After the June 1967 war and Israel’s occupation of the West Bank and the Gaza Strip, tens of thousands of Palestinian workers started working in Israel and continued to do so after the Oslo agreement was signed in 1993 and the Palestinian Authority was set up. All along, economic and varying security considerations governed Israeli policy toward employing Palestinian laborers within its territory and in the settlements.
Palestinian Labor since 1967
The economy of the West Bank and the Gaza Strip went through a process of structural change in the period 1967–93. It became dependent on Israel and in the process, it transitioned from a primarily agricultural economy to a service economy that generated few jobs and had little productive capacity. The flow of workers into Israel increased. These structural economic changes had three main outcomes: they integrated the West Bank and the Gaza Strip into Israel, determined the nature of Palestinian development, and provided an important source of income for Palestinians, individually and nationally.
According to Leila Farsakh, Palestinian dependence on the Israeli labor market went through five main phases. In the first phase, from 1968 to 1973, sectors other than the services sector experienced negative growth, while the number of Palestinian working in Israel increased more than 38 percent a year.
In the second phase, from 1974 to 1980, the influx of Palestinian workers into Israel slowed down to about 1.5 percent a year. The supply of Palestinian labor reached equilibrium by the start of 1974, when the Israeli labor market and the labor market in the West Bank and Gaza converged. During that period Palestinian workers had two outlets: the Gulf for skilled workers and Israel for unskilled workers.
In the third phase, from 1981 to 1987, the demand for Palestinian workers in neighbouring countries declined, and so fewer laborers were emigrating. The Israeli and Palestinian labor markets were fully integrated because of free movement between them. Local employment grew for the first time: by 3.4 percent a year in the West Bank and 2.6 percent a year in Gaza, mostly in the services sector. Nevertheless, West Bank and Gaza economic growth rates were lower than Israeli economic growth rates during that period.
The fourth phase, from 1988 to 1993, was less stable. The first intifada broke out, the first Gulf War erupted, and Israel began to impose security restrictions on the movement of workers. The Israeli and Palestinian labor markets began to separate.
The year 1993 was a turning point in the economy of the West Bank and the Gaza Strip. The Paris economic protocol, signed by the PLO and the Israeli government in April 1994, claimed to help the Palestinian economy grow, by linking the Israeli and Palestinian economies through a customs union. In reality, however, the linkage deepened the Palestinian economy’s dependence on the Israeli economy.
The Palestinian economy had surplus labor because of the rapid growth in the labor force and the low levels of participation, but the economic protocol did not address this. Instead, it laid the groundwork for turning the West Bank and the Gaza Strip into reserves of manpower. The protocol’s seventh article, Labor, was intended to regulate Palestinian manpower moving to the Israeli areas in the transitional period, but its provisions are ambiguously worded.
During the fifth phase, from 1994 to 2000, major upheavals took place. The number of Palestinian workers in Israel dropped by 51 percent between 1992 and 1996 (see figure 1).
Note: No data available for 1994 because of transfer of authority from Israel to the Palestinian Authority
Figure 2 shows the rise and drop in the number of Palestinian workers in Israel over a twenty-five-year period. Almost 140,000 Palestinians worked in Israel in 1998, in the years of relative political stability, but then dropped sharply to 40,000 when the second intifada broke out and construction began on the Separation Wall. According to the annual workforce survey for 2021, released by the Palestinian Central Bureau of Statistics (PCBS) in April 2022, Palestinian workers in Israel and the West Bank settlements accounted for 18.8 percent of the total workforce in the West Bank in 2021.
Israel imposed a blockade of the Gaza Strip in 2007. No Palestinian workers from Gaza were allowed to work in Israel between 2007 and 2019. In 2020 and 2021, no more than 0.1 percent of the Gazan workforce worked in Israel. Gaza has had high unemployment rates—up to 46.6 percent in the first quarter of 2022 and even higher (62.5 percent) for those aged 15 to 29 years. Because of economic stagnation in Gaza, working in Israel offered the only hope for improving people’s economic situations. Israel has used work permits to blackmail individuals and as leverage to secure political objectives (permits in exchange for an end to militia action).
Some studies show that 48 percent of West Bank workers in Israel come from rural areas and 23 percent from refugee camps; for Gaza workers, 39 percent come from the camps. According to the PCBS, most of the Palestinian workers in Israel are between 15 and 44 years old. The older the workers, the less likely they are to be working in Israel: only 16.5 percent of them are more than 55 years old. The construction sector accounts for the largest share of workers, followed by agriculture, industry, and services.
Palestinian Women and Children Workers in Israel
Most of the Palestinian women employed in Israel work in agriculture and manufacturing in the agricultural settlements in the Jordan Valley area or in the industrial settlements such as Mishor Adumim and Maale Adumim. They are hired through agents, who coordinate with Israeli employers. Working conditions are harsh and workdays extend between ten and twelve hours a day.
