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As Israel shuts down more, increasing economic uncertainty lurks

Jul 7, 2020
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The government decided on Monday to impose more restrictions to keep the Corona outbreak down. The number of guests in restaurants, praying in synagogues, reducing the number of passengers in public transport, increasing the fine for not wearing a mask to 500 shekels (equivalent to about 1000 kr), closing of party rooms, theaters, concerts, cultural events, swimming pools , gyms, bars and nightclubs, writes the newspaper Times of Israel.

“Israel is” one step away from a total shutdown, “Prime Minister Benjamin Netanyahu told cabinet members at a recent Corona meeting. Although the current shutdown is not as far-reaching as it was during the first Corona wave, it is a major step back and the economic consequences for the Israeli economy are incalculable.

The Corona crisis has also become an economic crisis and, as companies and shops succumb to the red numbers on the bottom line, millions of people are left without jobs. Economists and politicians are most concerned about the unemployed aged 18-35, writes the newspaper Times of Israel.

Based on past crises, they fear that young unemployed men and women will find it difficult to return to the labor market quickly and risk ending up in long-term unemployment and ending up in very low-paid jobs.

– Giving young people skills and tools to find a job is not only good for their own prospects and self-esteem, it is also good for economic growth, social cohesion and well-being. Therefore, investing in youth must be a political priority worldwide, said OECD Secretary-General Angel Gurría in a report on young people and the way out of the Corona crisis.

Concerns about rising unemployment
Although the new restrictions are not as sweeping as during the previous closure, the job centers in Israel are under tremendous pressure. Before the Corona crisis, unemployment in Israel was below 4%, now, according to the latest data from the employment service, it is 20.9%. In numbers, this means that 847,207 Israelis are unemployed, 584,819 of them have been sent on unpaid leave – they do not know when or if they will be able to return to work at all.

Since April 19, when the Israeli economy was gradually shut down again, 385,020 Israelis have returned to work, according to the latest figures. But it is worrying that between 2 July and 5 July, there were more new unemployed who joined the unemployment queue than there were waiting to return to work. 466 Israelis announced that they had found work, while 850 people were registered as unemployed, the latest figures show.

Latest OCD report paints gloomy picture of Israeli economy
Israeli economy is expected to decline between 6.2% and 8.3% in 2020 – depending on whether the second Corona wave comes this year or later, according to an OECD report published in June. High unemployment could be the biggest obstacle to Israel’s way out of the crisis, experts fear.

Almost 1 in 10 jobs that workers under the age of 30 had in developed countries were “destroyed” during the crisis, the OECD report shows. . They were virtually all part-time or temporary jobs in the industries most affected by the Corona crisis: restaurants, bars, catering companies, hotels, leisure and tourism.

The current crisis comes after European countries such as Spain, Greece and Ireland saw the number of young people employed halved between 2007 and 2014 – it was largely the young people who felt the social and economic consequences of the financial crisis in 2008. The number of unemployed young people increased by 20% during the period, leaving one in eight people aged 18-25 in poverty, according to the OECD report.

Many of the young people who lost their jobs after the economic crisis in 2008 never returned to the labor market in a proper way – even after the economies had recovered. In the OECD, the employment rate for young people has stagnated since 2010 and is still below the level before 2008, according to the report.

About 40 million young people in OECD countries, corresponding to 15% of those aged 15-29, are so-called NEETs. This means that they are not in education, employment or in vocational training. Two-thirds of them are not even looking for work. Up to 40% of all young people experience a period of inactivity or unemployment during a four-year period. For about half of them, the period will last a year or more and this can lead to “discouragement and exclusion”, according to the report.

– Being unemployed at a young age can have long-term and ‘far-reaching consequences’ in relation to career choices and future income. Young people with a history of unemployment have fewer career development opportunities, lower wage levels, poorer prospects for better jobs and ultimately lower pensions. The economic aftermath of the pandemic exacerbates the vulnerability of young people in the labor market, as they are more likely to work under poorer employment conditions – such as temporary or part-time work and with a greater risk of losing both jobs and income, according to the OECD report.

In Israel, the Corona crisis has meant that an increasing number of young people up to the age of 34 have registered as unemployed at the employment service. According to their figures, the number of young people registered with them has increased from 41.7% before the crisis to the current 47.6%.

