The Palestinian Economy and Palestinian Workers in Israel before the Swords of Iron War

The latest chapter in the chartbook takes a look at the Palestinian economy and its labor force

The data illuminates the following main points:

The Palestinian labor market and economic standard of living before the war:

• The labor market in the Judea and Samaria areas showed better averages than the Gaza Strip, with lower unemployment rates and higher participation rates in the labor force – for both men and women. These disparities steadily increased since Israel’s withdrawal from the Strip and Hamas’ takeover.
• Most Palestinian women do not participate in the labor market. The unemployment rates of young women (aged 25-44) in the Gaza Strip are higher than 50%.
• The GNP per capita in Gaza has been in decline since the Hamas takeover, aggravating the disparity between the Gaza Strip and the Judea and Samaria areas in the standard of living.

Palestinian employment in Israel:

• Leading up to the war (in the third quarter of 2023), approximately 170,000 Palestinian workers entered Israel, 22% of whom were employed with no work permit. Nearly 98% of them came from Judea and Samaria.
• Nearly a quarter of the employed Palestinians from Judea and Samaria worked in Israel in 2022 – a peak of at least 22 years. Most were employed in the construction industry.
•  Parallel to the increase in Judean and Samarian Palestinian workers employed in the Israeli construction industry was a decrease in the number of Arab-Israelis working in the industry. It is possible there is a measure of substitution between Palestinian and Israeli Arab workers.
• The increase in accessibility of employment in Israel can cause a disruption in the incentives structure of the Palestinian economy, since a significant part of the uneducated population earned more than the educated, creating disincentives to invest in human capital.

Effects of the Swords of Iron war on the Palestinian Economy:

• The initial data gathered points to more severe damage to the Palestinian economy, particularly in the Gaza Strip, than in past conflicts, at least since the second Intifada.
• The economic damage was caused by the direct effects of the war and by the indirect effects on the Judea and Samaria areas, particularly in the sharp reduction of Palestinian workers in Israel.        

For the full chapter [Hebrew]