Jobs galore, but Israelis don’t want them

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Take this job and shove it,
I ain’t working here no more.
My woman done left and took all the reason,
I was working for.

Johnny Paycheck‘s country music hit was written back in the 1970s, but the attitude of the song’s protagonist couldn’t be more 2021, except it’s the coronavirus that took all the reason.

It’s early to say exactly how the pandemic has changed the nature of the labor market in the long run, but in Israel and most of the developed world, it seems at least to have created a serious supply-demand imbalance. Economies are bouncing back from the worst of the COVID recession and lots of jobs are on offer, but workers are less than anxious to apply for them.

The United States has been suffering this labor crunch the worst. Its unemployment rate has fallen, but to a large degree that’s because people have dropped out of the labor force altogether.

Last month, five million fewer Americans were employed than in February 2020 on the eve of the pandemic. Yet job openings are at a record high, and many employers report having a hard time filling positions.

The same thing is happening in Europe: Jobless and other COVID-era aid has ended and economic growth is recovering, both of which economists had predicted confidently would push people back into the labor market. But it hasn’t, which has created labor shortages and exacerbated supply-chain disruptions.

In Israel, the economy has been growing strongly all this year, even as we were coping with the fourth COVID wave, thanks to a government policy of injecting everyone with a third vaccine dose and avoiding lockdowns. Labor demand, in particular in the red-hot high-tech sector, has been growing, but labor supply has not kept up.

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The number of job openings in Israel jumped 4.9 percent in September to a record 137,400, just as what you would expect during an economic recovery. But Israel’s broad unemployment rate has not been coming down (it was 7.9 percent in September) and the employment rate is lower than it was pre-COVID (58.7 percent in August versus 61.1 percent in 2019), which is something you wouldn’t expect with so many jobs to be filled.

In fact, there are fewer Israelis in the labor market today than there were before the pandemic.

The experts have no ready explanation for the phenomenon, much less any answers. Just as it is for doctors and scientists, the COVID pandemic is terra incognita for economists.

But it seems the pandemic has both changed people’s attitudes towards work, and changed the kinds of work that needs to be done, not least due to the increased digitization of services like education and medicine. No one can yet say precisely what these changes are and to what extent they are a short-term reaction to a remarkable two years that disrupted much of life as we know it. It’s early days to call it a structural change. But this is what seems to be happening.

The twilight zone of 2021

For many, if not most workers, the pandemic created a strange twilight zone: Huge numbers of people were furloughed and unemployment soared, but no one was going hungry because government grants were widely available and often quite generous.

In Israel and elsewhere the poverty rate actually declined in 2020. Meanwhile, people’s savings grew both because of a rising stock market and the lack of places to spend their money while restaurants and entertainment venues were closed.

In Israel, there was certainly no shortage of kvetching during the lockdowns about living, working and studying at home 24/7 – kvetching is, after all, a national pastime. But it seems that when all is said and done, a lot of people got used to this more leisurely existence and are in no rush to go back to the daily grind. In many countries – although less evidently in Israel – workers at the bottom of the market spurned the low pay and onerous conditions at the jobs they once had.

In Israel, people over age 45 are still getting COVID-related jobless benefits till the end of 2021, and have even less incentive to look for work than others. Many younger, single people moved back to their parents’ homes and can get by on savings for quite a bit longer.

The habit-forming nature of sloth

Eventually, except for the real leisured minority with sizable savings if not fortunes, they will all have to return to the labor market. The question is what will be awaiting them. Jobs are going begging now, but if the labor crunch continues for an extended period, it may crimp economic growth and the supply of work.

The longer you wait to get back into the world of work, the more likely that world will be harder to re-enter.

Sloth can be habit-forming(C) Handout . / Reuters/REUTERS

The bigger and more serious problem is how work is changing, and this is a particular challenge to Israel. Digitization has been good for the Israeli high-tech sector and for the economy, which has been lifted by the industry’s spectacular growth. Tech is growing so quickly that its share of the labor force has grown, too, a little, to 11 percent.

The challenge will be for the economy to supply enough of the labor the industry needs, which is no mean feat. High-tech isn’t about warm bodies with reasonable skills; it requires not only high skill levels, but creativity and dedication, which even the best government policy can’t create.

Israel’s higher education system has succeeded in producing more engineering and science graduates, but at the elementary and high school level, the failure to impart the core skills needed for work in adult life remains as serious as ever. At some point, the universities and colleges will have tapped out the pool of potential engineering and science applicants. If tech stops growing because it can’t get the workers it needs, the rest of Israel will stop growing, too. At that point, employers will be singing, “Take this job and love it, or for you, it’s out the door.”