Abstract

In the last five years, unemployment in the West Bank and Gaza rose sharply and exhibited large volatility. While public sector employment expanded rapidly, job creation in the local private sector was very limited. Moreover, a substantial part of the labor force continued to be employed in Israel and the settlements, and changes in the unemployment rate largely reflect changes in job opportunities for Palestinians in Israel and the settlements. As a result, the introduction of a permit system in 1994 and frequent closures, especially in 1995-97,1 have had a strong impact on unemployment. The level of unemployment in the West Bank and Gaza must be assessed bearing in mind that only about half the population is of working age and that the labor force participation rate is very low, so the dependency ratio is high. Given the absence of any formal unemployment insurance system or an effective social safety net, the loss of employment for a breadwinner leads to much hardship for the typically large households.2 This chapter describes the structure of, and developments in, the Palestinian labor market since the Oslo Accords and discusses tentatively the possible reasons for the very high level of unemployment.

Introduction

In the last five years, unemployment in the West Bank and Gaza rose sharply and exhibited large volatility. While public sector employment expanded rapidly, job creation in the local private sector was very limited. Moreover, a substantial part of the labor force continued to be employed in Israel and the settlements, and changes in the unemployment rate largely reflect changes in job opportunities for Palestinians in Israel and the settlements. As a result, the introduction of a permit system in 1994 and frequent closures, especially in 1995-97,1 have had a strong impact on unemployment. The level of unemployment in the West Bank and Gaza must be assessed bearing in mind that only about half the population is of working age and that the labor force participation rate is very low, so the dependency ratio is high. Given the absence of any formal unemployment insurance system or an effective social safety net, the loss of employment for a breadwinner leads to much hardship for the typically large households.2 This chapter describes the structure of, and developments in, the Palestinian labor market since the Oslo Accords and discusses tentatively the possible reasons for the very high level of unemployment.

The Palestinian Labor Force

Labor Force Participation

The Palestinian population in the West Bank and Gaza has a very young age structure and a low labor force participation rate. In 1998, about 47 percent of an estimated 2.7 million Palestinians, were below 15 years of age, and 53 percent were of working-age (Table 6.1 and Box 6.1). Of the latter, only about 40 percent actually participated in the labor force. Most countries in the region, except Jordan and Syria, have a larger share of working age population and a higher labor force participation rate. Two factors contributing to the low participation rate in the West Bank and Gaza are the low participation rate of females—a third of the level in neighboring countries—and the higher share of the working-age population that are still students.

Table 6.1

Population, Labor Force, and Employment

(1996, unless otherwise indicated)

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Sources: World Development Indicators, World Bank; International Labor Organization Yearbook of Labor Statistics; Palestinian Central Bureau of Statistics; and IMF staff estimates.

In 1994-98, reflecting the demographic dynamics, the labor force increased by about 147,000 people to 577,000, but only 92,000 new jobs were created during that time, while about 55,000 people became unemployed (Figure 6.1 and Box 6.2). The level of unemployment in 1998 was about 15 percent on average, more than twice as high as the 1993 level of 7 percent (Figure 6.1). While cross-country comparisons are problematic due to differences in statistical methods and definitions, the level of unemployment in the West Bank and Gaza, nonetheless, appears quite high compared with neighboring countries.

Figure 6.1
Figure 6.1

Labor Force Data

Sources: Palestinian Central Bureau of Statistics, Israeli Central Bureau of Statistics; and IMF staff estimates.

Employment

In 1998, roughly 494,000 Palestinians were employed, of which 107,000 were in Israel and the settlements. There has been a marked change in the employment structure: services became by far the most important sector in terms of employment, while the importance of agriculture declined (Figure 6.1). For Palestinian workers in the West Bank and Gaza, the roles of the agriculture and construction sectors declined, while that of services (including the PA, municipalities, NGOs, financial services, commerce, transportation, and communication) increased. By contrast, for Palestinian workers in Israel and the settlements the construction sector remained most important despite its diminished role; at the same time there has been a steady increase in the share of Palestinians working in the service sector.

Labor Force Survey: Concepts and Definitions

The Palestinian Central Bureau of Statistics has produced ten labor force surveys since 1995. Each survey consists of interviews with a representative sample of households regarding the employment pattern of all household members aged 15 years and above. Given that the survey is household based, it includes both formal and informal employment, although no attempt is made to distinguish between the two categories.

The following definitions are applied:

Work: Includes any activity for wage or salary, for profit or family gain, in cash or in kind. One hour or more of such activity constitutes work. Includes unpaid activity on a family farm or business.

Working age population: Defined as all persons in the West Bank and Gaza aged 15 years and above.

