central Bureau of
Statistics, reflects reporting that does not provide the complete picture, as costs for the Israeli
employer are higher. The Employer is obliged to pay a minimum wage per month for per
diem workers which is closer to 3600 shekels. With the addition of the social allotments, the
salary cost to the employer exceeds 4000 shekels a month per worker.
In Summary
Granting work permits in the amount proposed will help attain the near total replacement of
foreign workers by Palestinian workers within 2 years. Additionally, the net proposed
increment of Palestinian workers to the building and agricultural sectors in Israel will end the
bottlenecks that damage normal activity in these 2 sectors; will allow for a 2% increase in the
GDP; and will create 10,000 supplementary jobs for Israelis.
Table of Contents

The Main Points ...................................................................................................................3

Table of Contents..................................................................................................................8

Background Data: The Palestinian Labor Market .............................................................9

Palestinian Workers in Israel...............................................................................................9

The Employment of Palestinian Workers in Israel...........................................................10

Quantities and Development ..............................................................................................10

The Palestinian Perspective................................................................................................18

List of Sources ....................................................................................................................21

Interviews ...........................................................................................................................22
Background Data: The Palestinian Labor Market
And Palestinian Workers in Israel

The Palestinian Labor Market: Manpower, Employment, Unemployment


The Palestinian population currently totals over 4,000,000 people, with slightly more than 2.5
million people in the West Bank (including East Jerusalem -- the Palestinian Jerusalem
district), and slightly more than 1,500,000 in the Gaza Strip.3
The Palestinian population is very young: half of it is under the age of 15 (the official work
age according to PCBS). From the standpoint of the labor market, the importance of this
young demographic is that in recent years this cohort has flooded the labor market, and will
continue to do so for the foreseeable future. According to the PCBS data, the total net increase
of the work age population is about 80,000 per annum. The result is that the Palestinian work
age population has risen by 70% since the Palestinian Authority was established in 1994 and
currently totals 2.3 million, out of which 1.5 million are in the West Bank (including East
Jerusalem) and about 800,000 are in the Gaza Strip.4
Additionally, the participation rate of the Palestinian population over the age of 15 in the
workforce5 is continuously increasing: the average rate rose from less than 35% during the
1970s, to 38% in the latter half of the 1980s, to 40%-42% during the years 2003-2007 and to
45% in 2009 (47.5% in the West Bank in 2009; in Gaza the rate is much lower).6
The result: the Palestinian workforce which totaled half a million in 1994 has doubled
over the last 15 years and currently totals slightly over 1,000,000 (data for mid-2009), of
whom 700,000 live in the West Bank.
The unemployment rate -- which reached 40% at the peak of the intifada (2002) -- has
gradually declined in the West Bank in recent years to around 30% for the years 2003-2004,
around 55% in 2005-2007, and up to 21% in mid-2009. 7
Nevertheless, considering the huge number of young people who join the workforce each
year, the Palestinian economy needs to continue generating 30,000-40,000 new jobs each
year for the West Bank alone in order to preserve the current rate of unemployment (a
very high rate of about 20%, as aforementioned).

