Finance Ministry: Soaring unpaid leave to cost state NIS 15 billion

The number of unemployment benefit claimants has climbed to almost 939,500, or 22.6% of the workforce.

Shai Babad
Employees placed on unpaid leave are likely to cost the state NIS 14 billion-NIS 15b. during the next three months, Finance Ministry director-general Shai Babad told lawmakers on Sunday.
According to figures published Sunday evening, the number of unemployment benefit claimants has climbed to almost 939,500, or 22.6% of the workforce, including more than 781,000 new applicants since the beginning of March. The number is expected to exceed one million before the Passover holiday.
Some 89.9% of new claimants are employees placed on unpaid leave, as measures to contain the coronavirus outbreak hammer businesses nationwide.
"The unpaid leave is estimated to reach the scope of NIS 14b.-15b. within the next three months, with one million people on unpaid leave," Babad told the Knesset's special committee on the coronavirus.
Babad presented committee members with the first details of the government's long-delayed financial assistance plan, which is expected to be worth approximately NIS 80b. to businesses, employees and self-employed workers. The plan is likely to be approved later on Sunday or Monday.
While refusing to provide exact details or sums involved in the aid package, which is still being considered by Prime Minister Benjamin Netanyahu and Finance Minister Moshe Kahlon, Babad said additional funds will be provided to the healthcare system, salaried and self-employed workers and businesses. He added that the program is of a similar scope to initiatives implemented by many governments worldwide.
"Huge sums" will be provided to the healthcare system, Babad said, highlighting the need for the next government to invest heavily in public health, irrelevant of the current crisis.
While salaried employees have access to a "financial safety net" in the form of unemployment benefits, the new package will also offer a solution to employees aged over 67, and a grant to assist self-employed workers until the end of April. Businesses of all sizes will be eligible for a combination of grants, access to low-interest loans to assist cash flow shortages, and deferral of VAT and municipal tax payments.
Babad said the package will also facilitate efforts to create employment opportunities during the current period, including by accelerating national infrastructure projects.
Responding to Babad, Manufacturers Association of Israel president Ron Tomer disagreed that the financial package is of a similar scope to foreign government initiatives.
"The aspiration should be to provide us with NIS 100b.," Tomer told the committee. "The economic plan should address three elements: liquidity – loan funds and payment deferrals; growth – strengthening the authority for Investments and the Israel Innovation Authority; and, thirdly, compensation."
Histadrut labor federation chairman Arnon Bar-David lamented that Israel was one of the last countries to present an economic plan, due to disagreements within the Finance Ministry.
"There is some progress, but I do not see solutions on their way," said Bar-David. "In this catastrophic situation, people want some element of certainty or, to whatever extent is possible, to dispel uncertainty – that is the importance of the economic plan."
Lawmakers were also presented with a range of financial forecasts, estimating the extent of damage to GDP as a result of containment measures.
Should the current restrictions on the economy continue for a period of five weeks, damage valued at 5% (NIS 70-75b.) of GDP Is likely. If the current status continues for 12 weeks, damage will increase to 12% of GDP.
A full shutdown of the economy for five weeks, excluding essential industries, would cost 9% of GDP. A similar shutdown lasting 12 weeks would damage GDP by some 18%.
Seeking to tackle rapidly rising unemployment, the Employment Service published an "emergency program" to assist those out of work. According to estimates shared by the service, one in five workers on unpaid leave will not return to their place of work should the crisis continue past mid-April.
To facilitate the return to work, the Employment Service released details of four initiatives intended to improve would-be employees' prospects, and a series of recommendations for decision-makers tackling the financial fallout of the coronavirus crisis.
Initiatives rolled out by the Employment Service feature a program assisting employers to rehire workers currently on unpaid leave, including the reallocation of resources to help returning employees; a "direct placement" track designed for jobseekers with high prospects, using advanced digital tools and job search workshops; a "skills reinforcement" track for individuals requiring limited assistance to improve their productivity and ability to persevere; and, finally, a vocational college or on-the-job training course for individuals deemed likely to fall into long-term unemployment.
"We must tailor the response to be as personal as possible for each jobseeker, in order for them to return to a suitable job," said Employment Service director-general Rami Garor. "In order to deal with the crisis, a national effort aimed at restoring workers to their places of work must be enacted, especially so that the temporary situation that we are currently experiencing does not become permanent – this is our major and important goal for the near future."
Citing lessons learned from the recovery from the 2008 financial crisis and actions already taken by other nations, the service also presented the government with a series of recommendations to minimize damage to the labor market.
Ofir Pinto, deputy-director for research and planning at the Employment Service, told The Jerusalem Post that the government is advised to combine its current reliance on the unemployment services with either financial assistance through the workplace or in direct grants to householders.
Financial assistance through the workplace may involve providing paid sick leave or government funding to encourage the continued employment of workers.
"If 10% or 20% of employees will not return to their last place of work, this will cause great damage to our labor market, to our economy and to taxation collected by our government – the State of Israel needs to adopt a new approach by looking at other countries," said Pinto.
"Thinking about the day after the coronavirus, providing as many benefits and incentives to employers as possible is the best thing we can do in order to decrease the number of people that will be made redundant after this period."
Noting great uncertainty regarding the future of the outbreak, Pinto said the Employment Service's recommendations could be subject to change. If the virus outbreak continues into 2021, and many businesses crash, the Israeli strategy to direct everyone to the National Insurance Institute (Bituah Leumi) – rather than providing incentives to employers – will be seen as the ideal solution.