Mas Latest News


30 may 2023


Ramallah, Wednesday, May 17, 2023:- The Palestine Economic Policy Research Institute (MAS) held a roundtable meeting entitled “The Economic Impact of Labor Shortages on Certain Vital Sectors in the Local Economy,” with the participation of specialists and experts, either in person at MAS or via Zoom. Dr. Rabah Marar, Director of Research at MAS, prepared the background paper for the meeting with the assistance of Mr. Islam Rabi’e, Assistant Researcher at MAS. Dr. Samia Al-Botmeh from Birzeit University, Mr. Azmi Abdel Rahman, representative of the Ministry of Labor, Mr. Salah Hussein, Director General of the Ramallah/Al-Bireh Chamber of Commerce and Industry, and Mr. Abdel Hadi Abu Taha, representative of the Palestinian General Federation of Trade Unions, presented their comments on the discussion paper.


MAS Director General Mr. Raja Khalidi opened proceeding by stressing the importance of the subject matter, which has political repercussions in terms of everyday life. He stated that this research paper complements government’s priorities, as the Prime Minister referred to this phenomenon exactly one year ago today, describing it as a disturbing phenomenon given its negative repercussions and unknown causes. Mr. Khalidi stated that this phenomenon clearly affects the Palestinian economy, causing structural distortions. He added that the MAS background paper attempts to distinguish these dynamics from the outputs of the educational system, and their relevance to the needs of the labor market. Mr. Khalidi proceeded to explain that MAS holds periodic roundtables to discuss various topics, as a method for proposing policy recommendations that are useful to guiding the decision-making process, reflecting positively on the Palestinian economy and citizenry. Mr. Khalidi concluded his intervention by thanking the Heinrich Böll Foundation’s Palestine and Jordan Office for supporting this roundtable.



MAS Background Paper


Causes of Labor Shortages

The paper identifies the weak structure of the Palestinian economy and its weak absorptive capacity as the most important causes of labor shortages. This is mainly due to the policies of the Israeli Occupation, which undermine the Palestinian economy, limiting its development by imposing restrictions on the movement of people and goods. Israel’s tight grip over the West Bank and Gaza Strip enforces their separation, controlling their commercial and economic relationships with the outside world and limit these to the Israeli economy. This, in turn, causes structural distortions within the economy, resulting in restrictions that limit the operational and absorptive capacity of the Palestinian economy.

This is further compounded by the increasing tendency of Palestinian labor to work in Israel, especially in light of the lack of jobs and low wages in the local market, when compared to the availability of better-paying job opportunities in the Israeli labor market. This has seen a significant percentage of the Palestinian labor force ‘migrate’ to the Israeli labor market.

The gap in skills – combined with the incompatibility of the outputs of the technical and vocational education (TVET) system in Palestine with the requirements of the labor market - leads to a shortage of labor in the local market. This is the result of poor coordination between TVET programs and the private sector, in addition to the lack of adequate support and funding which further widens this gap.


Economic Effects

The paper illustrates that labor shortages in certain sectors lead to a disruption in production (supply) chains, raising prices and causing a decline in economic activity. It also shows that the agricultural, industrial, construction and tourism sectors were most affected by the increasing tendency of skilled Palestinians to work in the Israeli market. An additional outcome is a rise in prices, resulting in a decline in the competitiveness of Palestinian products in the local market vis-à-vis imported goods, and in foreign markets.


Plausible Interventions

The paper touches on the most important interventions that can reduce the impact of this phenomenon, characterized by the need to further develop a comprehensive social protection system providing health insurance, sick leave and unemployment benefits. There is also a need to intensify policies that encourage the rehabilitation of job seekers, particularly new graduates. Intensive training programs for graduates of vocational institutes helps to match their skills to the needs of the local labor market. Governance within the TVET sector should be enhanced further through the establishment of a specialized TVET body that works to address gaps in management and coordination between the main players in this sector, in addition to developing human resources. Employers and industry should play a greater role in determining workforce priorities, by involving them in shaping the TVET system through accurate, periodic assessments of the skills they require. In addition, in order to maximize the benefits accrued by the private sector from the further development of human resources, it is necessary to increase investment in experimental TVET and in enhancing vocational education programs.


Mr. Abdel Hadi Abu Taha indicated that labor shortages in some vital sectors in the local economy have significant repercussions. He attributes the tendency of Palestinian workers to find work in the Israeli labor market to the wage difference, in spite of the great difficulties faced by workers in crossing checkpoints to and from Israel, and in dealing with “work permit brokers”. Abu Taha called on concerned parties to reform the Palestinian labor law, apply the minimum wage, improve social protection systems, promote local investment, and develop TVET qualifications and interventions.


At the start of his address, Mr. Salah Hussein suggested that the term ‘flight of labor’ (to Israel) is more appropriate than ‘shortage of labor’ in the local economy. He also stressed the need to adopt a clear, official vision on Palestinian labor in Israel and the settlements, questioning whether such a vision will challenge the status quo, taking into consideration the pros and cons of this relationship across the short and long term. In the same context, he called for the launch of viable and practical initiatives, especially with regard to the issue of disengagement from the Israeli economy, and the provision of strategic support and implementation plans to help higher education match its outputs to the needs of the labor market.


Mr. Azmi Abdel Rahman indicated that the effects of this issue are of national importance. The Palestinian market suffers from a lack of labor in some vital sectors, as a result of Israel’s efforts to use Palestinian labor as a tool in maintaining the dependence of the Palestinian economy on the Israeli one. High wages in Israel prompt Palestinian workers to work in Israel, with employers in the local market obliged to raise wages to counter this phenomenon. He outlined that current development policies are ineffective, as they do not accommodate new entrants to the Palestinian labor market. He mentioned that there must be a realistic vision, encompassing all stakeholders from employers to workers, in order to restore a state of economic competitiveness.


Dr. Samia Al-Botmeh, in turn, called for activating the productive sectors such that they can ‘bring back’ workers to the local market. Al-Botmeh questioned the Palestinian market’s attraction attributes to labor, such as raising local wages. She commented that “the burden should not be left on the shoulders of the private sector alone.” Government must play an active role in formulating policies and interventions. Concerning women’s employment, this is concentrated mainly in agriculture, industry, technology and services, and it can only be enhanced by improving the efficiency and role of these sectors specifically (and not other sectors such as construction or transport).


Following the general discussion, participants stressed the importance of the subject matter, agreeing that the Occupation is the most prominent impediment to development in Palestine. Participants also unanimously agreed that development is the main engine for the advancement of the economy, and its creation of sufficient employment opportunities to accommodate new entrants to the labor market. This development depends on activating the productive sectors, which requires effective interventions by government and the private sector. Government must create the enabling environment to further investment by the private sector. Participants stressed the importance of linkages between employment in Israel and security conditions. Should work permits cease to be issued, as happened during the Second Intifada, the problem of unemployment will worsen, with further negative repercussions on the local economy. Herein lies the importance of developing the local economy, such that it can overcome these repercussions.

To download the background paper