Position Paper May10 [Palestinian Workers in Israel -- Peres Center]

8/9/2019 Position Paper May10 [Palestinian Workers in Israel -- Peres Center]

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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. Onthe one hand, there are those who contend that Palestinian workers will drive Israeli workers intounemployment. Others say that Israelis in any event do not work in the occupations that thePalestinians are employed in, and the latter will only replace the foreign workers who have becomepart 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 workersin Israel. Some of the government ministries would prefer that Israel employ Palestinians over foreignworkers, due to the implicit political, public relations and economic benefits of a measure that will beinterpreted as granting alleviation to the Palestinians. Others, particularly in the Ministry of Financeand at the Bank of Israel, view the Palestinian workers as they view the foreign workers -- namely as athreat 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 tightlyinterwoven 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 theemployment of a calculated number of Palestinians benefit the Israeli economy and the broadernational 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. Ourrecommendation is to permit 25,000 additional Palestinian workers to work in Israel over a graduatedtimeframe 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 employedPalestinians, plausible ratios for both economies.

We are dealing with a specific measure with far reaching economic implications and the potential toimmediately ameliorate the condition of scores of thousands of Palestinian families. There are thosewho 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 thisregard is clear: economic peace cannot be sustained on its own; it can only be achieved alongside apolitical process which effectively realizes the “two states for two nations” solution. Only a genuinepolitical agreement can guarantee both true stability and security. At the same, it will bring economicgrowth to Israel as well as a boost to the Palestinian economy, allowing it to solidly stand on its ownfeet.

This paper has already been circulated among Israel’s key decision makers and presented by itsauthors to the relevant governmental ministries. It is our hope that the analysis and recommendationsprovided herein will serve as valuable and constructive inputs for the Israeli inter-ministerialcommittee 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 forsupporting 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 alsowant to thank the report's authors and the team in the Business and Economics Department of thePeres 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 findthis 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 Palestinianperspectives) to return to the high ratio of Palestinian workers in the Israeli economy thatprevailed on the eve of the second Intifada that erupted in the year 2000. Nevertheless, as weshall see in this position paper, it will greatly benefit both parties to have a calculated andfocused 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 permitsin Israel on a scale of about 25,000 Palestinian workers (an increment to the current numberof 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 foreignworkers).1

• 15,000-20,000 permits would be issued on a gradual basis over the course of the year2010 and the year 2011, as a response to specific demands (primarily in the agriculturaland construction sectors). These Palestinian workers would gradually replace additionalforeign workers.

With the completion of these two measures, the total number of Palestinian workers (notincluding Palestinian workers in the industrial zones and Israeli communities in the WestBank) 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 employedin the Israeli economy, and about 7% of Palestinian employees (from the West Bank and theGaza 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 Israelieconomy and reap the inherent social and economic benefits. Granting work permits toPalestinian 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 dealingwith 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 anappreciable number of them are experts. Therefore, we do not refer to these sectors in this position paper. Wealso do not refer to the area of care giving. This area apparently is the only one where in the foreseeablefuture 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 effectiveimplementation of the recommendations of the Inter-Ministerial Committee for Promoting theEmployment 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 arenot Israelis, in accordance with the framework and the employment plans that are prevalent inthe 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 thepolicy recommended by the Eckstein Commission. Rapid and complete replacement of foreign workers by Palestinians would result in timely progress on the framework proposedby the Eckstein Commission. 2

Avoiding Harm to the Employment of Israeli Workers

One must seriously consider the argument that Palestinian workers may supplant Israeliworkers in various branches. Nevertheless, the manpower shortage in construction andagriculture 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 Israeliworkers in specific sectors, such as Arab-Israeli workers employed in agriculture.

Furthermore, the ability to preserve Israeli interests is immeasurably higher when Palestinianrather than foreign workers are employed, because Israeli authorities are able to immediatelyend the employment of Palestinian workers.

Additionally, the measure that we propose provides specific important advantages for theconstruction 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 animmediate 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 tosubstantial growth in the sector's activity, as well as to increased activity insupplementary 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 thenumber 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, asopposed to 12.4 months in 1991.

We propose allowing 5000 to 8000 additional permits for the construction sector, to begranted on a gradual basis over the years 2010 and 2011. Some of these workers will replaceforeign workers and some will constitute a net increase in the number of workers employedby the sector.

Every net addition of 1000 workers in the wet works can create a marginal benefit on thescale of 100,000,000 shekels to the product of the building sector, as well as a large increasein 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 theyears 2010-2011 is expected to contribute one billion shekels to the Israeli GDP -- anincrement 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 lengthof time.

• Granting the proposed permits will check the constriction that has occurred over thelast couple of years in the very labor-intensive branches of agriculture (for examplethe cultivation of certain species of flowers that has relocated to an appreciable degreeto Africa and other locations).

