Israel to Struggle for Years to Get People Back to Work

(Bloomberg) --

It’s going to take up to six years for Israel’s joblessness to fall to pre-coronavirus levels, according to a top Employment Service official.

Government restrictions including a near-total economic shutdown between mid-March and late April sent jobless figures skyrocketing near 28% from 3.4%. As people trickle back to work, the current rate has dropped to around 22%, with 88% of the unemployed on unpaid leave, Ofir Pinto, the agency’s deputy chief for research and planning, said in a phone interview Monday.

Jobless claims have surged around the world during the pandemic, with the devastation often a function of the emergency safety nets in place. If furloughing was a widespread prescription in Israel, where protections have weakened across the decades, then programs in France and Germany have kept tens of millions on payrolls. Turkey has virtually banned firings. At the other end of the spectrum is the U.S., where the absence of such cushions has hammered its labor market.

Israel’s government is trying to get employers to call back their furloughed workers by offering grants in exchange. Pinto predicts that could bring down the jobless rate to 10% by the end of July. It will drop to about 6% by the end of 2021, but it will take much longer to narrow the gap back to the pre-pandemic low, he said.

“A lot of employees need to change their occupation to become more connected to the future labor market, to all the computerization of the labor market,” Pinto said. “The transformation from 6% to 4% will take more time, maybe even five to six years.”

Israel maintains two unemployment gauges: the Employment Service’s rate and the standard measure issued by the Central Bureau of Statistics, which doesn’t include people on unpaid leave and in April declined to 3.3%, despite the legions of jobless.

Since the government began reopening the economy from April 19, Pinto said about 300,000 workers have returned to their jobs, largely in sectors such as finance, transportation and education.

Read more: Post-Lockdown Mideast Shows Signs of Virus Trouble Returning

While Israel is struggling to recover from its first bout of virus, fear is rising of a potential second wave as cases spike following the reopening of most of the economy. If the daily increase fell to as low as five new cases in late May, then the reactivation of the economy has sent that number climbing as high as 176 this week.

Should there be another surge, Pinto said officials may try to avoid a second mass wave of joblessness by shifting strategy and immediately subsidizing wages rather than providing unemployment benefits, because that encouraged employers to furlough.

“Our government is trying to do everything in order to avoid another unpaid leave tsunami like we had two months ago,” Pinto said.

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