Labor force: The economically active population defined as all persons 15 years and above who are either employed or unemployed.

Employed: All persons 15 years or older who were at work at least one hour during the reference week, or who were not at work during the reference week, but held a job or owned a business from which they were temporarily absent.

Unemployed: Individuals aged 15 years and older who did not work at all during the reference week, who were not absent from a job, and were available for work and actively seeking a job during the reference week.

Underemployed: Exists when a person’s employment is inadequate in relation to alternative employment, taking into account his/her occupational skills: (1) visible underemployment refers to insufficient volume of employment (less than 35 hours during the reference week); and (2) invisible underemployment is defined here as applying to persons who wish to change their jobs because of insufficient income or because they are working in an occupation that does not correspond to their qualifications.

In all, an increasing share of Palestinian workers in the West Bank and Gaza, and in Israel and the settlements became employed in the services sector in 1994-98 (Figure 6.2). Although the importance of this sector is not unusual compared to other countries in the region, it is striking how rapidly it has grown, from 37 percent of total employment in 1993 to about 50 percent in 1998, of which 23 percentage points were in the private sector and 27 in the public sector.3 The construction sector continued to play a dominant role, especially for employment in Israel. Although its share of total employment declined to about 22 percent in 1998 from about 31 percent in 1993, it remained much higher than in neighboring countries (Table 6.2).

Figure 6.2

Employment in Israel and Public Sector

Employment in the PA

Sources: Palestinian Central Bureau of Statistics, Israeli Central Bureau of Statistics; and IMF staff estimates.
Table 6.2

Employment by Sector

(In percent)

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Sources: Latest available information as reported by countries in the International Labor Organization Yearbook of Labor Statistics; Palestinian Central Bureau of Statistics; and IMF staff estimates.

Unemployment

Unemployment rose sharply in 1994-96, when it peaked at around 24 percent, after which it declined to around 15 percent in 1998 (Figure 6.1). Changes in the unemployment rate during this period largely mirrored changes in the availability of employment opportunities for Palestinians in Israel and the settlements. For instance, during a comprehensive closure in the second quarter of 1996, the unemployment rate jumped to 28 percent, from about 18 percent in the first quarter. In addition to the direct impact on unemployment from closures—in 1993-96 about 50,000 Palestinians lost their jobs in Israel and the settlements—the loss of labor income was a major factor behind the 1995-96 recession in the Palestinian economy with a resulting slowdown in labor demand. The decline in the unemployment rate in 1997 and 1998 coincided with a recovery of job opportunities for Palestinians in Israel and the settlements. Although the unemployment rate declined to about 15 percent in 1998, it was still high compared to 1992, when the recorded unemployment rate was only 4 percent. While labor conditions in Israel affected the Palestinian unemployment rate, its rising trend was mainly due to the inability of the private sector in the West Bank and Gaza to create jobs at a sufficiently fast rate to absorb the very large inflows to the labor market.

Generally, the level of unemployment was higher in the Gaza Strip (20 percent in 1998) than in the West Bank (12 percent in 1998). The Gaza Strip is more substantially affected during times of closure because closures there are absolute, with no crossing of workers without permits, while the West Bank is more open. The level of underemployment has fallen even more rapidly than unemployment in recent years. Toward the end of 1995, 21 percent of the labor force was underemployed, but at the end of 1998 the underemployment rate had declined to 7 percent of the labor force.

The Palestinian Labor Force in Numbers

The Palestinian population in the West Bank and Gaza grew to 2.7 million in 1998 from 2.1 million in 1993, an average annual growth of 5 percent. During this time, the labor force increased to 577,400 from 430,600, an average annual growth of 7 percent. This reflected the large number of new entrants into the labor force due to the young population and the inflow of returnees after the signing of the Oslo Accords.

Total employment increased to 493,700 in 1998 from 401,600 in 1993, an annual growth of 5 percent. This growth was not sufficient to keep up with growth in the labor force, and unemployment increased by 55,000 to 83,700 in 1998. Employment inside the West Bank and Gaza increased by 92,000, or a 9 percent annual growth, whereas employment for Palestinian workers in Israel and the settlements, both with and without permits, dropped to 55,200 in 1996, from 106,900 in 1993, and subsequently rebounded to 107,100 by 1998.

Most of the new jobs created in the Palestinian economy were in commerce and other services, predominantly in the public sector, but also in financial services. Jobs in agriculture declined, while jobs in manufacturing grew moderately. Employment in construction increased somewhat in 1994 in response to an increase in construction activity, followed by a decline in 1995 and 1996. For Palestinian workers in Israel and the settlements, a substantial reduction in construction jobs took place, while jobs in manufacturing and services increased more rapidly, albeit from a very low level.