3
The analysis in this chapter is based primarily on data from the Palestinian Central Bureau of Statistics –
hereafter PCBS.
4
Source: PCBS Ongoing Workforce Survey, Second Quarter, 2009, Table 1.
5
The participation rate in the workforce = the percentage of the total population at the work age that is looking
for work. The rise in the rate of participation derives to a large extent from a higher rate of women obtaining
academic education and seeking to integrate in the labor market. According to the aforementioned workforce
survey, the participation rate of women with higher education (13 years of study and over) approaches 50% --
fivefold the average rate of participation of women with an education of 0-12 years of study. The total
participation rate of those with higher education (women and men) is about 60%, in comparison with about
40% on average amongst those with an education of up to 12 years of study.
6
The source for the data up to 1994 is the Israeli Central Bureau of Statistics; from 1994 onwards it is the
PCBS -- various tables as well as the Current Workforce Survey, second-quarter 2009, table 1.
7
The calculation is made by employing the "broad definition" that also considers as unemployed a person who
previously searched for work but "gave up" and stopped looking for work on an active basis. According to
the more restrictive definition (the definition employed by the International Labor Organization that
considers only someone who continued to look for work on an active basis as unemployed) the
unemployment rate in the West Bank declined in mid-2009 to about 16%. Source: PCBS -- various tables as
well as the current workforce survey, second-quarter 2009, table 2.
The Employment of Palestinian Workers in Israel
Quantities and Development
During the years prior to the establishment of the Palestinian Authority, the work of
Palestinian laborers in Israel exerted enormous influence over the Palestinian economy and
employment.
For a period of about 20 years, from the mid-1970s until 1993, work in Israel constituted a
third of all Palestinian employment. Between the years 1990-1992, for example, the number
of Palestinian workers in Israel ranged between 100,000-115,000, compared to a total of
about 200,000 employees within the areas of the West Bank and Gaza.8
During the early years of the Palestinian Authority, the number of Palestinian workers in
Israel declined significantly (particularly in the years of the severe terror attacks of 1995-96).
Towards the close of 1990s, however, a sharp rise was recorded, and in the years 1999-2000
(until the eruption of the intifada at the end of September 2000) the number again rose to over
100,000.
At the end of the year 2000, the employment of Palestinian workers in Israel (with the
exception of those from East Jerusalem) was almost completely terminated. In recent years,
with the improvement in security conditions in the West Bank, the employment of Palestinian
workers from the West Bank in Israel was renewed. The picture, as of mid-2009, is as
follows:
• According to Israeli data, the total number of Palestinian workers employed in Israel
and in Israeli communities in the West Bank is 48,000, of whom 26,000 are employed
inside Israel and the rest in Israeli communities in the West Bank (including Israeli
industrial zones in the West Bank).9
• The Israeli data is corroborated by data from a Palestinian Authority labor survey,
which attests that as of mid-2009, there were 49,000 Palestinian workers in Israel and
Israeli communities in the West Bank.10
• The aforementioned workers (all from the West Bank) constitute 9% of all Palestinian
employees who are residents of the West Bank, and about 6% of the total number of
Palestinian employees (including Gaza).
If we were to exclude the Palestinian workers in Israeli communities in the West Bank, work
in Israel proper accounted for about 5% of total employment of Palestinians living in the West
Bank and about 3% of total Palestinian employment (including Gaza).
According to Israeli estimates, the number of illegal Palestinian workers working in Israel is
not high. According to the report of the Inter-Ministerial Committee on the Topic of Non-
Israeli workers from 2007 (The Eckstein Commission), the total number of illegal Palestinian
workers is estimated at only 7,000, compared to 102,000 illegal foreign workers.11
A PCBS survey of the Palestinian workforce living in the West Bank districts informs us that,
except for a few districts that send an unusually large number of workers to Israeli
8
Source: calculated according to the Israeli Central Bureau of Statistics data.
9
The State of Israel, Report to the Conference of Donor Countries to the Palestinian Authority, September
2009
10
Source: PCBS -- the Current Workforce Survey, second-quarter 2009, table 30, excluding East Jerusalem
residents who appear on a separate line in the table.
11
Report of the Commission for Shaping Policy with Regards to Non-Israeli Workers, September 2007, p. 31,
table 4-a.
communities and industrial zones located within the West Bank territories (specifically, the
Jericho district – which includes the Jordan Valley – as well as the Salfit and Kalkilya
districts), employment in Israel is divided relatively equally among Palestinian workers from
all the West Bank regions. 12
Nearly 60% of the Palestinian workers who work in Israel are employed in the construction
industry; a quarter of them are employed in agriculture; about 10% work in industry; and the
rest are employed in other sectors. 13

Palestinian Employment in Israel: Wages, Employment Conditions and Administrative


Arrangements
According to Palestinian data, as of mid-2009, the average wage for a Palestinian worker in
Israel is 146 shekels per day. The highest wages were recorded in the building sector (155
shekels per day on average) and the lowest wages were in agriculture (96 shekels per day).
The average number of workdays for a Palestinian worker in Israel was 20 workdays a month;
therefore the average monthly salary for a Palestinian worker in Israel is about 3000 shekels.
14

