Israel’s Labor Market: An Overview
Author: Hadas Fuchs, Avi Weiss
December 23, 2018
In 2018, Israel’s labor market continues to be strong: participation rates continue to rise, employment rates of both men and women are increasing, and unemployment has reached a historic low. The number of job vacancies has also increased, and wages have been continually rising. The study examines changes that have occurred in the Israeli labor market overall, as well as changes within specific population groups.
The labor market: A general picture
Israel’s employment rate has reached slightly more than 78% in 2018 and the unemployment rate is continuing to decline, reaching a low of 3.4%.
- Overall, the employment rate for men has risen by 7 percentage points since 2003, while women’s employment has increased by 13 percentage points.
- The employment rates of non-Haredi Jewish women and men and Haredi women in Israel are higher than the average employment rates in the OECD, and among non-Haredi Jewish women, it is the second highest in the OECD (after Iceland). For both men and women, most of Israel’s employment growth between 2003 and 2018 was due to changes in the non-Haredi Jewish population (5 and 10 percentage points for men and women, respectively), mainly because they are the most populace group.
- When broken down by age group, the greatest impact on the rise in employment among women came from the 35-44 and 55-64 age groups, but for different reasons: the former because there was a major increase in the percentage of mothers of young children in the labor market, the latter due to women close to retirement working more than their predecessors and the increased retirement age. Among men, the most substantial employment rate increase occurred in the 55-64-year-old age group.
- Wages have continued to rise in 2018 at a fast pace. This increase is consistent with the rapid rise in real wages since 2014 – an increase of 11% in total.
High tech employment
While the high tech sector employs only 8%-9% of Israel’s workers (as of 2017), it contributes 12% of GDP, a quarter of the country’s tax revenues, and 42% of exports. Employment rates in this sector differ by gender and across population groups.
- Over the past decade, the share of workers in high tech has increased from 8% to 15% among non-Haredi Jewish men, but among Arab Israelis and Haredim the percentage has remained negligible.
- The share of women employed in high tech is low (as it is in the rest of the world), standing at 32% of those working in the sector in 2017, and those women employed in high tech are mostly non-Haredi Jews.
- There has been an impressive rise in the share of Haredi women employed in the field: from less than one percent in the middle of the last decade to about 3%.
Labor market trends by population group
Arab Israeli employment
- After several years of stagnation, the employment rate of Arab Israeli women increased substantially and stands at about 40% – nearly double the rate in 2003 and an increase of more than 6 percentage points since 2016 – and is now very close to the government’s 2020 target (41%). Most of the increase (72%) stems from the improved education of Arab Israeli women.
- Arab Israeli men’s education levels have not risen as much as those of Arab Israeli women, and the increase in their employment rate is relatively low. Low levels of education also affect the employment opportunities available to Arab Israeli men, 50% of whom (as of 2017) work in occupations characterized by low wages: manufacturing, construction, and agriculture. These are also physically demanding occupations, and, consequently, Arab Israeli men show a major decline in employment rates from age 50 and on.
- After rising by more than 15 percentage points between 2003 and 2015, the employment rate of Haredi men has declined slightly in recent years, and stands at about 48% – far from the government’s 2020 goal of 63%. About 42% of employed Haredi men ages 30-64 worked part time in 2017 (compared to 15% of non-Haredi Jewish males), mostly due to yeshiva studies. About 23% of employed Haredi men work in education, most without academic or post-secondary training other than yeshiva study.
- The employment rate of Haredi women increased by 5.5 percentage points between 2013 and 2018, and stands at 76%. About 51% of Haredi women were employed in part-time positions in 2017, and 55% of those working in part-time positions do so in order to care for their families and households. This is a higher share than for Arab Israeli women (36%) or non-Haredi Jewish women (30%). The share of Haredi women employed in education dropped from 58% in 2004 to 46% in 2017, while the share of women learning technological studies in seminaries is on the rise.
Employment among older adults
- Israel’s population is aging at a slow pace relative to the OECD, but when taking into account Israel’s high birth rate, the dependency ratio (the ratio between those not of prime working age and those of prime working age) is the highest in the OECD. One possibility for coping with this situation is to raise the retirement age for women.