We recommend allowing approximately 5000-8000 additional workers entry into theagricultural sector. Some will enter the sector as permanent workers who will replace foreignworkers, while others will be seasonal workers. The addition of these workers will happen ona 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 thatwill both allow normal work over time and provide the sector with flexibility in accordancewith seasonal needs. Stability and flexibility for the work roster will provide farmers with thesecurity necessary to increase manufacture and agricultural export; allow them in a few yearsto provide agricultural exports on a scale of 100 -- $200,000,000 per annum; and makepossible a similar increase in the agricultural product (an addition of about 0.5% to the IsraeliGDP).

The Security Aspect

• The system that deals with granting work permits to the Palestinian workers in Israel ishighly formalized and efficient, and has been in place for 20 years. This system isoperated today by the Ministry of Industry Trade and Labor, in conjunction andcooperation with the security organizations.

• The track record of this system is excellent. Even in the peak years of the secondIntifada there was hardly a terrorist incident involving Palestinian workers who enteredIsrael legally.

• The 3 primary crossing points for Palestinian workers (Gilboa, Shaar Ephraim andTarkumiya) are organized and experienced, and currently handle the crossing of



Palestinian workers efficiently and professionally. The calculated and gradual increasein the number of Palestinian workers will allow the crossing points to prepare toefficiently handle the larger number of workers who can be expected to pass throughthem during the peak hours.

The Political AspectThe measure proposed in this position paper offers tremendous advantages to the Palestinianeconomy and the welfare of Palestinians resident in the West Bank. It also dovetails with thecurrent policy of the Israeli government headed by Binaymin Netanyahu, who previouslycalled for promoting the concept of an "economic peace". The proposed measure will lead toan amelioration in the welfare and quality of life of West Bank residents; as such, it can beexpected 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 adirect and indirect reduction of unemployment on a scale of over 5% (in addition to theworkers who will move from part-time employment with very low wages to full-timeemployment at a higher salary level -- something that is not reflected in the unemploymentstatistics 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 theWest Bank and is 130% higher than the average wage in Gaza (87 shekels per diem and 64shekels per diem respectively).

According to this calculation, every additional Palestinian worker will bring in 36,000 shekels perannum on average (almost double the annual average income of a Palestinian worker in the WestBank). In many cases, this earning doubles the total family income of a household and jump startsthe 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 Israeliemployer are higher. The Employer is obliged to pay a minimum wage per month for perdiem workers which is closer to 3600 shekels. With the addition of the social allotments, thesalary 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 proposedincrement of Palestinian workers to the building and agricultural sectors in Israel will end thebottlenecks that damage normal activity in these 2 sectors; will allow for a 2% increase in theGDP; 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 2.5million people in the West Bank (including East Jerusalem -- the Palestinian Jerusalemdistrict), 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 thisyoung demographic is that in recent years this cohort has flooded the labor market, and willcontinue to do so for the foreseeable future. According to the PCBS data, the total net increaseof 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 andcurrently totals 2.3 million, out of which 1.5 million are in the West Bank (including EastJerusalem) and about 800,000 are in the Gaza Strip.4

Additionally, the participation rate of the Palestinian population over the age of 15 in theworkforce5 is continuously increasing: the average rate rose from less than 35% during the1970s, to 38% in the latter half of the 1980s, to 40%-42% during the years 2003-2007 and to45% 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) -- hasgradually 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 eachyear, 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 obtainingacademic education and seeking to integrate in the labor market. According to the aforementioned workforcesurvey, 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 totalparticipation rate of those with higher education (women and men) is about 60%, in comparison with about40% 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 thePCBS -- 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 whopreviously searched for work but "gave up" and stopped looking for work on an active basis. According tothe more restrictive definition (the definition employed by the International Labor Organization thatconsiders only someone who continued to look for work on an active basis as unemployed) theunemployment rate in the West Bank declined in mid-2009 to about 16%. Source: PCBS -- various tables aswell 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 andemployment.

For a period of about 20 years, from the mid-1970s until 1993, work in Israel constituted athird of all Palestinian employment. Between the years 1990-1992, for example, the numberof 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 inIsrael 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 over100,000.

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 Palestinianworkers from the West Bank in Israel was renewed. The picture, as of mid-2009, is asfollows:

• According to Israeli data, the total number of Palestinian workers employed in Israeland in Israeli communities in the West Bank is 48,000, of whom 26,000 are employedinside Israel and the rest in Israeli communities in the West Bank (including Israeliindustrial 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 andIsraeli communities in the West Bank.10

• The aforementioned workers (all from the West Bank) constitute 9% of all Palestinianemployees 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 WestBank and about 3% of total Palestinian employment (including Gaza).