Palestinian Labor Force Data

(In thousands, annual average)

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Sources; Palestinian Central Bureau of Statistics, Israeli Central Bureau of Statistics; and IMF staff estimates.

The Unemployment Problem

The Palestinian labor market is relatively free of regulatory constraints; there is no minimum wage, very few effective labor regulations, and no centralized wage-setting process. In addition, there is no widespread public provision of unemployment benefits that might make the wage-setting process more rigid (Box 6.3).4 Real wage adjustments, however, have not been very significant and have fallen short of clearing the labor market. The effects of shocks to the economy have been absorbed for the most part by changes in unemployment.

A discussion of the reasons for the persistent high level of unemployment can only be speculative in nature, owing to the lack of comparable time series data for the labor market. It is useful to recall that by the early 1990s restrictions on trade and obstacles to domestic economic development had created an economic structure in which the Palestinian economy exported labor to Israel and to other countries, particularly in the Gulf, rather than goods.5 This was a viable system and resulted in low unemployment rates, as long as Palestinian workers had unfettered access to the Israeli labor market.6 After the Oslo Accords, however, the share of employment in Israel declined significantly, particularly during the first years of the PA’s existence, leading to a substantial upward shift in the level of unemployment. The absolute number of employees recovered in 1997-98, so that, by the end of 1998, it was approaching the number that prevailed in 1993.

One reason for the increase in unemployment is the intensification of restrictions since 1993 on labor mobility between Israel and the West Bank and Gaza; between the Gaza Strip and the West Bank; and, to some extent, within the West Bank itself. These restrictions sharply increased the difficulties in job matching and the costs of job search, both of which may have raised the equilibrium level of unemployment.

Another key explanatory factor of the increase in unemployment is the low level of private investment, other than for construction, in the last five years. Since 1993, the labor force increased by 34 percent. At the same time, there is no evidence of a real increase in productive private sector investment.7 The depressed growth of productive capital limited the capacity of the Palestinian economy to generate new jobs. To combat unemployment, more private investment is essential, and serious efforts are required to create an environment conducive to private sector investment.

These factors do not explain, however, the apparent lack of decline in real wages. While comparable data exist only for 1996-98, there is little evidence of a downward adjustment in real wages (Box 6.4). A number of hypotheses may be advanced. First, it is possible that the relatively high wages paid to Palestinian workers in Israel—in 1998 the average daily wage for Palestinians in Israel was about NIS 100, compared to NIS 58 in the West Bank and Gaza—affected the domestic reservation (or aspiration) wage below which workers who otherwise might seek employment in Israel were reluctant to accept employment. The reservation wage would be a function of the wage in Israel and the probability of employment in Israel.

Second, since the Oslo Accords public sector employment has expanded rapidly, and it is likely that the wage level in the public sector also influenced the reservation wage for skilled labor in the private sector.

Third, owing to the restrictions on labor and on the reallocation of productive capital between the Gaza Strip and the West Bank, and to some extent within the West Bank, pockets of high unemployment may have persisted. The unemployed could not move to regions with job opportunities, and production facilities could not be shifted readily to regions of higher unemployment even if real wages were lower there. Such restrictions may have limited the role of real wages in clearing the labor market.

Finally, the Palestinian economy continued to be dominated by small production establishments, many being family owned and employing only a few workers. This type of production unit is likely to maintain informal but strong ties between employers and employees. Workers employed in these units would be less likely to be fired, and their wages might not vary much, even during a recession, whereas new entrants into the labor market would be unable to find jobs in such units even if they were willing to work for lower wages.

Employment of Palestinians in Israel

Since the 1970s, a large number of Palestinian day workers have been employed in Israel and the settlements. In the early 1990s, more than 130,000 Palestinians, or one-third of the labor force, worked in Israel, resulting in recorded unemployment rates below 5 percent. After the Oslo Accords, however, Israel imposed greater restrictions on the movement of Palestinian labor, and employment in Israel and the settlements fell by more than half to an average of 55,000 in 1996, including workers without permits (Table 6.3).8 Since then, access for Palestinian workers to Israel was gradually eased, and the labor inflow increased to 77,000 in 1997 and to 107,000 in 1998.

Table 6.3

Palestinian and Foreign Workers in Israel

(In thousands)

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Sources: Palestinian Central Bureau of Statistics, Ministry of Labor, Israeli Central Bureau of Statistics; and IMF staff estimates.

