Israel's low unemployment isn't the only job market indicator - analysis

While falling unemployment – a key measure of labor under-utilization – is certainly welcome news, the rate itself does not paint the full picture of the Israeli job market.

Employees work at Internet data firm SimilarWeb at their offices in Tel Aviv, Israel July 4, 2016 (photo credit: BAZ RATNER/REUTERS)
Employees work at Internet data firm SimilarWeb at their offices in Tel Aviv, Israel July 4, 2016
(photo credit: BAZ RATNER/REUTERS)
The Israeli unemployment rate continued its decline to a historic low in October, reaching just 3.4% – the lowest level recorded by the Central Bureau of Statistics (CBS) since 1978.
Hailing the new figures published on Monday, Finance Minister Moshe Kahlon emphasized that low unemployment indicates both a “strong economy, and no less important, a strong society.”
While falling unemployment – a key measure of labor under-utilization – is certainly welcome news, the rate itself does not paint the full picture of the country’s job market. In keeping with internationally accepted standards, being recorded as employed by the CBS requires working in a paid job for as little as one hour per week.
The measure, however, completely disregards all those outside the labor force, whether due to being unfit to work, living on benefits alone, volunteering, living on a pension, or other sources of private income. It also ignores the quality and conditions of employment for those recorded as working.
Rather than over 96% of Israelis heading out to work, as the unemployment rate might suggest at first glance, the 3.4% unemployment rate only refers to the 140,500 unemployed Israelis actively seeking work.
Indeed, CBS data showed that the share of all Israelis aged 15 and over in employment dropped from 61.2% in September to 60.6% in October. A total of 64.6% of men and 56.9% of women were recorded by the CBS as currently employed.
Among Israelis age 25-64 – the key workforce of the nation – the rate of participation decreased from 78.2% in September to 77.8% in October.
In terms of quality of employment, data from the third quarter of 2019 showed an increasing trend of part-time work and decrease in full-time work (in excess of 35 hours per week) among Israeli employees.
Between July and September, the number of individuals in full-time employment decreased by 0.6%, or 18,000 workers, compared with the previous three months. During the same period, part-time employment increased by 2.5%, or 21,000 workers.
While many potential employees do seek part-time work, the figures from recent months may suggest job-seekers opting to work in part-time jobs due to their greater availability, and accordingly earning lower wages than desired.
As of October, the number of job vacancies across the country stood at 98,200, or 3.46% of all jobs. Despite a slight increase since September, the quantity of unfilled positions has declined by 0.3% over the past 12 months. The sectors with the highest number of unfilled positions from July to September included engineering (9,079 job vacancies), sales (7,854) and software development (6,572).
According to a report published by the Labor Ministry earlier this year, considerable obstacles still remain in the integration of Arab women and haredi (ultra-Orthodox) men into the national workforce.
While employment among haredi women and Arab men has increased significantly in recent years to approximately 76%, just below the high national average, only 38.2% of Arab women and 50.2% of haredi men are employed.
Large wage gaps exist between different population groups and genders. The average non-haredi Jewish man earns NIS 15,372 per month, compared with NIS 9,928 among women, the report stated. Arab men earn NIS 8,552, compared with just NIS 5,791 among Arab women. The average wage among haredi men stands at NIS 8,467, compared with NIS 7,527 among haredi women.
The continued lack of workforce participation and disparity in pay among the haredi and Arab populations has left a large gap in GDP per capita between Israel and the world’s developed nations, a recent report by the Organization for Economic Cooperation and Development (OECD) revealed.
Facing higher income distribution inequality than most advanced economies, the gap in GDP per capita between Israel and the upper half of OECD countries has remained at approximately 30% for almost a decade.
While GDP per capita in Israel increased annually by 2.3% between 2002 and 2008, according to OECD data, it grew by an average of only 1.7% between 2012 and 2018.
“Inequalities have edged down since 2007, thanks to higher employment rates among Israeli-Arabs and the haredim, but poverty remains widespread among these disadvantaged groups,” the authors of the report said. “Enhancing skills of and employment opportunities for disadvantaged groups, better transportation infrastructure and further product market reforms and boosting productivity are crucial for making growth stronger and more inclusive.”