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 Q3 for Israel (OECD harmonised unemployment rate data are not available on a monthly basis for this country).Source: OECD Main Economic Indicators.

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% October 2010 December 2007

The key labour market & social policy challenge is too-high poverty

Poverty rate thresholds set at 50% of median (equivalent) household income data refer to the late 2000s from the OECD Income Distribution questionnaire, and OECD (2010) ,Labour Market and Social Policy reviews: Israel

OECDaverage

Poverty rates

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….

Mobilizing these resources is key to enhancing economic growth and social cohesion

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:

Recent initiative to invest 800mn NIS in infrastructure in 13 Arab localities is a step, but it’s too small to overcome large infrastructural or educational deficiencies.

More investment in Arab schools to redress disadvantage

Take enforcing public sector employment quotas seriously: currently at 7% rather than the avowed objective of 12%.

Israel needs more effective employment-oriented social policies...

Very disappointing “Wisconsin” fell through.

OECD evidence shows that well-designed and implemented mutual obligation policies can work:

Clients have to look for work/engage in training or be subject to a benefit sanction

Policy has to provide an effective package of employment services, vocational training and childcare supports. Spend a bit more on cost-effective ALMPs

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.

Public social expenditure as % of GDP. Data concern 2007: OECD Social Expenditure database, .

Increase EITC payments for low-paid workers to give a real incentive to take work

This could be partly financed by reducing child allowances.

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Turkey

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United States

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Japan

United Kingdom

Italy

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Denmark

Sweden

France

OECD19.3%

Foreign workers in Israel make up a greater proportion of the labour force than in most

OECD countries

Foreign workers as % of the Labour Force: OECD Review.Source: OECD (2010), Labour Market and Social Policy reviews: Israel

Foreign workers (FWs) seem to displace Israeli workers.

The system of foreign labour management needs improving

Impose labour market test and prevailing wage and working conditions on employers recruiting from abroad.

Only recruit workers for jobs which Israelis refuse or cannot fill

High agency fees ineffective in encouraging employers to hire locally, exploitative and negatively affect employment conditions

Consider unlimited stay for employment for jobs where demand is structural/permanent

Favour cross-border workers over foreign workers

Improve transparency and address illegal brokerage fees

Use short-term permits for seasonal work in agriculture

Eliminate middlemen and labour brokers

Develop bilateral agreements for recruitment

Reinforce inspectorate, including with interpreters.

Strengthen sanctions for employers and bar violators from future recruitment

...and improve the labour system for foreign workers (continued).

Further reading

www.oecd.org/els/israel2010