According to Israeli estimates, the number of illegal Palestinian workers working in Israel isnot 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 Palestinianworkers 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

200910 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, theJericho district – which includes the Jordan Valley – as well as the Salfit and Kalkilyadistricts), employment in Israel is divided relatively equally among Palestinian workers fromall the West Bank regions. 12

Nearly 60% of the Palestinian workers who work in Israel are employed in the constructionindustry; 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 AdministrativeArrangements

According to Palestinian data, as of mid-2009, the average wage for a Palestinian worker inIsrael is 146 shekels per day. The highest wages were recorded in the building sector (155shekels 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 theWest Bank and higher by 130% than the average wage in Gaza (87 shekels per diem and 64shekels 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 Israelfor a legal Palestinian worker are identical in terms of labor laws, to those for an Israeliworker. Therefore, the Israeli employer is obligated to pay a minimum wage that currentlytotals about 178 shekels per diem. The minimum monthly wage of day workers, calculated onthe 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 theemployer 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 ahighly formalized and efficient system that classifies and approves Palestinian workers forwork permits in Israel. The system is currently operated within the framework of the Ministryof 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 alegal 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-visthe employer via the Support Unit for Foreign Workers in the Ministry of Industry Trade andLabor 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 workersand 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 theMinistry of Industry Trade and Labor, while deducting the allotments mandated by law.



labor laws and the accepted yardsticks in the international system, including full compliancewith OECD demands.

The three crossing points that see the bulk of Palestinian worker traffic (Gilboa, ShaarEphraim and Tarkumiya) are organized and experienced, and currently handle the dailypassage of Palestinian workers efficiently and professionally. An analysis comparing the dataof 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; withrelatively 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 asignificant reduction in the number of foreign workers employed in the country -- both legalworkers 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 bringforeign workers to Israel.

As a result of this policy, the construction and agriculture industries have languished for sometime due to a chronic lack of workers in areas where Israelis are not prepared to work. Thisdoes severe damage to these sectors. As a point of contrast, the industrial and hospitalitysectors employ a very low number of legal foreign workers, an appreciable number of whomare experts. Additionally, the leaders of these sectors do not currently believe that addingPalestinian 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 theemployment 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 unskilledworkers as well as jobs which Israeli workers are not prepared to do. However, in the opinionof 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 tothe area of care giving. This area is apparently the only one where there is no substitute forforeign 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 wetconstruction works (scaffolding, iron rods, plastering and flooring), labors that Israelisare 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 preparedto do for an extended length of time.



flexibility to the manpower roster will provide the farmers with the requisite security toincrease 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 effectiveimplementation of the Inter-Ministerial Committee's recommendations for encouraging the

employment of Israelis and reducing the number of foreign workers (the EcksteinCommission, 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. Theseplans 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 dovetailwith 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 highlyformalized and efficient system with decades of experience in classifying Palestinian workersand approving them for work permits in Israel. This system is currently operated within theframework of the Ministry of Industry Trade and Labor in full coordination and cooperationwith 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 terrorattack 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 tospecific requests by the employers. Each request is examined on its merits by the defenseagencies; this also includes a series of administrative and technological measures for bothongoing security control over the permit-holding worker and for strictly examining the workerupon each and every one of his entries into Israeli territory.

As previously mentioned, the crossings that serve the workers can process an additional5000+ workers per day as they are now, and an additional 5000 by making relatively easyadjustments. To accommodate numbers beyond these -- and in order to support continuedgrowth in the number of Palestinian workers -- the crossings will need to undergo suitableadjustments.

The measured and gradual increase in the number of Palestinian workers that we propose inthis 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 theamount 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 andprofessionalism acquired in recent years by the Crossings Authority in the Defense Ministrywill also prove very valuable in overcoming specific loads than can be created at any thecrossings.

Another aspect that should be considered in this context is a calculated and focused expansionin 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 Palestinianworkers in the agricultural sector totals up to 3000, particularly in the high season of the oliveharvest.

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. Asthe 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 originallyreceived 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 foreignworkers 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 withregard to security.

The Israeli employers claim that when it comes to the level of professionalism, the Palestinianworkers are in no way inferior to the foreign workers in their professionalism and theirreadiness 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 chooseon a personal basis, the Palestinian worker is hired by the employer on the basis of hisspecific 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 ismuch 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

IsraelisIt 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 tolabor-intensive industries such as construction (the “wet works” of scaffolding, iron rods,plastering and flooring) and agricultural manual labor (continuous and intensive work in thegreenhouses, 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 nopractical way to rely on Israeli workers for these jobs. In the agricultural sector it is verydifficult to hire Israeli workers for the aforementioned labors, and the workers who are hireddo not persist. In the construction industry, despite attractive offers and a major investmentin 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 theharvesting season (particularly crops that need to be harvested quickly and in a short timespan) and an inability to plan a regular course of work; in construction a failure to meet thetimetable 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 sectorscreates a large increase in supplementary jobs in the areas of the construction and agriculturalprofessions 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 theemployment of Israelis while also emphasizing the need to avoid damage to the employmentof 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 fromthe 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 forthe long term.

