All eyes are at present turned to the genocidal war waged by Israel against the Palestinian people in the Gaza Strip, to the massacres, vast destruction, state of siege and the lack of basic healthcare and food services. Yet the longer-term damage done by this war which will leave behind negative and deep economic, social and psychological effects has not yet been highlighted, attracting minimal attention from the media, politicians and academic researchers. And this, even though these effects are dangerous and widespread, touching the lives of most classes of the Palestinian population in the Gaza Sector (hereinafter GS) and the West Bank (hereinafter WB) and are expected to last for a long period after the war’s end. This being so, this paper will focus on the current war’s effect on the Palestinian labor sector and the economic consequences resulting from hundreds of thousands of Palestinian workers and employees becoming idle in the WB and GS and in the Israeli workplace.
The Palestinian workforce in the WB and GS amounts to about 1.2 million workers with 868,000 in the WB and about 292,000 in the GS. The government sector is considered the primary employer of this work force, employing some 205,000 workers, with 121,000 in the WB and about 84,000 in the GS. Restrictions imposed by the occupation upon the Palestinian economy which, during these past years, has become subsidiary to Israel’s economy, have led to weakness in absorbing the Palestinian workforce in local labor markets, and increasing dependence on the Israeli labor market, which latter in the past few years has come to constitute the principal source of income for thousands of Palestinian families. This fact has come to be one of the main factors deepening the dependence of the Palestinian national economy upon that of Israel. Making this dependence even worse is its stark revelation, resulting from the policies of collective punishment practiced unceasingly by the Israeli occupation.
Statistics carried out by the Palestinian Statistics Center show a rise in the number of Palestinian workers from the WB and GS who work in Israeli establishments, inside Israel and in the settlements, from 51,000 in 2013 to over 178,000 in 2023, that is, on the eve of war, with 153,000 workers from the WB and 25,000 from the GS. This figure represents some 20 % of the total Palestinian workforce, and most of them work in the building, services and agricultural sectors.[1]
In tandem, these statistics also reveal the hardships experienced by the Palestinian workforce as a result of a high rate of unemployment, especially in the GS on the eve of war. In the WB and GS the unemployment rate among those constituting the workforce (ages 15 and above) was around 24 %. The disparity in the unemployment rate between the WB and the GS was large, reaching 45 % in the GS as opposed to only 13 % in the WB. The rates of unemployment are the biggest challenge to Palestinian youth, reaching 32 % among males and 59% among females. These rates are higher in the GS when compared to the WB, reaching 75 % and 30% respectively. Perhaps the highest rate among youth of ages 18-29 has been recorded among the graduates, those holding an intermediate diploma or higher, reaching 48%, and with a glaring gender difference: 34% among males and 61% among females.[2]
Following the Tufan al-Aqsa operation carried out on October 7 by HAMAS and other resistance groups, and beginning with the first day of war, Israel began to target all civil economic and services establishments throughout the GS, leading to suspension of all work and cessation of all economic and social activity. Concurrently, Israel revoked all work permits previously granted to Palestinian workers in Israel from both the GS and the WB, repeatedly attacked their places of residence in territories occupied in 1948, and arrested thousands of GS workers, holding them for several weeks under harsh and inhuman conditions in collective detention centers. Israeli police arrested some 14,000 workers from the GS, then expelled them and brutally dumped them at Israeli checkpoints bordering the WB, after having tortured them and stolen their belongings. Most of these expelled workers arrived at various cities and towns in the WB carrying the bare minimum of belongings and little money, and were accomodated by Palestinian institutions, especially provincial offices, civic organizations, some schools and hotels, and some private sector companies.