This per diem wage is higher by 70% than the per diem wage for workers in the area of the
West Bank and higher by 130% than the average wage in Gaza (87 shekels per diem and 64
shekels per diem respectively).
Comment: The aforementioned salary, as reported by the Palestinian Central Bureau of
Statistics, reflects incomplete reporting. As mentioned below, the employment terms in Israel
for a legal Palestinian worker are identical in terms of labor laws, to those for an Israeli
worker. Therefore, the Israeli employer is obligated to pay a minimum wage that currently
totals about 178 shekels per diem. The minimum monthly wage of day workers, calculated on
the basis of 20 workdays a month as reported in Palestinian statistics, is nearly 3600 shekels.
When one adds to this the social allotments mandated by Israeli law, the wage cost to the
employer exceeds 4000 shekels a month (the minimum wage for a monthly worker is 3850
shekels per month, and the total cost to the employer exceeds 4500 shekels).
The employment of legal Palestinian workers in Israel has been regulated for 20 years by a
highly formalized and efficient system that classifies and approves Palestinian workers for
work permits in Israel. The system is currently operated within the framework of the Ministry
of Industry Trade and Labor, in full cooperation and coordination with the defense system.
As noted above, from the standpoint of labor laws, the terms of employment in Israel for a
legal Palestinian worker are identical to the terms for an Israeli worker (minimum wage,
Social Security, pension, sick days, paid vacation, etc.). His employment is regulated vis-à-vis
the employer via the Support Unit for Foreign Workers in the Ministry of Industry Trade and
Labor and he is entitled to the protection of the Histadrut, the General Workers Association
(in return for a labor organization tax that is deducted from the salary of legal Palestinian
workers).
This classification and handling apparatus monitors the employment of Palestinian workers
and ensures that licensed Palestinian workers are employed according to both the binding

12
Source: PCBS -- the Current Workforce Survey, second-quarter 2009, table 20.
13
The Eckstein Commission Report, ibid., as well as data updates from the Association of Contractors.
14
Source: PCBS -- the Current Workforce Survey, second-quarter 2009, tables 33,36. This data coincides with
the scale from the Israeli data, as reported by the employers to the Support Unit for Foreign Workers in the
Ministry of Industry Trade and Labor, while deducting the allotments mandated by law.
labor laws and the accepted yardsticks in the international system, including full compliance
with OECD demands.
The three crossing points that see the bulk of Palestinian worker traffic (Gilboa, Shaar
Ephraim and Tarkumiya) are organized and experienced, and currently handle the daily
passage of Palestinian workers efficiently and professionally. An analysis comparing the data
of workers currently passing through these crossing points to the points’ capacity shows that
without making any adjustments, they can serve an additional 5000+ workers per day; with
relatively slight adjustments, yet another 5000 additional workers could cross at these points
(see below).

