The Crisis Has Hit at the Core of the Labor Market

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The current crisis threatens the heart of the labor market with 400,000 workers between the ages of 35-54 designated as "temporarily absent from work" due to the coronavirus.

Flash 90

According to figures released on June 22 by the Israeli Central Bureau of Statistics (ICBS), in May there were approximately 950,000 people in Israel defined as “temporarily absent from work due to reasons associated with the coronavirus.”This is how the CBS defines the group of those entitled to unemployment benefits that are not “unemployed” according to the traditional definition; it is reasonable to assume that most of them are on furlough. Of these, some 800,000 (84%) were not working at all, and around 150,000 were partially absent from their jobs. These numbers include approximately 760,000 salaried employees who were furloughed, and approximately 190,000 self-employed Israelis who had not yet gone back to work. Men make up 45% of the total, and women—55%.

It is important to emphasize that this figure does not include those who are officially unemployed (estimated by the CBS at about 170,000). Furthermore, the ICBS estimates that there are an additional 81,000 people who would like to work but who have not been looking for work because of the current situation (lockdown/lack of demand for workers in their field), and therefore are not registered as unemployed in the official figures.

Thus, as of May 2020, there were some 1.05 million people out of work in Israel (whether unemployed, furloughed, self-employed and not working, or wanting to work but not actively seeking work due to the epidemic). In actual fact, this figure represents an unemployment rate of 25.8%. Of course, the figure is based on a different definition of the unemployment rate from that traditionally used, as it includes a much broader mix of populations left without work during this period.

Analysis of the ICBS data reveals that around 55% of those temporarily absent from work are in the 30–54 age group. This represents a total of 518,000 people, the vast majority of them with families, and a large proportion of them with small children who are economically dependent on them—around 215,000 aged 35–44; 185,000 aged 45–54; and 118,000 aged 30–34.

Only 21% of those temporarily absent from work due to the coronavirus are in the younger 18–29 age group, and the remaining 24% are older people ages 55 and above.

950,000 Israelis Temporarily Absent from Work due to the Coronavirus: May 2020 by age, in thousands ( absent for all or part of the working week)

Source: Israel Democracy Institute analysis of ICBS data

Thus, at the heart of the problem of the “temporary coronavirus unemployed,” most of whom have been furloughed and whose future is unclear, are families with children who have been left with no source of income. Moreover, in some cases both spouses in a household have been left without work and—for several months now—have been surviving solely on unemployment benefits, with the situation being even worse for those among them who are self-employed.

Breaking down the data by age group reveals that though more than half of the “temporary unemployed” are in the primary working age group (30–54), it should also be noted that the rate of those aged 25–29 who are “temporarily unemployed” is particularly high, at 26.9%, compared with an average of 23.6% for those ages 30–54. For the 55-59 age group, this percentage drops even lower, to 22.5%, before jumping back up to 28.9% among those ages 60–69, and reaching a peak of 44.3% among those age 70 and above. 

Temporarily Absent from Work due to the Coronavirus”: May 2020 (% of employed in each age group, (absent for all or part of the working week)

Source: Israel Democracy Institute analysis of CBS data

Analysis of the ICBS data by economic branch reveals that the hardest hit branch, with around 330,000 workers temporarily absent due to the coronavirus, are the services branches, including some 87,000 absent from the hospitality and food service branches; 80,000 from the professional, scientific, and technical service branches; 53,000 from the transportation and postal service branches; and around 90,000 from the management, support, and other service branches, with just 18,000 absent from the insurance and financial service branches.

In addition, in May 2020 some 155,000 people were temporarily absent from the education branch and some 120,000 from the health, welfare, and caregiving branches. 

In the wholesale and retail branches, almost 117,000 were temporarily absent from work due to the coronavirus; in industrial branches—approximately 65,000, and in the construction—41,000.

In terms of occupation, the ICBS data also reveal that 28% of those temporarily absent from work due to the coronavirus—representing some 264,000 people—are sales and service workers; 26% (approximately 245,000 people) have an occupation requiring academic qualifications; 17% (around 160,000 people) are in technical occupations such as practical engineers, technicians, and the like; 12% (113,000 people) are skilled l workers in manufacturing and construction industries; and around 73,000 are office workers and clerks.

The Solution: Vocational Training

The Israeli government should immediately seize the opportunity offered by the current situation, in which hundreds of thousands of workers are temporarily not working, and offer them vocational training and retraining through their employers. Under the terms of this arrangement, the state will provide employers with subsidies of courses s for workers on furlough, and even full funding of some courses.

For courses that are essentially vocational, employers should be given discretion in referring workers to courses, to ensure compatibility with the needs of the labor market.

Thus, the budget for vocational training courses will be transferred via employers, who will be responsible for referring employees to relevant courses, and will include a payment of handling fees to employers participating in this track to cover the management of the referrals to the vocational training system. The initial budget for this plan, at around NIS 300 million, has already been provided in principle as part of the government’s aid program. Additional funds of around NIS 500 million should be allocated in 2021 to pay for the training courses, with this sum not including stipends for living costs to be paid to workers undergoing training, which should be funded in lieu of unemployment benefit payments. Establishing this track will enable employers to conduct some of the training courses in the workplace, thus maintaining the contact between employees and employers or between employers and the labor market, without the employer being obligated to continue employing the program graduates in the future.

A similar track should also be offered to self-employed workers who are interested in undergoing vocational training or retraining during a period in which they have been forced to suspend or severely curtail their business activities.

In addition, the state should offer courses tailored to providing basic skills that are essential in the labor market, open to anyone eligible for unemployment benefits

In the 2020 state budget, around NIS 500 million should be allocated for a training framework that will be open to all unemployed Israelis (in the broader sense of the term, to include furloughed salaried workers and the non-working self-employed) and will provide courses to upgrade workers’ basic skillsets, particularly in skills in which Israelis have been found to be lagging behind in international comparisons: digital skills, mathematical skills, reading skills, and language skills (especially English), as well as for online marketing and sales capabilities for the self-employed.

This plan has several clear advantages, including:

• Improving workers’ personal situation and mental health: Instead of these hundreds of thousands of salaried and self-employed workers sitting at home and receiving unemployment benefits, they will be busy upgrading their skills or undergoing vocational retraining. This will have a positive impact on their wellbeing and on their sense of being needed in the labor force. 

Accelerating economic activity: Such an initiative will help accelerate economic activity, since many training institutions will be given contracts to conduct employee training programs.

Improving employment productivity: This plan will enhance the skillsets of Israeli workers, which currently rank low in international comparisons, including in the OECD’s PIACC international employment skills survey and in reports from employers in the Israeli business sector. In the long term, going in this direction will lead to better skills, higher productivity, and greater competitiveness of Israel’s economy.

Ensuring preparedness for the “day after” The plan will help employers by addressing the current lack of skilled workers in many technological areas. This situation was evident before the epidemic, and if nothing is done to address it—will likely to continue to be relevant after we recover from the crisis, unless such steps are taken. Training will also enable the self-employed to prepare for a possible “second wave” of the coronavirus, equipped with a new skillset which will provide them with better tools to survive the new economic and/or business reality.