The increment proposed above in the number of Palestinian workers in Israel will result in asituation wherein 7% of all working Palestinians will be employed in Israel (not including theemployment of Palestinians in Israeli communities in the West Bank).

This is a plausible ratio by comparison with international economies that share characteristicswith the Palestinian economy. It does not harm economic development within the areas of theWest 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 isshared 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 wouldhave 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 Israelgenerates 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 onthe 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 aserious 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 5000Palestinian workers in Israel is a reduction of over 1% in the unemployment rate.

On the macroeconomic level, the comprehensive influence of employing 25,000 additionalPalestinian 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 theworkforce (alongside the transition of workers from part-time employment at a very lowwage level to a full-time job at a higher salary level -- this is not reflected in theunemployment 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 onaverage per annum. This amount is the equivalent of almost 2 average salaries for aPalestinian worker in the West Bank. In many cases, particularly in the agricultural villagesand among the more impoverished population of the West Bank, this income more thandoubles the gross family income of a household and jumpstarts the economic capability of theentire extended family.



The comprehensive influence of employing 25,000 additional Palestinian workers in Israelcan 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 standardof living of over 250,000 people -- more than 10% of the West Bank population (notincluding 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 wellas among many Palestinian economic leaders, is that the Israeli labor market is extremelyimportant to the Palestinian economy and will remain so for the foreseeable future.

Nevertheless, official Palestinian bodies also prefer to have the entry of Palestinian workersinto 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 Palestinianlabor market and economy in sectors with sufficient internal demand for workers.

A Comment about GazaUnder certain conditions there are grounds to consider a limited amount of permits forPalestinian workers from Gaza as well. With the extremely difficult economic situation in theGaza Strip, the contribution of employment in Israel to the GDP, employment, and householdincome 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 recommendincreasing 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 theremainder of 2010 and in 2011 as a response to specific demands in the agricultural andconstruction 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 theWest 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 systemhandling work permits for Palestinian workers will facilitate an individual response to specificconditions that might endanger the employment of Israelis. In such cases the specificemployer will not be granted a work permit for Palestinian workers unless the system hasbeen persuaded that there is no practical possibility to recruit Israeli workers for the soughtafter job.



In Summation

The Palestinian workers would serve as an almost complete substitute for foreign workers inthe 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 willfacilitate 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 agriculturalsectors 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 jobsfor Israelis.

This measure will also yield great advantages for the Palestinian economy and for the welfareof Palestinians residents of the West Bank. It also dovetails with an Israeli policy that strivesto promote economic peace and to improve the welfare and quality of life of the Palestiniansin the West Bank.

Furthermore, an Israeli decision to substantially increase the number of work permits forPalestinian workers in Israel will be gratefully received and acknowledged by the

international community in general, will improve Israel's international image, and will aidIsrael's public relations needs, which is especially needed in its relations with the PalestinianAuthority, 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 , April2009

World Bank, A Palestinian State in Two Years: Institutions For Economic Revival, September 2009



Interviews

Name Body Position

Zvi Alon The Plants Production and MarketingBoard

Chairperson

Gadi Horowitz The Plants Production and MarketingBoard

Director of the Fruit Sector

Yizhak Gurevich

Association of Contractors and Buildersin Israel

Deputy CEO and Director of theEconomics and Finance Departments

Shmuel Zuriel Israel Hotel Association CEOYoav Bachar Israel Hotel Association Deputy CEO for Human Resources

Eli Paz The Ministry of Industry Trade andLabor

Senior CEO for Emergency Situations

Dan Catarivas Manufacturers Association of Israel Director of the Division for Foreign Tradeand International Relations

MichalFinkelstein

The Ministry of Finance Director of the CEO's Staff

Michal Zuk The Ministry of Finance Budget Division

Adi Ashenazi The Ministry for Regional Cooperation Head of the Economics and Research

DivisionYishai Soreq The Ministry for the Development of

the Negev and the GalileeHead of the Regional Frameworks

DivisionYael Ravia-

Zadok The Foreign Ministry

of Foreign AffairsHead of the Middle East Economy unit

Saeeb Bamiya Former Deputy Minister of economics in the Palestinian Authority and senioreconomic advisor to Palestinian bodies and executives

Position Paper May10 [Palestinian Workers in Israel -- Peres Center]

Documents

Transcript of Position Paper May10 [Palestinian Workers in Israel -- Peres Center]