The Closure of the Israeli Labor Market: A Momentous Development
The closure of the Israeli labor market to the Palestinian workforce has resulted in a very grave economic repercussions, with multiple negative effects on all economic aspects of living. That workforce had been contributing some 3 billion dollars annually to the Palestinian economy, or nearly 15 % of national income, thus keeping the rate of unemployment in the WB below 20%, according to statistics carried out by the Central Statistics Office in 2022. In the GS, however, the rate remained unchanged, i.e. at about 45%. A report by the International Labor Office reveals that Israel’s assault on Gaza has, since October 7, had catastrophic consequences for the labor market. The report further showed that the humanitarian crisis in the GS had dangerous effects on the labor market, employment prospects and living conditions, as also throughout occupied Palestine. This has caused a social and economic crisis with hugely damaging results to employees and companies which are likely to leave palpable effects for several years to come.[3]
According to some estimates, this means that, if no employment is found for these workers in the short term, the unemployment figure will rise to more than 30% in the WB and perhaps to 90% in the GS, given the stoppage of work in most economic sectors in the GS,[4] and
their largescale recession in the WB. This is especially the case in sectors like agriculture, construction, trading, hotels, and restaurants, resulting from restrictions on movement and other hostile measures enforced by the Israeli army and settlers.[5]
Judging by what is happening on the ground and the current hardship in living conditions throughout Palestine, it is not expected that these workers will return to work in Israel given the dangers involved and the harassment they are subjected to when travelling to or working in the Israeli workplace. This is coupled to the fact that some Israeli employers are unwilling to rehire a “hostile” labor force, despite their need for Palestinian labor, except in certain exceptional circumstances and in certain sectors like agriculture, construction and services located in industrial settlements on the borders of major cities such as `Atrut near Jerusalem and the Modiin Ilit settlement to the west of Ramallah and similar industrial settlements. Some Palestinian workers working there have been granted temporary work permits and they are employed under circumstances that resemble labor camps in prisons.
Expansion of Unemployment with the Collapse of the Palestinian Economy
The closure of the Israeli labor market in the face of Palestinian workers since the start of the war on October 7, coupled with a series of measures of collective punishment leading to the destruction of the already fragile Palestinian economy, whether they be the military assault on the GS, the fragmentation of the WB, or the siege imposed on thousands of inhabitants and workers throughout Palestine’s cities and provinces, turning them into islands isolated from one another—all this has led to a sharp decline in all economic indicators and widespread unemployment and poverty.
Some estimates indicate the probability of an increase in loss to the GDP in the third month of this war to 12% of GDP, amounting to some 2.5 billion dollars.[6] This loss is the direct result of measures of repression and collective punishment imposed by Israel on the Palestinians in the WB and the GS. Accordingly, the loss of individual and family security is not confined to inhabitants of the GS but extends to wide sectors of the population in the WB where the occupation authority and the settlers have put in place measures of repression and movement constriction that negatively impacted all aspects of social and economic life.
Restrictions of movement of Palestinians in the WB since October 7 have come to constitute a serious threat to their security and an effective obstacle to the movement of more than 67,000 Palestinian workers holding jobs in provinces other than their places of residence. Consequently, they are forced to cross tens of military checkpoints placed by Israel on the main roads connecting the provinces of the WB and the cities and towns around them. This is coupled with tens of gangs of settlers that attack Palestinian cars and vehicles when passing by, leading to an almost total paralysis of movement and preventing thousands of workers, employees and students from reaching their places of work or study. Hundreds of productive industrial and agricultural establishments and government agencies, have suffered severe loss of work, and several universities have closed their doors or else adopted internet teaching. In all, thousands of workers have lost their jobs.
Some research[7] reveals that there are major consequences for the restrictions on movement, especially on chances of employment and wages. For example, one research reveals that the presence of a single checkpoint, one minute distant from a local area, reduces the wages of its residents by 5.2 percentage points every hour and reduces the chances of finding employment by 0.5 percentage points. ILO’s estimates indicate the loss of 61% in opportunities for work in the GS, equivalent to 182,000 jobs at the end of the war’s first month, while the WB lost 24 % of opportunities for work, equivalent to 208,000 jobs. By the end of the second month of war the GS had lost about 95% of work opportunities while the WB is expected to lose about 60%.
The War’s Effect on the Palestinian Economy: From Dependence to Collapse[8]
The sudden cessation of work for workers and employees throughout the GS, and for a large percentage of the workforce in the WB has contributed to paralysis in economic activity and increased the sense of economic insecurity and instability. According to MAS, the Palestine Economic Research Institute, this has led to a fall in the level of household consumption expenditure by about 16 % for 2024 compared to previous levels if the stoppage were to be total and long-lasting, which in turn will lead to a fall in imports amounting to 10%.
As regards possible effects on general incomes, it is expected that the income tax on workers’ wages in Israel will fall to zero if the war continues for three months or more. This is a tax which the Israeli government used to transfer to the PA on a quarterly basis, in accordance with the Paris Agreement. In 2022, it amounted to 1.69 % of clearance revenue, amounting to ILS 188.2 million (around 51 million USD). The total clearance revenue constitutes some 70% of the PA,s revenue, the equivalent of nearly 2.2 billion USD annually.