The Israeli Perspective


Economic Aspects
There is general understanding in Israel that the comprehensive national interest requires a
significant reduction in the number of foreign workers employed in the country -- both legal
workers and, even more so, illegal workers. This general understanding finds expression, inter
alia, in an inflexible government policy adopted in recent years for granting permits to bring
foreign workers to Israel.
As a result of this policy, the construction and agriculture industries have languished for some
time due to a chronic lack of workers in areas where Israelis are not prepared to work. This
does severe damage to these sectors. As a point of contrast, the industrial and hospitality
sectors employ a very low number of legal foreign workers, an appreciable number of whom
are experts. Additionally, the leaders of these sectors do not currently believe that adding
Palestinian workers constitutes a practical solution for the employment needs of their sector.
In the industrial sector, the nature of the work and the relatively higher wages facilitate the
employment of Israelis; in general, this branch has no real need for Palestinian workers.
In the hospitality sector (primarily in the hotels), there is a need for low-paid unskilled
workers as well as jobs which Israeli workers are not prepared to do. However, in the opinion
of the sector's leaders, Palestinian workers cannot provide a solution.
We therefore do not refer to these sectors in this position paper. Likewise we do not refer to
the area of care giving. This area is apparently the only one where there is no substitute for
foreign workers.
We believe that although it may be possible to reduce the number of non-Israeli workers
to a certain degree, these sectors require a specific minimal amount of non-Israeli
workers in order to function properly and realize their economic potential. The
agricultural and construction sectors in Israel require about 8000 workers (foreign or
Palestinian) on an immediate basis in the following areas where there is no practical
option to hire Israeli workers:
• In the construction sector, 5000 workers are urgently needed to handle the wet
construction works (scaffolding, iron rods, plastering and flooring), labors that Israelis
are not prepared to do even for especially high wages.
• In the agricultural sector, there is a pressing need for 3000 workers to do arduous work
in the hothouses and for labor-intensive field crops, work that Israelis are not prepared
to do for an extended length of time.
The Construction Sector
Due to the continuing shortage of workers for the wet works, the time required to complete
construction of an apartment in Israel has risen from 12.4 months back in 1991 to 24 months
in recent years, and there has also been a reduction in construction activity. The shortage of
workers has deterred contractors from taking on projects due to uncertainty about their ability
to complete the projects and to meet deadlines.15 In order to allow a resumption of standard
activity in the construction sector, contractors must be provided with a flexible and fast
response to their manpower requirements in the critical professions of the wet works. We
therefore recommend the approval of an additional 5000-8000 Palestinian workers over
the course of 2010-2011, who will also gradually replace some of the foreign workers
who are still employed in the construction sector.
Restoring stability to the construction sector’s work roster and restoring contractors'
confidence in their ability to meet project deadlines is likely to produce a substantial increase
in the sector's activity. This will help realize this sector’s capacity for growth and for
generating employment, as well as generating demand for its supplementary and feeder
branches (building materials, professional services for the construction sector, etc.).
Every net addition of 1000 workers in the wet works can create an increment on the scale of
100,000,000 shekels to the product of the building sector, as well as a huge addition of
supplementary jobs in professions that employ Israelis.
Therefore, a net addition of 10,000 Palestinian workers for the wet works over the years
2010-2011 can contribute 1,000,000,000 shekels to the Israeli GDP -- in other words, an
addition of nearly 1.5% to the GDP, as well as nearly 10,000 additional jobs for Israeli
workers.
Reducing the time required for apartment construction (a gradual return from the current
duration of 24 months to the early 1990s average of 12 months) will naturally reduce
financing costs and other building costs and could possibly work to either reduce or decelerate
the rise in apartment prices.

The Agricultural Sector16


In addition to the aforementioned pressing needs of this sector, it is also necessary to curtail a
process that has been continuing for some years: namely a substantial reduction in certain
agricultural branches that are characterized as labor intensive (for example, growing certain
species of flowers where an appreciable proportion has in recent years moved to Africa and
other locations).
For this purpose we recommend the approval of an additional 5000-8000 Palestinian
workers for the agricultural sector, with the permits to be granted on a gradual basis over
the years 2010-2011. Some of the increment will be used to replace foreign workers,
another part will be hired as seasonal workers and a third part will represent a net
increase in the number of permanent agricultural workers.
This gradual addition will stabilize the manpower roster in agriculture – one of the sector's
pressing needs -- in a manner that will allow normal work on a prolonged basis. It will also
give the sector the flexibility suited to seasonal requirements. Stabilizing and providing

15
Various documents of the Association of Contractors and Builders in Israel during the course of 2008 and
2009.
16
Based on interviews as detailed in the appendix and on an analysis of agricultural output and export data.
flexibility to the manpower roster will provide the farmers with the requisite security to
increase production and agricultural export.. Within a few years it will facilitate a boost in
agricultural exports of 100-200 billion additional dollars per annum and a similar
increase in the agricultural product (an addition of about 0.5% to the Israeli GDP).
The replacement of foreign workers with Palestinians will also permit the rapid and effective
implementation of the Inter-Ministerial Committee's recommendations for encouraging the
employment of Israelis and reducing the number of foreign workers (the Eckstein
Commission, in its updated reports from January 2000 dealing with the agricultural sector).
The commission recommends a new policy for employing workers who are not Israelis,
according to the framework and employment plans that prevail in the OECD countries. These
plans facilitate the introduction of foreign workers for brief periods, in accordance with
seasonal and specific needs, while guaranteeing the transience of the foreign worker's
sojourn.
The OECD policy document recommends that the developed countries set an
employment policy and plans that contend in a focused manner with the specific needs
of the local economy in areas where low-skilled foreign workers are required, while
operating control and enforcement mechanisms to prevent competition with local
workers.
The framework for the employment of Palestinian workers in Israel will optimally dovetail
with this approach and with the policy proposed by the Eckstein Commission.17

Administrative and Security Arrangements for Palestinian Workers Employed in Israel