According to the PCBS, about 5.3 percent of Palestinian children between the ages of 15 and 17 years in the occupied territories were employed in 2021: 7.8 percent in the West Bank and 1.7 percent in the Gaza Strip. About 63 percent of the workers in the 10-17 age group are concentrated in mining, construction, and agriculture. A Human Rights Watch (HRW) report in 2015 said that hundreds of Palestinian children work in “dangerous” conditions in the Jewish-only settlements. Sarah Leah Whitson, director of the Middle East and North Africa division of HRW at the time, said that “Israel’s settlements are profiting from rights abuses against Palestinian children.”
The Work Permit System
In 1970, the military commander issued a “general permit” that allowed Palestinian workers from the West Bank and the Gaza Strip to enter Israel to work. The decision made it possible for tens of thousands of Palestinians to enter Israel to work, so much so that by the mid-1980s about 40 percent of the Palestinian workforce was working inside Israel. In 1991 the “general permit” was rescinded and the West Bank was completely closed off. Later, under the Foreign Workers Law of 1991, any Palestinian seeking to work in Israel had to obtain an individual permit from the Population and Immigration Authority (part of the Israeli Interior Ministry), based on a request from an Israel employer who would have been given a quota of permits. This system remained in force until 2020, when a new permit system was adopted.
Under the new system, the Israeli Civilian Administration set up a website through which Palestinian workers can apply for work permits in specific economic activities (e.g., construction, agriculture), without reference to a specific employer. The new system was designed to be the only channel for employing Palestinian workers, so that the Civilian Administration could tighten controls on Palestinian workers, while the workers who obtained work permits would have a chance to move between employers, provided they worked only for employers with permits to employ Palestinian workers. It also reduced the ability of employers to exploit workers and violate their rights. The new system was supposed to end the black market in permits. In 2018, for example, 45 percent of the 94,254 Palestinian workers in Israel obtained their jobs through agents, who might take up to one third of the worker’s wages. But the adoption of the new system in 2020 did not end the role of agents in the process.
To obtain a work permit, Palestinian need to have a biometric identity card issued by the Israeli military branch in the occupied territories and pass a security test that includes factors that are not security related, such as whether the worker is married or older than 22 years.
In the Gaza Strip, when the Israelis resumed issuing work permits for Gazans, the Israeli military authorities announced in the summer of 2022 that they intended to change the category of permits granted to Gazans from “economic needs” to “worker,” and they would require employers to give their workers pay slips with their wages, and not just pay them in cash.
Rights of Palestinian Workers
In 1970 the Israeli government decided that Israeli labor law applied to Palestinian workers in Israel, and in 2007 the Israeli supreme court ruled that the same law applied to workers in settlements. But in reality Palestinians work under poor conditions, without safety measures or appropriate insurance, and they face serious discrimination when it comes to wages, work hours, annual vacations, sick leave, and pensions.
Thanks to the publication of international reports by the International Labour Organization and the International Trade Union Confederation, the activities of Palestinian and Israeli human rights organizations, and the demands of the workers themselves, the Israeli authorities, in coordination with the Palestinian Authority, worked to adopt a new system that would tend to contribute to real implementation of Israeli labor law. Under this system the wages and salaries of Palestinian workers in Israel will be transferred to Palestinian banks. This should limit the practice of Israeli employers paying workers in cash, and it might force the employers to pay the minimum wage and social security contributions.
But when the new system was implemented in August 2022, it aroused the suspicions of Palestinian workers because of the unstable relationship with the Palestinian Authority. Their biggest fear was that the Palestinian Authority would tax their wages. (Taxes are deducted from their earnings by the Israelis before their money is transferred.) The Palestinian Authority has been ambiguous about the process; initially it claimed that Palestinians requested that payments be transferred to Palestinian banks, but later it became clear that it was an Israeli request. In any case, given that a certain percentage of the West Bankers who work in Israel do not have work permits and are therefore considered by the Israeli authorities to have broken the rules (about 30 percent of them in 2019), it is not expected that they will benefit from the protection that Israeli labor law is meant to provide in general, or from the bank transfer system in particular.
Conclusion
For Palestinians, the labor market in Israel is a “managed market,” subject to political decisions taken in Israel and not to the political, economic, or social inclinations of the Palestinian Authority. Israeli policy is determined by many considerations (economic, strategic, and security) that do not work in concert but change according to circumstances and the area in question. These considerations can be summarized as follows: (a) Israel has a general strategic-economic objective: to control the West Bank and the Gaza Strip by controlling the Palestinian economy, among other domains and instruments of control. (b) It has an internal economic objective, namely, to meet the needs of the Israeli economy for foreign workers in sectors that do not attract Israeli Jewish workers. Attempts by Israeli employers to evade their legal obligations can be overlooked in return for higher profits, especially when the workers do not have permits to cross into Israel. Israel might give work permits to hundreds of Palestinian workers in the technology sector, because it has a pressing need for workers with those skills. (c) Israel has a security/political consideration linked to the attempt to maintain the status quo and contain the Palestinians' struggle and their political demands through employment. This objective was central in the first stages of the occupation and it continues as part of the “economic peace” policies that Israel carries out.