Labor Market Institutions

The PA can learn from the experience of other countries regarding new labor market regulations and institutions. Any changes that increase labor costs or reduce employment or labor force participation will have a negative impact on the economy’s growth performance. The following are some lessons from the OECD countries:

Minimum wages and indexation

The level of employment in the West Bank and Gaza benefits from the fact that there is presently no official minimum wage in place. Countries that introduce minimum wage are likely to motivate it as an antipoverty policy, but it tends instead to reduce employment, induce substitution between covered and uncovered employment categories, reduce labor force participation, reduce training opportunities for unskilled workers, and raise prices.

Employment security regulation

Labor market regulation is very limited in the West Bank and Gaza. Most industrial countries have statutes requiring advance notice of dismissals and, often, severance payments. Research indicates that employment security regulations (1) influence both layoff and hiring behavior; (2) have an ambiguous effect on the level of unemployment; (3) result in longer durations of unemployment; and (4) influence the method, rather than the scope, of adjustments of labor input to demand shocks.

Unemployment insurance

There is no formal unemployment insurance system in place in the West Bank and Gaza. Usually, unemployment insurance exists to provide a cushion or safety net to support the unemployed during periods of job search. Research shows that unemployment benefits extend the duration of unemployment by increasing the reluctance to accept a job. One way to limit the negative impact is by reducing the period of joblessness during which benefits can be collected. An alternative approach to stimulate greater search intensity is to combine unemployment benefits with a reemployment bonus, or even with a negative income tax, that is conditional on job search.

Active labor market policies

The goals of active labor market policies are to raise skills and improve job matching. Typical policies are public employment services, labor market training, youth employment measures, subsidized private employment, job creation in the public or nonprofit sectors, and vocational rehabilitation. In the West Bank and Gaza, the main labor market policy tool has been donor-funded employment-generation programs.

Source: Flanagan (1995).

The Gaza Strip was most affected by the reduced employment opportunities in Israel. As a percentage of employment, more Palestinians from the West Bank than from the Gaza Strip are now working in Israel and the settlements, in contrast to the situation before Oslo when the West Bank and the Gaza Strip had the same proportion of workers in Israel (Figure 6.2). Domestic job creation has not been strong enough to offset the loss of job opportunities in Israel, and unemployment has increased rapidly in the Gaza Strip.

It seems that the expansion in 1997-98 of Palestinian jobs in Israel and the settlements was mostly for non-permit holders. This is confirmed by comparing the PCBS employment survey data with the number of permits issued. Also, all foreign workers with permits are registered with the National Insurance Institute (NII) in Israel, and the number of Palestinians registered with the NII increased only modestly in recent years.9 Perhaps the resurgence in jobs was primarily the result of an easing in the enforcement of the permit policy rather than of a substantial increase in the number of permits issued. Of course, working without a permit is riskier and is likely to involve less favorable working conditions.

Wage Structure and Real Wage Changes

The persistent high level of unemployment suggests that real wages have not adjusted in the West Bank and Gaza. Data from recent labor force surveys support this assertion, at least in the short term, On average, real wages declined in 1997 by 4.8 percent in the Gaza Strip and 0.3 percent in the West Bank, while they increased in 1998 by 6.5 percent in the Gaza Strip and 7.1 percent in the West Bank. In contrast, real wages for Palestinian workers in Israel increased in both years, by 1.8 percent in 1997 and 2.9 percent in 1998.

The difference in nominal wage levels is also interesting. The average wage for Palestinians working in Israel is about 75 percent higher than in the West Bank, which in turn is almost 20 percent higher than in the Gaza Strip. In some sectors, the difference is even more striking: a construction worker in Gaza in 1998 could earn 180 percent more if he got a job in Israel Wages are considerably higher in the West Bank than in the Gaza Strip across all sectors except the service sector, where wages are broadly the same owing to the large employment in the PA at an equivalent pay scale. The largest difference in wages between the West Bank and the Gaza Strip is in manufacturing, followed by commerce and agriculture. This wage structure is only partly mirrored in price level differences between the two regions; prices are on average 14 percent higher in the West Bank relative to the Gaza Strip (Box 2.3).

The large differences in wage levels suggest differences in labor productivity. Since there is no reason to believe that the skills of a Palestinian working in the West Bank is much higher than one working in the Gaza Strip, the explanation lies in the institutional environment (in the broadest sense) and in the endowment of productive capital, or possibly technology management, all of which make labor more productive in the West Bank than in the Gaza Strip, and more productive yet in Israel.

Average Daily Wages, 1996-98

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Source: Palestinian Central Bureau of Statistics.

