GLOBES conference, Tel Aviv, 12 -13 December 2010 Key Labour Market and Social Policy Challenges facing Israel: an OECD perspective John P. Martin Director for Employment, Labour and Social Affairs, OECD (www. oecd. org/els/)
Israel has weathered the global recession rather well OECD harmonised unemployment rates in selected OECD countries, December 2007 to October 2010* * June 2010 for Greece; August 2010 for the United Kingdom; September 2010 for Denmark, and Norway; and 2010 Q 3 for Israel (OECD harmonised unemployment rate data are not available on a monthly basis for this country). Source: OECD Main Economic Indicators.
The key labour market & social policy challenge is too-high poverty Arabs Haredim Others (Non-Arab, Non-Haredi) 70 2005 60 Poverty rate (%) 2007 50 2006 OECD average 40 2007 1997 30 20 Poverty rates 1997 10 20 30 40 50 Employment rate (%) Poverty rate thresholds set at 50% of median (equivalent) household income data refer to the late 2000 s from the OECD Income Distribution questionnaire, and OECD (2010) , Labour Market and Social Policy reviews: Israel 60 2007 70
Israel is a divided society, and demographic trends warrant inclusive policy action quickly § The proportion of children entering primary school belonging to the poor minority groups will increase from just below 50% at present to 75% in 2030. § Employment is the best route out of poverty § Policy should change now to increase employment among Arabs and Haredim…. ü Mobilizing these resources is key to enhancing economic growth and social cohesion ü Public policy and investment towards minority groups has to become more effective
Low-paid work is relatively widespread in Israel Prevalence of low-paid work: per cent of employees with earnings of less than two-thirds of the national median. Source: OECD (2010) , Labour Market and Social Policy reviews: Israel
An effective policy response includes better enforcement of labour laws. . . § Israel has a general problem of failing to enforce its labour laws. § Especially detrimental to the more vulnerable workers (low-paid, foreign, employed through temporary work agencies or sub-contracted).
Ineffective enforcement of labour laws does not get the policy attention it deserves § Labour inspectorate underfunded and understaffed § Sanctions for employers who fail to respect labour laws are derisory
Policy has to become more effective: a New Deal for Arabs? § Government should lead by example by stamping out discriminatory practices: ü Recent initiative to invest 800 mn NIS in infrastructure in 13 Arab localities is a step, but it’s too small to overcome large infrastructural or educational deficiencies. ü More investment in Arab schools to redress disadvantage ü Take enforcing public sector employment quotas seriously: currently at 7% rather than the avowed objective of 12%.
Israel needs more effective employmentoriented social policies. . . § Very disappointing “Wisconsin” fell through. § OECD evidence shows that well-designed and implemented mutual obligation policies can work: ü Clients have to look for work/engage in training or be subject to a benefit sanction ü Policy has to provide an effective package of employment services, vocational training and childcare supports. Spend a bit more on cost-effective ALMPs ü Counsellors in Israeli PES have far too high a caseload (350 unemployed compared with an OECD norm of 100).
To some extent you get the poverty rates you are willing to pay for. § Increase EITC payments for low-paid workers to give a real incentive to take work § This could be partly financed by reducing child allowances. Public social expenditure as % of GDP. Data concern 2007: OECD Social Expenditure database, .
Foreign workers in Israel make up a greater proportion of the labour force than in most OECD countries §Foreign workers (FWs) seem to displace Israeli workers. 25 2007/08 20 15 10 5 0 d lan Sw er itz ain Sp d lan Ire y an rm Ge L AE ISR ly Ita ee Gr ce UK e ds nc an Fra erl th Ne rea Ko an Jap Foreign workers as % of the Labour Force: OECD Review. Source: OECD (2010), Labour Market and Social Policy reviews: Israel
The system of foreign labour management needs improving § Impose labour market test and prevailing wage and working conditions on employers recruiting from abroad. ü Only recruit workers for jobs which Israelis refuse or cannot fill ü High agency fees ineffective in encouraging employers to hire locally, exploitative and negatively affect employment conditions ü Consider unlimited stay for employment for jobs where demand is structural/permanent § Favour cross-border workers over foreign workers
. . . and improve the labour system foreign workers (continued). § Improve transparency and address illegal brokerage fees ü Use short-term permits for seasonal work in agriculture ü Eliminate middlemen and labour brokers ü Develop bilateral agreements for recruitment § Reinforce inspectorate, including with interpreters. § Strengthen sanctions for employers and bar violators from future recruitment
Further reading www. oecd. org/els/israel 2010
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