As the dust of the coronavirus pandemic starts to settle and Israel slowly reopens its economy, a bleak picture emerges regarding the damage the virus has wrought on workers, with the lowest-paid, the youngest and the oldest workers bearing the brunt of the onslaught.
Malls, outdoor markets and gyms reopened Thursday morning after over six weeks of closure, as the numbers of daily new cases of the novel coronavirus remained in the low dozens. Thursday’s openings are part of a raft of eased coronavirus restrictions announced last week.
Israel had 16,458 confirmed cases of COVID-19 and 248 deaths from the coronavirus as of midday May 10. With the economy at a near-halt, jobless figures spiked to 1,093,000 by mid-April, bringing the unemployment rate to an unprecedented 26% from below 4% pre-coronavirus.
Data released by the Finance Ministry on Wednesday showed that the workers who lost their jobs – whether laid off or furloughed (placed on unpaid leave) – had a lower than average salary (compared to the average 2019 salary), and 54 percent of them came from small businesses.
Data compiled by the Israel Democracy Institute (IDI) on the unemployed showed that the youngest workers, ages 18-24, and the oldest, over 65, were the most affected by the job cuts.
Of the over 1 million people who have registered as jobless at the National Insurance Service and the Employment Services office since the start of the coronavirus crisis. 88% were on unpaid leave, while the rest were fired, the Finance Ministry said.
Half of the total came from six sectors: education, food and beverage, retail, industry, household service providers, and wholesale trade. The sectors that were most affected, the ministry said, were those that naturally generate gatherings of a large number of people, such as entertainment, sports, movies and music performances.
The average salary of the workers who lost their jobs was a third lower than the average salary. They earned an average of NIS 6,342 ($1,803) a month in their last place of employment, compared to an average salary rate of NIS 10,481 a month in 2019. This means that overall, it was the weakest workers, those who earned less and had the lowest levels of productivity, who lost their jobs, the report said.
Even within the higher paying sectors — for example, the financial sector — the workers most affected were those with the lower salaries, the data shows.
Fifty-four percent of all of the workers who lost their jobs came from small businesses. Of those, 27% came from workplaces with a turnover of less than NIS 5 million a year, the Finance Ministry data showed.
“The loss of the weakest workers” increases firms’ abilities to operate “and reduces the scope of the economic damage,” the report said. “But the return of workers who have lower productivity to the workplace will be much harder.”
The government should thus invest in helping those who lost their jobs learn other skills, the report said. “This investment can lead to a better-quality integration into the job market, and raise in the longer run the productivity of the economy,” it said.
In a representative survey of some 600 respondents from March 29 to April 2, the Israel Democracy Institute found that some 60% of workers aged 18-24 were placed on mandatory vacation or unpaid leave (furlough) or were fired. This compared to 42% of those aged 25-34, 29% of those aged 35-44, and 34% of those aged 45-64. The figure jumped to 49% for those aged over 65, the data showed.
“Those most harmed by the virus are the younger salaried workers,” said Daphna Aviram-Nitzan, director of the Center for Governance and the Economy at the Israel Democracy Institute, in a phone interview. “They are at the heart of the crisis, because a big share of them are working in sectors that are still closed and won’t be open in the next few days, like restaurants, the entertainment industry, tourism, leisure.”
The oldest population has also suffered, because at the end of their career people often work in jobs in which they can be easily replaced, she said.
Both of the age groups, the oldest and youngest, are generally “the most vulnerable in the labor market,” she said. “This is always the case.”
Workers who are new and young — with the exception of those in the tech sector — are less valuable to their employers than those with more experience, she said. Older people, for their part, are seen as replaceable since they are close to retirement, so it is often “easy to let go of these workers.”
However, she added, what is different in this crisis, caused by the coronavirus, is that “the younger workers were harmed more than we generally see, more than in previous crises.” And that is because the social distancing measures imposed to curb the infection rates led to the shutting down of bars, restaurants, and entertainment activities in which many young people tend to work.
“They may have been saving money before their big trip” after their mandatory army service, “which won’t happen now,” she said. “These are people at the beginning of their career.”
The 18-24 age group is also the one that is eligible for the smallest amount of unemployment benefits, she said, because they have likely spent the least time in the workplace. The maximum they can get is 50 days worth of unemployment or furlough benefits, which means very soon, most of them will have no way to support themselves, Aviram-Nitzan said. If they don’t go back to work and run out of unemployment benefits, “they are very vulnerable.”
Not all is lost, however, for this age group, Aviram-Nitzan said. “Some of them will go to study…some of them will perhaps change their plans. But they are still at the beginning of their lives, they still, most of them, don’t have families with children, so they can manage more easily than people aged 30 or 40 who have children.”
“The recovery will be easier” for the younger ones, she added. They can start anew, “all of their careers are before them, so they can change their plans and adjust to the current situation. They can manage more easily than people of 40 who lost their jobs, because they are more flexible.”
Plus, the younger workers can go back to live with their parents, if they can’t pay their rent. “If you have a family, this is more complicated.”
In data published on Thursday, the IDI forecast that during May, around half a million of the million workers furloughed since March will slowly return to work. Thus, the unemployment rate (including those furloughed) is expected to drop in May to around 15.2%, from a current level of some 27%, with the overall number of unemployed (including furloughed workers) estimated to fall to 620,000.
In June, as the economy resumes almost full functioning, the situation in the labor market will continue to improve, with some 160,000 people expected to go back to work, the IDI said.
Some sectors of the economy are likely to continue to function at a more limited level, and thus the economy will not reach the full employment level registered pre-coronavirus crisis. Thus, the number of unemployed in June is expected to be around 460,000 — that is, an unemployment rate of around 11.2%.
A two-digit unemployment rate was last recorded during the 2001-2004 crisis caused by the dotcom crash and the Second Intifada, and even then, unemployment only ranged between 10.3% and 10.7%, the IDI said.
The last time Israel saw an unemployment level of 11.2 percent was in 1992, caused at the time by the huge influx of working-age immigrants from the former Soviet Union, the IDI said. That immigration of highly educated people eventually turned into an economic boon for Israel, laying the foundations for its thriving tech sector.