Working in Palestine: perpetual crisis in the Palestinian labour market

As with the latest, largely symbolic, round of “peace talks” sponsored by France, discussion about real life in Palestine is frequently overshadowed by grandstanding and political abstractions. However, while diplomatic envoys busy themselves in pursuit of meaningless ways to re-label aspects of the status quo without changing anything substantive, it is possible to bring to light some of the real structural barriers to improving the lives of ordinary Palestinians.

By examining the current state of the Palestinian labour market, this article shows how two main factors combine to produce serious social issues of concern. These factors are (a) Israel’s restrictive and belligerent occupation, and (b) various weaknesses in the structure of Palestinian economic governance; together they produce high unemployment, low pay and the under-representation of women in the labour market.

Working in occupied Palestine

The Palestinian labour market is extremely weak. There is high unemployment and declining wages (in real terms), and the Gaza Strip is struggling to cope in the aftermath of a series of devastating military offensives by Israel.

While conditions in the West Bank are not as obviously bad, there are troubling trends. These include the high dependence on foreign aid, a very weak private sector and extremely low rates of female participation. The West Bank’s economy, in particular, is far weaker in structural terms than is apparent prima facie.

As noted, the West Bank remains heavily dependent on foreign aid, which – at its peak – reached 42 per cent of GDP in 2010. Moreover, structural weaknesses within the Palestinian economy can be seen in the fact that the public sector has effectively become a social security network – which offers relatively stable employment and good wages – in comparison to the moribund private sector.

Key indicators

According to data from the Palestine Central Bureau of Statistics (PCBS), the levels of labour force participation (LFP) for both genders remained relatively consistent during the period 2000 to 2012. However, male participation in the labour force has been between 60 and 75 per cent consistently, while for women it has remained between 10 and 20 per cent.

The unemployment rate in Palestine has grown significantly since a low of around 11 per cent in 1998. At that time Palestine’s unemployment rate was only just higher than Israel’s (9 per cent) and comparable with Iran and Yemen, but it was far below Iraq (19 per cent), Libya (19 per cent) and Algeria (23 per cent). By 2012, though, according to World Bank data Palestine had the highest level of unemployment in the Middle East.

The service sector has been the largest employer, on average, in the Palestinian economy across the period 1995 to 2011; the sector employed 33 per cent of the Palestinian work force. The next largest were commerce (19 per cent), construction (14.7 per cent) and mining (13.7 per cent). However, while male employment has remained relatively consistent in its distribution across the various sectors women’s employment is particularly skewed towards the service and agricultural sectors. There are also far more women employed in informal agricultural work with few rights and no legal recognition.

Moreover, the average daily pay in Palestine decreased in real terms during the period 2000 to 2012. From 103 NIS (shekels) per day in 2000 to 90.5 NIS in 2014. (Real term wage values are found by dividing the nominal wage per year by the consumer price index.)

There is a significant pay gap between the genders in Palestine, although it is much wider in some sectors than others. On average across all sectors, women’s median daily wage is 84 per cent of that of men. In fact, for women employed in the manufacturing sector, the median daily pay is 57 per cent that of Palestinian men.

The International Labour Organisation (ILO) explains that

the gender pay gap is driven less by women’s lower pay for same work than by their lower pay for work of equal value… Occupations more frequently filled by women, such as clerks, administrative assistants, nurses and teachers, generally receive lower remuneration, but for the same occupation men and women access the same wage. This phenomenon is also prevalent in the public sector.

The significance of gender differences in the Palestinian labour market is the product of multiple interwoven factors, some of which are tied to established social norms and poor educational preparedness for the demands of the labour market. Importantly, as Samia Botmeh points out, there is also the impact of the political and military constraints imposed by Israel’s occupation and the suppression of Palestinian economic activity that are a result of Israeli trading practices which restrict women’s access to work opportunities in general.

The roots of the problem

According to the ILO, the current conditions in Palestine can be “characterised by increased political instability, a continued divide between the West Bank and Gaza, stagnating economic growth, persistent fiscal crisis, higher unemployment and increased poverty and food dependency.” Clearly, these conditions are neither solely the product of the occupation nor the policies of the Palestinian Authority. However, it is important to note that the envelope created by Israel’s occupation is severely debilitating to Palestinian economic prospects overall and, both directly and indirectly, contribute considerable impediments to the development of the Palestinian labour market.

Indeed, according to Sara Roy, the consequences of Israel’s occupation on the Palestinian economy have been so extreme that, rather than use the term “underdevelopment” she contends that, under Israel’s influence, Palestine has been “de-developed”.

The critical difference, in Roy’s opinion, is that Palestine’s economic development has actually regressed, not merely been held back. The specific details of the consequences of Israel’s relationship to the Palestinians are dealt with in depth elsewhere, so it is appropriate simply to summarise the key points that relate directly to the issue of access to Labour markets:

• Denial of access to international markets (including the siege of Gaza). The impact of denial of access to international markets is complex and multi-faceted. Specifically with regard to the labour market a recent report from the ILO notes that, “If the multiple restrictions on economic activity, arising out of the occupation, are not removed, no sustainable improvement in the situation of Palestinian workers and entrepreneurs can be expected.”
• Restrictions on movement within the West Bank and between the West Bank, Gaza Strip and East Jerusalem. In essence, these are particularly debilitating because delays and uncertainty of access discourage overall economic growth. More specific concerns focus on the maltreatment of workers undergoing frequent yet ultimately arbitrary security checks. According to an ARIJ (2012) report, “A concerted effort by the GoI [Government of Israel] to reduce reliance on Palestinian labour has resulted in significant unemployment within Palestine, and has dramatically altered the structure of family economies.”
• Denial of access to Area C: A recent report from the World Bank suggests that the economic potential for Area C (some 61 per cent of the West Bank that is under the direct control of Israel’s occupation forces) could be the key to rebalancing the Palestinian economy: “Relatively conservative estimates show that the direct gains, in terms of potential value added in these sectors, would amount to at least USD 2.2 billion, equivalent to some 23 per cent of 2011 Palestinian gross domestic product (GDP).” (World Bank 2013) This would obviously translate into a significant boon for the labour market. For example, in the tourism sector alone, 2,900 jobs could be created.
• The dominance of Israel’s economy. The high level of integration of the Israeli and Palestinian economies has created a situation of overwhelming dependence of the latter on the former. Many Palestinian industries are simply unable to rival Israeli competitors and the Palestinian Authority has no power to take legal steps to protect its industry. This impact is accentuated because Israel frequently interprets agreements between itself and the PLO – the most important of which are the Paris Protocol of 1995 – in the most favourable way possible to its own interests. Israel is also the only participant with the capacity to enforce its will on the other.

• The de facto annexation of East Jerusalem. The cutting off of Jerusalem from the rest of the Palestinian economy has been particularly debilitating for Palestine’s de jure capital. So much so, in fact, that the International Crisis Group has questioned if it is a “failed city”.

In sum, the Palestinian labour market suffers from a range of structural weaknesses. These are more complex and, in many ways, more insidious than what might be apparent prima facie. The under-representation of women, for example, is not merely a product of patriarchal social norms (though this is a factor) nor is the moribund nature of the private sector a factor of inefficiency and/or poor governance. Rather, the status of the contemporary Palestinian labour market is a condition of the broader economic restrictions that, for the most part, result from the unique conditions imposed by Israel’s occupation policies.

The views expressed in this article belong to the author and do not necessarily reflect the editorial policy of Middle East Monitor.