As discussed above, the employment of (legal) Palestinian workers is regulated by a highly
formalized and efficient system with decades of experience in classifying Palestinian workers
and approving them for work permits in Israel. This system is currently operated within the
framework of the Ministry of Industry Trade and Labor in full coordination and cooperation
with the relevant defense agencies. From a security perspective, this system is excellent: it
has a near-perfect security record. For scores of years there was hardly a case of a terror
attack involving a Palestinian worker who had received a permit to work in Israel.
In this current system, permits for employing Palestinian workers are granted in response to
specific requests by the employers. Each request is examined on its merits by the defense
agencies; this also includes a series of administrative and technological measures for both
ongoing security control over the permit-holding worker and for strictly examining the worker
upon each and every one of his entries into Israeli territory.
As previously mentioned, the crossings that serve the workers can process an additional
5000+ workers per day as they are now, and an additional 5000 by making relatively easy
adjustments. To accommodate numbers beyond these -- and in order to support continued
growth in the number of Palestinian workers -- the crossings will need to undergo suitable
adjustments.
The measured and gradual increase in the number of Palestinian workers that we propose in
this position paper will allow the crossings to prepare for and handle the greater number of
workers passing through in the peak hours of the day. The existing coordination between the
17
See the Eckstein Commission's Report on the Agricultural Sector, January 2010 (source # 2 in the list of
sources): Commission Recommendations, pp. 10, 25; the proposed multi-year outline for reducing the
amount of foreign workers, pp. 12, 15; and a description of employment plans in the OECD countries, pp.
21-23. See also the OECD document (source #3 in the list of sources)
systems in this area; the vast experience that has been accumulated; and the dexterity and
professionalism acquired in recent years by the Crossings Authority in the Defense Ministry
will also prove very valuable in overcoming specific loads than can be created at any the
crossings.
Another aspect that should be considered in this context is a calculated and focused expansion
in the sleep-over permits granted to Palestinian workers working in Israel, particularly those
in the agricultural sector. The number of sleep-over permits currently granted to Palestinian
workers in the agricultural sector totals up to 3000, particularly in the high season of the olive
harvest.

The Advantages Inherent in Employing Palestinian Workers over Foreign Workers


Many of the foreign workers who arrived in Israel for work stayed on for many long years. As
the years went by, they created a severe social problem.
After a foreign worker arrives in Israel, there is no practical way to supervise him. Many of
the foreign workers eventually leave the place of employment for which they originally
received a permit to enter Israel, and join the vast population of illegal foreign workers.
The large scope of the problem and its severe social implications induced the government of
Israel to adopt a policy whose objective is to substantially reduce the number of foreign
workers in Israel and to decrease to the lowest possible minimum number the new work
permits granted to foreign workers.
The Palestinian workers, by contrast, do not create a social problem. They return to
their homes in the West Bank at the end of the workday and are subject to daily and
constant supervision via the administrative system described above.
The main problem tied to the employment of Palestinian workers is the security risk. As
noted above, this risk is optimally neutralized by the well-practiced and efficient
filtering and control system that has developed through decades of accumulated
experience. As previously mentioned, this system has an outstanding track record with
regard to security.
The Israeli employers claim that when it comes to the level of professionalism, the Palestinian
workers are in no way inferior to the foreign workers in their professionalism and their
readiness for hard work in the construction and agricultural sectors; in certain fields
(particularly in the wet construction works) they are even superior to the foreign workers.
It is important to note that as opposed to foreign workers whom the employer cannot choose
on a personal basis, the Palestinian worker is hired by the employer on the basis of his
specific personal suitability to the required work. It is not uncommon for long-lasting work
relations to develop; in this context, the contribution and output of the Palestinian worker is
much higher than that of a foreign worker.
One should add an economic benefit to the advantages discussed so far. The Palestinian
worker uses his income primarily to purchase in Israel, both directly -- by purchases
made in Israel proper -- and indirectly by the purchase of Israeli products imported into
the West Bank (about three-quarters of imports into the West Bank originate in Israel).
The foreign worker, on the other hand, remits a large part of his salary back to his home
in order to help his family make a living there.
There is a further advantage that is more difficult to measure but that exerts a positive
influence for the long-term. This is the positive exposure to Israel of a large strata of the
young Palestinian generation, a closer familiarity with the variegated civilian aspects of
the Israeli experience, the establishment of close relations, etc.,as occurred with previous
generations of Palestinians.