A month after declaring war on Gaza, the Israeli political and security cabinet decided to deduct the monies allocated to the GS from the Palestinian clearance revenue, in addition to the monies paid to prisoners and their families. As is its wont, Israel uses these monies to exert pressure on the PA, withholding monies in part or in whole and precipitating a severe economic crisis for the PA. This is why the PA rejected that decision and refused to accept the decrease in clearance revenues, since these belong to the Palestinian people and Israel does not have the right to reduce them as per the Paris Agreement. This has led to denying the Palestinian treasury its most important source of revenue and the PA is now almost bankrupt, unable to pay its employees their wages over the past two months and now forced to borrow money from Palestinian banks to pay part of their wages.
As the rate of unemployment doubled due to the dismissal of the Palestinian labor force from Israeli markets and the thousands of workers and employees dismissed from Palestinian economic establishments due to the recession in the WB and government employees being unable to receive their normal wages, general imports are expected to fall by 7-14 % due to the fall in total consumption imports by 10-20%. Furthermore, general imports are expected to fall by 0.9 -1.3 % due to a fall in the local VAT, and the fall in household consumption expenditure by 10-15 %during the first three months of the war.
To all the above are added the fall in commercial and capital flows, future investments, lower productivity and higher production costs, especially costs of transport. These economic repercussions will doubtless grow worse as the war with all its attendant repressive measures goes on. Palestinian household consumption rates are also expected to fall as well as demand for consumption items, resulting in a fall in money flow in the markets and a fall in domestic wages. All these have dangerous repercussions and long-term economic effects and will require several years to deal with once the drums of war have fallen silent.
In this context, some optimistic estimates[9] indicate that it is probable that the war will result in a fall in the level of human development in Palestine as a whole to between 11 to 16 years resulting from a fall in educational attainment and in expected work, together with a fall in the individual share of income, living standards, lack of nutrition and rate of poverty. These latter are the basic criteria adopted to measure the level of human development. We on the other hand expect that the developmental repercussions of this war will be far worse than these estimates, a fact essentially related to how long the war shall last, its political consequences, the material and human damage it has caused, and the amount of aid required to help the reconstruction process and how that aid is handled. All these are future events that are hard to predict with any accuracy as long as the war has not ended. But facts on the ground indicate that this a total genocidal and unprecedented war, and its political and social effects will be dreadful.
Poverty Overwhelms All Inhabitants of the GS and a Third of the Inhabitants of the WB
The cessation of work of almost the entire labor force in the GS since the northern region of the GS has become uninhabitable, and the movement of about 1.9 million inhabitants from their northern homes and residences towards the already crowded center and southern regions of the GS, has perhaps turned the entire GS into a far-flung refugee camp, inhabited by a blighted society where most families lack essential needs and all its inhabitants have become impoverished.[10]
The economic situation of Gazan families had already been very bad before the current war. According to figures published by the Ministry of Social Development in the GS, 1,422,955 inhabitants in 2022 suffered from diverse levels of poverty,[11] and these amounted to about 61 % of the total inhabitants of the GS. One third of these suffered extreme poverty. Thus, some 21 % of the entire population of the GS benefited from a program of remittances paid them by the Ministry and known as “the cheque from [the Ministry of Social] Affairs.” These families were unable to supply their basic needs. Some 17,000 families were on a waiting list to benefit from that program but had been unable to do so for lack of needed funds at the Ministry of Social Development.[12] The beneficiaries of this program rely on limited financial resources to satisfy their basic living needs with the amount that each family receives varying between 75 and 180 USD per month. The total value of this annual aid amounts to 128 million USD.
