Israel’s Foreign Labor Surge
How will the continued influx of foreign workers affect Israeli society? A country once in conversation about whether it aspires to the Scandinavian or American model now, perhaps, looks elsewhere. The diverse array of foreign workers in Israel nowadays creates a Tower of Babel in the middle of Tel Aviv, where contractors are challenged to facilitate communication among Chinese, Indian, Thai, and other workers.
For Israelis, decades of ignoring our backyard, disregarding the goings on in the Palestinian Territories, have equipped Israeli society with the ability to blissfully go on with life. At the same time, a class of lower-tier residents of exploited foreign workers is created. Additionally, the era of Palestinian workers crossing from the West Bank daily to work within the green line is practically over, creating an even greater reliance on foreign labor.
Post-October 7, Israelis don’t want to see or think about Palestinians. Palestinian workers constituted an essential workforce that came daily to do jobs the Israeli public is reluctant to take, such as construction, industry, and agriculture. Workers arrived in Israeli territory early in the morning and returned to the West Bank in the evening. Therefore, unlike migration crises in other Western countries, workers from the West Bank did not reside in Israel, did not use the local education system, and did not place an excessive burden on welfare systems. For an advanced economy, this situation is nearly ideal. However, Israel’s security situation does not allow the economy’s “invisible hand” to operate undisturbed. After the outbreak of the war, the number of workers plunged from over 100,000 to just 8,000. To offset the shortage, the government decided to increase the foreign worker quota to roughly 330,000, mainly from Asian countries.
The crisis of foreign and Palestinian workers in Israel, which intensified significantly following the events of October 7th, exposed deep failures in the state’s preparedness and labor market management. A State Comptroller’s report published this year noted that government ministries had not prepared for a situation of prolonged labor shortages. They anticipated gaps in agriculture only in the short term and completely ignored the construction sector, which tends to be hit hard in emergency situations.
Before the war, most sectors of the economy relied on bilateral agreements with a single country (for example, Thailand in agriculture). This situation created a dependency of entire sectors on the policy of one foreign country. A proliferation of foreign workers could lead to changes in national identity, neglect and crime in neighborhoods where they concentrate, and the creation of a “servant class.”
Moreover, changes in employment affected the Palestinian Authority’s economy even more drastically. Palestinian workers in Israel constituted about a quarter of the entire West Bank labor market and contributed about a quarter of its GDP. Accordingly, the unemployment rate in the West Bank surged significantly in 2024, and GDP plummeted. At the same time, a significant number of Palestinians still work in the settlements, since oversight of work permits there is looser. Wages earned in Israel were a major source of income for tens of thousands of West Bank households, so the work stoppage led to a sharp drop in private income, local consumption, and business activity. In addition, the hit to workers’ incomes also shrank the Authority’s tax base and deepened its ongoing fiscal crisis. The rise in unemployment and dependence on external aid has reinforced economic and social instability in the West Bank, with broader political and security implications.
These labor policy shifts, however, were not the product of a unified strategy. Reporting shows that senior military and intelligence officials pushed to reinstate Palestinian work permits, not out of concern for Palestinian livelihoods, but because leaving hundreds of thousands of Palestinians unemployed and desperate was itself judged a security risk. Far-right ministers took the opposite view, treating the exclusion of Palestinian labor as an end in itself, an opportunity to sever the West Bank’s economic dependence on Israel for good.
For decades, Israel has been torn between the Bismarckian and Nordic welfare-state models – whether it is part of Europe or a Middle Eastern version of the United States. Employment trends and the growing reliance on foreign workers, along with the inadequate treatment of them, suggest that the current government does not envision Israel in the image of Norway or California, but rather closer to Saudi Arabia.