The Employment of Palestinian Workers versus Possible Damage to the Employment of


Israelis
It is important to note that not all of the professional economic bodies are in accord with
our analysis of the construction and agricultural sectors.
The position of the Finance Ministry, as it found expression both in interviews and in
various reports, is that in the event that the government adopts a consistent policy of
denying employment permits to non-Israeli workers (foreign or Palestinian) in the
construction and agricultural sectors, the employers will adjust the structure of activity
in these sectors to meet this situation.
Under this approach, employers in these difficult professions can gradually raise salaries
to a level that will attract Israelis to these jobs as long-term stable employment. In the
end, salaries should equilibrate at this higher level in a manner that would not prove to
be substantially harmful.
Over the course of recent years, a number of attempts have been made to attract Israelis to
labor-intensive industries such as construction (the “wet works” of scaffolding, iron rods,
plastering and flooring) and agricultural manual labor (continuous and intensive work in the
greenhouses, harvesting, etc.). All of these attempts have failed.
The cumulative experience demonstrates that Israeli workers do not persist in these
jobs, even at a higher salary level than foreign workers or Palestinians, and there is no
practical way to rely on Israeli workers for these jobs. In the agricultural sector it is very
difficult to hire Israeli workers for the aforementioned labors, and the workers who are hired
do not persist. In the construction industry, despite attractive offers and a major investment
in vocational training, the Israeli workers did not persist in the wet works; a large portion of
them returned to easier jobs in building or left the sector.
For the employers, the consequences were serious: in agriculture the loss of crops during the
harvesting season (particularly crops that need to be harvested quickly and in a short time
span) and an inability to plan a regular course of work; in construction a failure to meet the
timetable for performing projects and completing apartments.
The conclusion: Israeli workers are not a practical substitute for foreign workers in the
agriculture and construction. Palestinian workers are the only practical substitute.
Furthermore, as noted above, the addition of Palestinian (or foreign) workers in these sectors
creates a large increase in supplementary jobs in the areas of the construction and agricultural
professions in which Israelis are employed. It also creates a substantial volume of indirect
employment.
The system of granting permits for Palestinian workers can ensure (via the Ministry of
Industry Trade and Labor) that permits are granted in a fashion that will not harm the
employment of Israelis while also emphasizing the need to avoid damage to the employment
of Israeli citizens..
It is important to emphasize that in this aspect as well, the ability to preserve Israeli
interests is inordinately greater when employing Palestinian workers than when
employing foreign workers. The flexibility and the immediacy of employing Palestinians
allows one to check each and every permit request in a detailed way and to award a
specific permit to every Palestinian worker that the employer wishes to introduce into
Israel. The permits will be granted on the basis of a genuine and professional inspection
of the talents of the specific Palestinian worker on the one hand, and a specific check
that no Israeli workers are available in practice for the sought-after positions.
As previously mentioned, we refrained from recommending the granting of permits for
Palestinian workers in the sectors where they can constitute competition to the
employment of Israelis, such as in the hotel and hospitality or industrial sectors (aside
from a few exceptions). Our recommendation is to focus on granting permits for work in
the construction and agricultural sectors, in the areas that were detailed above, where
no genuine competition exists with Israelis.
The Palestinian Perspective
Economic Aspects
Among all bodies dealing with the Palestinian economy, there is general agreement that from
the Palestinian perspective as well it would not be advisable to return to the high rate of
Palestinian workers in the Israeli economy that was the case on the eve of the outbreak of the
second intifada in the year 2000.
Nevertheless, work in Israel at a calculated rate and in specified sectors as proposed above,
dovetails with Palestinian economic interests -- definitely in the immediate term, but also for
the long term.
The increment proposed above in the number of Palestinian workers in Israel will result in a
situation wherein 7% of all working Palestinians will be employed in Israel (not including the
employment of Palestinians in Israeli communities in the West Bank).
This is a plausible ratio by comparison with international economies that share characteristics
with the Palestinian economy. It does not harm economic development within the areas of the
West Bank; it can be maintained for the long term; and it offers very important economic
advantages for the Palestinian economy. A recognition of these economic advantages is
shared by all bodies dealing with the Palestinian economy, Israelis and Palestinians alike.
Furthermore, during the negotiations that took place under the Olmert government,
Palestinian negotiators demanded that as part of a potential peace agreement Israel would
have to open its economy to Palestinian professionals in all fields and with no limitations.
A contribution to the Palestinian GDP: As discussed, every Palestinian worker in Israel
generates an average income of 3000 shekels per month (equal to 36000 shekels per annum).
Therefore, every additional 5000 Palestinian workers in Israel would generate an income on
the scale of 180,000,000 shekels per annum, equivalent to 1% of the Palestinian GDP.
A contribution to employment: The income of Palestinian workers in Israel constitutes a
serious injection of purchasing power into the local Palestinian economy that also finds
expression in an indirect contribution to local employment. With this consideration in mind,
the direct and indirect contribution to the Palestinian economy of every additional 5000
Palestinian workers in Israel is a reduction of over 1% in the unemployment rate.
On the macroeconomic level, the comprehensive influence of employing 25,000 additional
Palestinian workers in Israel is most significant:
• A GDP increase of 5%
• A direct and indirect reduction of unemployment on the scale of over 5% of the
workforce (alongside the transition of workers from part-time employment at a very low
wage level to a full-time job at a higher salary level -- this is not reflected in the
unemployment statistics, but contributes to the GDP).