When the war began, all aid ceased and so these families lost their basic source of income, and further lost all possibility of finding temporary or permanent employment. Thus, poverty spread fast and wide to include almost all inhabitants of the GS because of the genocidal war waged by Israel on civilians and all economic establishments without distinction. Some estimates expect the poverty rate to exceed 96 % among the population at the end of the third month of war. It is further expected that most of them will suffer extreme poverty in light of the catastrophic living conditions engendered by the war and that they will lack the most basic life needs, such as food, shelter and so forth as they live out in the open. The rise in the poverty level and the cessation of aid are expected to have dire consequences on families where the main providers are women. Since the war, this category of family has increased by more than 2784 families due to the killing of men who had been their providers, while 23,181 families of women providers lost their homes and 10,000 children have lost their parents. One might imagine how difficult things are for families where the children are provided for by wives and where there is no alternative source of income.[13]
On the other hand, some 3.2 million Palestinians in the WB and east Jerusalem are facing threats of extermination and expulsion no less dire than what is being faced in the GS. Israel, by using military means and colonialist violence, is intent upon rendering all regions of Palestine uninhabitable, and not simply the GS, as it faces what it calls an “existential threat.” In this regard, it is expected that the poverty rate in the WB will double, this latter having already reached about 14 %, especially after the closure of the Israeli labor market to the Palestinian workforce, the twofold increase in the number of the unemployed and the decline in all economic indicators in the WB.
Conclusion
Despite the grave economic repercussions suffered by the Palestinians two and a half months after the start of a total war waged by Israel upon the people of Palestine, the resultant and deliberately planned economic destruction, and driving hundreds of thousands of Palestinian families into utter poverty, there is still no official or unofficial party that helps these employees and no national plan in place to face these economic challenges. It is now clear that the economic repercussions of the war will last into the short and medium terms after the war’s end, and that these repercussions cannot be dealt with without multiplying foreign aid for the process of rebuilding, drawing up policies of national salvation and aid to be joined by all parties to the development process, i.e. governmental, non-government and private sectors, and without resorting to a number of measures to provide a wide network of protection which includes urgent financial aid, starting to construct an economy of resistance and decreased dependence, and programs to provide local urgent employment opportunities in the various economic sectors to combat unemployment and poverty and revitalize the Palestinian economy as much as possible.
[1] "Basic Results of the Labor Force Survey: Third Quarter (July–September 2023)," Ramallah: Palestinian Central Bureau of Statistics.
[2] "Statement reviewing the conditions of youth in Palestinian society on the occasion of World Youth Day," Ramallah: Palestinian Central Bureau of Statistics, 12/8/2023.
[3] International Labour Organization (ILO), “Impact of the Israel-Hamas conflict on the labor market and livelihoods in the Occupied Palestinian Territory” (November 2023).
[4] "Economic Summary on the War on Gaza," Ramallah: Palestinian Economic Policy Research Institute (MAS), Issue 4, 6/11/2023.
[5] Undoubtedly, the most affected categories by these Israeli colonial measures will be the youth and women, especially university graduates. Unemployment rates in the Palestinian territories are notably higher among university graduates, reaching around 74% in the Gaza Strip and approximately 29% in the West Bank. Unemployment rates are also elevated among women, with an unemployment rate of 66.2% in the Gaza Strip, compared to 29% in the West Bank.
[6] "Economic Summary on the War on Gaza," previously mentioned source.
[7] Massimiliano Cali and Julia Oliver, “West Bank checkpoints damage the economy, illustrate the high cost of trade barriers,” Published on The Trade Post, World Bank Blogs, 18/7/2013.
[8] For more details on the economic impacts of laying off Palestinian workers from Israeli establishments in the 1948 territories and from Palestinian economic establishments in the West Bank, see the report by MAS Institute: Palestine Economic Policy Research Institute - MAS, “Preliminary Findings on the Impacts of the Cessation of Palestinian Labor in Israel on Key Palestinian Macroeconomic Indicators,” Gaza War Economy Brief, no. 5 (November 2023).
[9] "Gaza War: Expected Social and Economic Impacts on the State of Palestine," United Nations Development Program and the United Nations Economic and Social Commission for Western Asia, 5/11/2023.
[10] "Economic Summary on the War on Gaza," Ramallah: Palestinian Economic Policy Research Institute (MAS), Issue 6, 26/11/2023.
[11] The Palestinian Central Bureau of Statistics applied the concept of multidimensional poverty in 2020 to include a broader "multidimensional" scope. This concept enhances the economic, social, and cultural rights of poor families. It consists of both critical and non-critical aspects, examining aspects of material and social deprivation experienced by each citizen, particularly indicators related to living standards, income, education, and health.
[12] "Poverty in Palestine: A Rising Indicator Without Halt," Palestinian Center for Human Rights, 2022.
[13] UN Women, “Facts and Figures: Women and girls during the war in Gaza,” 22 December 2023.