The report published on June 30 also showed that since the Israeli economy reopened in April, only 20% of the workforce up to the age of 24 had returned to work by the end of May. The figure for other age groups is between 22% and 25%.

Not only has the crisis hit young Israelis hard, it has also exacerbated a general trend. Figures from the OECD in 2018 show that Israel’s share of NEETs was 13.3%, which is slightly higher than the OECD average of 13%, but it is lower than the number in Italy, Spain, Greece and France.

At the same time as the employment level in all age groups increased in Israel in the years 2012 – 2017, unemployment among those aged 18-34 was still the highest of all age groups at the end of 2017, the employment service’s figures show.

Young people “are increasingly being disconnected from the labor market” and are not developing “the simple daily skills” needed to fit into the labor market, says Yaniv Bar, a research economist at Bank Leumi. Those skills can be as basic as learning to use IT programs or the social skills that a workplace requires.

Research among European young people has shown that the more the skills are eroded, the harder it will be for young people to find a way into the labor market, says Bar.

– If no immediate steps are taken to do something about it, the concern is that a pattern similar to that seen in Europe in the wake of the 2008 crisis and will happen in Israel. This may mean we will see unemployment figures that are much higher than those we saw before the crisis, says Bar.

“Higher unemployment rates will mean” a loss of future tax revenue for the state “, says Bar and the financial burden of having to support more unemployed with subsidies and benefits will be on the government’s shoulders.

– Being young and inactive can lead to risky behaviors – such as substance abuse and alcoholism. Costs that the government will have to bear, Bar says.

The Israeli labor market differs significantly from other OECD countries in two respects, according to the report from the Israeli Employment Service.

Conscription in the Israeli Army (IDF) postpones the introduction of young people into the labor market. “Without service in the IDF, we would see many more new unemployed,” the report said.

The young people who report unemployed now probably come from societies exempt from compulsorymilitary service. For example, Arab youth, ultra-Orthodox Jews, or youths of low socioeconomic status who have either not been in the army or have not completed their military service, the report states.

Israeli young people have lower skills compared to their peers in other OECD countries, previous international studies show. It will probably make it even harder for them to return to work.

“The government should offer vocational training and retraining programs for the hundreds of thousands of unemployed, either directly or through their former employers,” said Daphna Aviram Nitzan, director of the Center for Governance and Economy at the Israel Democracy Institute.

Employers should be encouraged to re-employ the employees they have sent home on unpaid leave indefinitely. Employers should get state subsidies to retrain them for jobs they actually need to be filled and the state should offer fully funded courses for basic skills that are essential in the job market, Nitzan says.

As part of a 100 billion rescue package. shekel in the fight against the economic crisis, the government has allocated 200 mln. shekel for vocational training programs. But almost no money has been spent on it yet, Bar says.

As part of the 2020 budget, the Ministry of Finance is now dusting off an existing work plan with a work plan for 2030. But the reality on earth is very different today than when the plan was laid down. At the time, unemployment was at a record low and the ministry has not yet defined what the budget for vocational training plans should be, the financial newspaper The Marker reported on Monday.

– We believe it is extremely important that young people return in the labor market and therefore we have approved the payment of subsidies to employers to hire, the Ministry of Finance told the Times of Israel

Israel is now in the middle of the second Corona wave with daily new records on the number of infected. As a result, the government has now again decided to impose far-reaching restrictions.

At the time of writing, 338 people have died from Corona and over 31,000 are infected. So far, the young people have largely escaped the severe health consequences of the pandemic, but they are paying a high economic price for the Corona crisis.

Failure to meet the special needs of this age group will “affect their future in the labor market”, the employment service writes in their report.

– Returning to work will affect the reintegration of young workers into society and the labor market. Those who enter the unemployment queue and end up in long-term unemployment may end up being away from the labor market for a very long time. It is not enough to get them back to work – there is also a need to strengthen their skills. Only a good mix of getting them back to work on the one hand and giving them skills on the other hand will give young people the opportunity to survive the crisis and be prepared to cope with the changing needs of the labor market and the workplace, it says. employment service report.

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