The Social Welfare Aspect


Every Palestinian worker in Israel brings home to his family an income of 36,000 shekels on
average per annum. This amount is the equivalent of almost 2 average salaries for a
Palestinian worker in the West Bank. In many cases, particularly in the agricultural villages
and among the more impoverished population of the West Bank, this income more than
doubles the gross family income of a household and jumpstarts the economic capability of the
entire extended family.
The comprehensive influence of employing 25,000 additional Palestinian workers in Israel
can be expected to prove most significant for the welfare of the population. There would be a
very significant rise in the per capita income level and in the personal and family standard
of living of over 250,000 people -- more than 10% of the West Bank population (not
including East Jerusalem), primarily from the more impoverished strata of the population.

The Palestinian Position


The Palestinian position as it finds expression in the positions of most official bodies as well
as among many Palestinian economic leaders, is that the Israeli labor market is extremely
important to the Palestinian economy and will remain so for the foreseeable future.
Nevertheless, official Palestinian bodies also prefer to have the entry of Palestinian workers
into Israel in amounts that will help provide a solution to the unemployment problems
(primarily among unskilled workers), but will not exert heavy pressure on the Palestinian
labor market and economy in sectors with sufficient internal demand for workers.

A Comment about Gaza


Under certain conditions there are grounds to consider a limited amount of permits for
Palestinian workers from Gaza as well. With the extremely difficult economic situation in the
Gaza Strip, the contribution of employment in Israel to the GDP, employment, and household
income and welfare in the Gaza Strip is more than double that in the areas of the West Bank.

The Optimal Solution from Israel's Perspective: A Calculated and Focused Increment of
Palestinian Workers to the Construction and Agricultural Sectors
Considering the entirety of the analysis and the aspects discussed above, we recommend
increasing the number of work permits in Israel by the amount of 25,000 Palestinian workers
(from the areas of the West Bank) in two stages:
• About 8000 work permits would be granted on an immediate basis as a response to the
urgent needs of the agricultural and construction sectors in Israel.
• 15,000-20,000 additional permits would be granted on a gradual basis over the
remainder of 2010 and in 2011 as a response to specific demands in the agricultural and
construction sectors. These Palestinian workers will gradually replace foreign workers.
With the completion of these two measures, the total number of Palestinian workers in Israel
(not including Palestinian workers in the industrial zones and the Israeli settlements in the
West Bank) will increase from the current amount of 25,000 to 50,000.
Their total ratio will be about 2% of all employees in the Israeli economy and about 7% of all
employed Palestinians -- reasonable ratios for both economies.
The proposed gradual and calculated approach and the individual approach of the system
handling work permits for Palestinian workers will facilitate an individual response to specific
conditions that might endanger the employment of Israelis. In such cases the specific
employer will not be granted a work permit for Palestinian workers unless the system has
been persuaded that there is no practical possibility to recruit Israeli workers for the sought
after job.
In Summation
The Palestinian workers would serve as an almost complete substitute for foreign workers in
the agricultural and construction sectors (as they were in the past, prior to the year 2000).
Over the years 2010 and 2011, granting work permits in the amount proposed above will
facilitate the replacement by Palestinian workers of some of the foreign workers who are still
working in agriculture and construction.
Furthermore, the proposed addition of Palestinian workers to the construction and agricultural
sectors in Israel will end the bottlenecks that impair the normal activity of these two sectors;
will enable a GDP growth of 2%; and will mean the addition of 10,000 supplementary jobs
for Israelis.
This measure will also yield great advantages for the Palestinian economy and for the welfare
of Palestinians residents of the West Bank. It also dovetails with an Israeli policy that strives
to promote economic peace and to improve the welfare and quality of life of the Palestinians
in the West Bank.
Furthermore, an Israeli decision to substantially increase the number of work permits for
Palestinian workers in Israel will be gratefully received and acknowledged by the
international community in general, will improve Israel's international image, and will aid
Israel's public relations needs, which is especially needed in its relations with the Palestinian
Authority, discussions with the OECD, etc.
List of Sources

