Labor Market Challenges Facing Israel’s Arab Society During Normalcy and Emergency

This study portrays the gaps in the labor market between Israel’s Jewish and Arab populations as reflected in an overview of employment rate and quality at times of normalcy and emergency. It examines the impact of the war on employment in Arab society and presents recommendations for policies that would address employment challenges and promote the integration of Arab men and women into high-quality employment.

Looking back at the labor market in 2022, it is evident that the starting conditions of Arab society were unfavorable even before the outbreak of the war on October 7, 2023, characterized by substantial disparities in comparison to the non-Haredi Jewish society in terms of education, employment rates, and labor income. Among men, the main employment challenges are low education rates, increasing gaps in employment compared to non-Haredi Jewish men at the younger ages (25-44), and a high concentration of workers in low-productivity sectors and occupations involving physical labor. Among women, the biggest challenge concerns low employment rates, particularly among those with lower educational attainment, along with a low rate of academic education and large wage gaps across all educational attainment levels.

These starting conditions place Israel’s Arab society in a disadvantaged position at times of crisis, making it more vulnerable. The slump in employment during the war (between October 2023 and February 2024) is most pronounced in Arab society, and the war has led to a dramatic decline in effective employment (excluding absentees due to economic and other reasons) of Arab society, in particular Arab men, completely erasing the uptick which had been seen among Arab men and women during the first three quarters of 2023, prior to the war.

In the first month of the war, there was also a new phenomenon of significant absence of Arab men and women from their workplace due to “other” reasons, other than economic reasons or military reserve duty, and we assume that this situation reflects tensions between Arabs and Jews and a diminished sense of personal safety which prevented them from showing up at their workplaces, as well as restrictions imposed on Arab workers which hindered their access to work. Among non-Haredi Jews and Arab women, the decline in employment at the beginning of the war had been temporary, diminishing and vanishing later on. Among Arab men, who are the primary wage earners in most Arab households, employment rates have not yet fully returned to their pre-war levels at the time of writing. It appears that in Arab society, the war may mark the beginning of an ongoing shift in the labor market, which might lead to an even worse downturn in the medium and long term.

In order to reduce the gaps in the labor market and in labor income between Arab and non-Haredi Jewish households during normalcy, and abate the vulnerability of Arab workers during emergency, measures should be taken to increase employment rate and improve employment quality in Arab society, through:

(1) raising the rate of tertiary education, either academic or technological, in Arab society – investing in the education system from daycare through high school, enhancing competencies and soft skills with an emphasis on improving Hebrew-language literacy, diagnosis, counselling and guidance for high-school students and young adults, gap year programs and pre-academic courses for acquiring skills and filling in skill gaps past the age of 18, developing vocational and technological training courses in line with labor market demands and in collaboration with employers, and addressing barriers to academic education; (2) a significant increase in employment among non-educated Arabs, particularly non-educated women – regional employment centers which are adapted to local needs and provide skill-based diagnosis and guidance services, filling in skill gaps, and support through training, job search, and placement, employment hubs in or around Arab communities, and addressing the unique barriers facing Arab women with an emphasis on those with low educational attainment; (3) increasing the availability of high-quality employment opportunities – encouraging entrepreneurship in Arab society to create high-productivity businesses, and supporting an increase in productivity among existing employers through the integration of technological as well as non-technological innovation and building management skills; (4) building trustful relationships between Arab and Jewish workers, and between Arab workers and Jewish employers – diversity and inclusion programs aimed at Arab workers, setting ambitious targets for the employment and promotion of Arab workers in the public sector and implementing policies to achieve these targets; (5) adapting the entirety of policy measures to the needs and demands of each region and each distinct group within Arab society; (6) continuing the full implementation of government decisions and economic development plans for Arab society from previous years.