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Yotam Margalit
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On Palestinian workers: The right answer isn’t always the easy one

Israel should rehire the unemployed men of the West Bank for many reasons, including for the sake of reducing the security threat they pose
Illustrative: Palestinian workers wait to cross to Israel at the Qalqilya checkpoint. October 9, 2012. (AP Photo/ Nasser Ishtayeh/ File)
Illustrative: Palestinian workers wait to cross to Israel at the Qalqilya checkpoint. October 9, 2012. (AP Photo/ Nasser Ishtayeh/ File)

In the immediate aftermath of October 7th, the Israeli government decided that Palestinian workers from the West Bank would no longer be allowed to enter Israel. The immediate effect was to deprive the construction sector of some 80,000 workers. To make matters worse, about a third of the 24,000 foreign workers, concerned for their personal safety, packed up and left the country. Now, more than three months after the attacks, and despite the strong recommendation of the security services to allow these laborers into the country, the government is still not granting Palestinians work permits. The result is an unprecedented paralysis in the construction sector: activity plummeted by more than 60 percent, as roughly half of all construction sites stood idle, and the rest are advancing work at a much slower pace.

This is not a marginal issue; it has profound implications for the country’s economy and its citizens. On the macro level, the construction sector accounts for a large slice of all credit (bank and non-bank) in the economy — nearly half a trillion shekels. This means that the Israeli financial system has great exposure to the crisis and the immediate threat that construction and infrastructure companies are liable to go under.

The major shortage of working hands has grave consequences for the pace of construction, which is likely to exacerbate a housing shortage and a rise in real-estate prices. Last year already saw a large slowdown — more than 25% fewer building starts than in 2022. All forecasts are that the situation will only get worse. What is more, the construction crisis entails a large decline in government tax revenues (both national and local), which in normal times come to about 7.5 billion shekels a month. Given that government expenditures are skyrocketing because of the war, this sharp reduction in revenue is more dangerous than ever, and will require the government to take harsh economic measures to make up for the shortfall, measures that will severely affect all Israelis.

Despite the catastrophic ramifications of the building industry crisis, the government has not offered viable solutions. Finance Minister Bezalel Smotrich was at the forefront of those opposed to allowing Palestinian laborers from the West Bank into Israel proper, pointing to a perceived security threat, a position supported by both Minister of Construction and Housing Yitzhak Goldknopf, and Minister of Economy Nir Barkat. In contrast, Israel’s professional security services – including the IDF, the Israel Security Agency (Shabak), and the National Security Council – have expressed strong support for allowing Palestinian workers. They say that doing so would lessen the economic hardship in the West Bank and reduce the very real risk of the outbreak of violence and the opening of another front in the war. Prime Minister Netanyahu initially concurred with the security experts’ position, but soon backtracked, likely due to political calculations.

We must candidly acknowledge that a decision to allow Palestinian workers back into Israel is not at all a simple matter. Beyond the security challenges, it is certainly problematic for such a critical sector of the economy to be so heavily dependent on a labor pool whose availability is directly tied to the security situation. These considerations must not be taken lightly. The problem is that alternative solutions proposed are far from adequate to meet the economy’s acute and immediate needs.

One such proposal is to use government subsidies and incentives to encourage Israelis to work in construction. This idea ignores the fact that it has been tried in the not-so-distant past and failed, mainly because Israelis have long been less inclined to partake in this type of manual labor, despite the relatively high wages. Another idea that has been floated is to promote innovation and industrialized construction. The idea is to import advanced techniques that would ostensibly obviate the need for so many workers. While such technology is welcome and desirable, it fails to meet the needs of current situation because it would take years to import and adopt.

The government’s main proposal is to ramp up the import of foreign workers. In early January, the Population and Immigration Authority announced that it had recruited about 3,000 Chinese laborers for the construction sector, out of the annual goal of 10,000. India, Moldova, and Malawi are also potential sources; the Construction and Housing Ministry has announced plans to bring over another 23,000 workers. Increasing the number of foreign workers is certainly a reasonable step, but is clearly insufficient.

First, because it costs much more to employ foreign workers than Palestinians (about 1.5 times a much, according to estimates), housing prices would increase further. Second, unlike Palestinian workers who go back home every night, the foreigners need living accommodations inside Israel—and those are already in short supply. Consider, too, that in early November the government approved an increased quota of 10,000 foreign workers and had difficulty filling even that number. Where, then, will we find the nearly 100,000 laborers that the construction industry desperately needs now? Quite simply, we won’t. The idea of a massive influx of foreign workers in the near future seems completely unrealistic at this point in time.

If we are going to solve and avoid this looming crisis, the first step in doing so in any serious fashion is to acknowledge that all the alternatives are problematic. We must then ask ourselves whether we, as a country, are prepared to withstand another socioeconomic crisis, one that is largely avoidable. Moreover, we must consider the implications of continuing to deny Palestinian workers entry to Israel. Not only will acute poverty in the West Bank exacerbate the security threat — 80,000 unemployed men are a ripe recruitment pool for terrorist organizations — a permanent ban on Palestinians working in Israel would deprive Israel of an important bargaining chip vis-à-vis the Palestinian Authority, represented by the ability to open and close the border in response to events.

There is no doubt that Israelis should be encouraged to take on work in the construction sector and that advanced construction technologies should be imported. However, the main solution to the growing crisis has to be a mixture of foreign workers and the return of West Bank Palestinians to their jobs in Israel. This return could be gradual, beginning with older men, as the Shabak proposed. Ultimately, no other solution is feasible. The decision may not be simple, and could be politically unpopular in certain quarters, but a cost-benefit analysis clearly indicates that the national interest makes this step a necessity.

About the Author
Prof. Yotam Margalit is a faculty member at Tel Aviv University and a senior fellow at the Israel Democracy Institute.
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