Professor Zvi Eckstein, Chairman, The Eckstein Commission Report-The Inter-Ministerial Committee
for Shaping Policy with Regards to Non-Israeli Workers, September 2007

Professor Zvi Eckstein, Chairman, Report of the Inter-Ministerial Committee for Promoting the
Employment of Israelis and Reducing the Number of Foreign Workers in Agriculture, January 2010.

OECD, International Migration Outlook: SOPEMI 2009; Summary,


http://www.oecd.org/dataoecd/5/20/43176823.pdf

The Foreign Ministry of the State of Israel, The Government of Israel' s Report to the Coordinating
Committee of Donor Countries to the Palestinian Authority, September 2009

Yizhak Gal, The Palestinian Economy 2000 -- 2009 (unpublished draft)

PCBS (Palestine Central Bureau of Statistics), www.pcbs.gov.ps : Labor Statistics, various tables;
National Accounts Statistics; Labor Force Survey April – June 2009

Central Bureau of Statistics, The State of Israel: National Accounts -- various tables

The Israel-Palestine Chamber of Commerce and Industry, An Update on Economic Developments in


the Areas of the Palestinian Authority, December 2009

The Association of Builders and Contractors in Israel, The Construction and Infrastructure Branch:
Survey of 2008 and Forecast for 2009 -- 2011, March 2009, as well as various memoranda 2008-2009

The Peres Center for Peace, Assembled Data from a Tour of the Crossing Points, September 2009

The Ministry of Industry Trade and Labor, The Support Unit for Foreign Workers, Assembled
Employer Allocations and Deductions from Workers' Salaries by Sectors -- For Workers in the
Autonomy, 01/08 Update.

The Knesset Research and Information Center, Employment Policy in the Construction Sector and Its
Repercussions on Work and Workers in the Sector, January 2009

World Bank, Palestinian Economic Prospects, June 2009

World Bank, West Bank and Gaza Update, July 2009

World Bank & IMF, Economic Monitoring Note and Macro Economic & Fiscal Assessment, April
2009

World Bank, A Palestinian State in Two Years: Institutions For Economic Revival, September 2009
Interviews
Name Body Position
Zvi Alon The Plants Production and Marketing Chairperson
Board
Gadi Horowitz The Plants Production and Marketing Director of the Fruit Sector
Board
Yizhak Association of Contractors and Builders Deputy CEO and Director of the
Gurevich in Israel Economics and Finance Departments
Shmuel Zuriel Israel Hotel Association CEO
Yoav Bachar Israel Hotel Association Deputy CEO for Human Resources
Eli Paz The Ministry of Industry Trade and Senior CEO for Emergency Situations
Labor
Dan Catarivas Manufacturers Association of Israel Director of the Division for Foreign Trade
and International Relations
Michal The Ministry of Finance Director of the CEO's Staff
Finkelstein
Michal Zuk The Ministry of Finance Budget Division
Adi Ashenazi The Ministry for Regional Cooperation Head of the Economics and Research
Division
Yishai Soreq The Ministry for the Development of Head of the Regional Frameworks
the Negev and the Galilee Division
Yael Ravia- The Foreign Ministry Head of the Middle East Economy unit
Zadok of Foreign Affairs
Saeeb Bamiya Former Deputy Minister of economics in the Palestinian Authority and senior
economic advisor to Palestinian bodies and executives