In tandem with the introduction of restrictions on Palestinian workers’ access to the Israeli labor market, the number of other foreign workers in Israel increased substantially. In recent years, the number of non-Palestinian foreign workers registered with the NII almost tripled. After 1993, an estimated 200,000 foreign workers came to Israel, primarily from Asia and Eastern Europe. Also, more than half a million immigrants arrived from Russia and other countries of the former Soviet Union. Most of the foreign workers are only expected to stay on for a limited period of time as “guest workers,” although most of the Russians were permanent immigrants. The inflow of foreign workers exposed Palestinian workers to more competition for low skilled jobs in Israel, particularly in agriculture and construction (Figure 6.2). In 1997 and 1998, employment in construction rebounded somewhat, and the overall number of Palestinian workers in Israel and the settlements grew sharply, suggesting that there was still demand for Palestinian labor in Israel. A preference for Palestinian workers may be based on cultural familiarity, language skills, and common work practices.

Public Sector Employment

The PA has taken on a whole new set of responsibilities compared to the Israeli Civil Administration (ICA). The size of public sector employment more than doubled to 92,000 at the end of 1998 from 40,000 at the end of 1994, including a significant increase in the police force (Figure 6.2). While some growth in public sector employment was expected to enable the PA to take on its new responsibilities, the growth in recent years has been excessive and has not translated into a corresponding increase in the level and quality of services provided by the PA.

Compared with other countries in the region, the size of the PA employment (19 percent of total employment) is lower than central government employment in Jordan (22 percent) and Algeria (23 percent), but higher than in Egypt (17 percent) and Lebanon (14 percent) (Table 6.4). The size of the police force is also relatively high, absorbing 8.5 percent of total employment.10 At the same time, despite the very young population, which creates demand for education, only 3 percent of total employment in the West Bank and Gaza is in the public education sector, a share that is lower only in Yemen. Similarly, the health sector accounts for a low proportion, only 1 percent of total employment. Many education and health services in the West Bank and Gaza, however, are provided by UNRWA and NGOs. If health and education employees in UNRWA and NGOs are included, the PA does not deviate as much from governments in neighboring countries.11

Table 6.4

Public Sector Employment

(Percent of total employment)

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Note: Data for the police forces in West Bank and Gaza are shown in the armed forces column.Sources: Schiavo-Campo, de Tommaso, and Mukherjee (1997);and IMF staff estimates.

Excluding armed forces.

A number of reasons account for what was undoubtedly an excessive growth in public sector employment. First, the PA used public sector employment as a means to combat unemployment. While this might have reduced unemployment in the short term, the cost of such a strategy to the Palestinian economy will prove to be quite high over the medium term. Second, the PA used the public payroll to ensure the smooth integration of a diverse civil service consisting of returnees from a variety of PLO-affiliated groups and fractions, as well as former employees of the ICA. Unfortunately, the negative impact of such a strategy can be quite substantial in terms of fiscal cost, transparency, and the politicization of the civil service. Third, there was—and still is—no effective mechanism in place to constrain discretionary increases in public sector employment. The Ministry of Finance only controls the payroll of the civil service in the West Bank, while the payroll in the Gaza Strip is administered by the General Personnel Council, which does not face hard budget constraints.

It is not clear that the poorest households have benefited from the expansion of public sector employment. The experience of many countries shows that middle-income households are more likely to benefit directly from increased employment in the public sector. Also, several countries have seen their civil service become bloated and inefficient under similar circumstances.12 Furthermore, the rapid growth of the public sector wage bill crowds out other budgetary spending that may be more important for immediate public welfare, such as education and health, and for medium-term economic growth, such as investment. In this respect, it is undermining fiscal sustainability. In fact, the PA now faces a number of difficult tradeoffs: for example, between reduced expenditure for health, education, and other social services and the continued hiring of employees. A more effective way to address unemployment problems in the short run would be to finance targeted employment- generation programs that provide temporary job opportunities for low-skilled employees, for example, in response to closures, rather than to permanently inflate the public sector (Box 6.5).

Future Prospects and Challenges

The main challenge facing the Palestinian economy is how to create more jobs in the private sector, and, to this end, private sector investment must increase. The capital stock must expand if the economy is to absorb the rapidly growing labor force. Many obstacles to private sector investment remain, such as political uncertainty, closure risks, lack of a market-oriented legal and regulatory framework protecting property rights, weak governance, and the still underdeveloped institutional capacity of the PA.

Faster job growth in the West Bank and Gaza would also help reduce dependency on external labor markets, particularly that of Israel. With faster growth in private sector employment, the share of Palestinians working in Israel and the settlements would gradually decline as long as the current level of access to jobs in Israel and the settlements was maintained.

Employment-Generation Projects

Starting in 1989, donors have been funding employment-generation projects in the West Bank and Gaza, an effort that intensified in response to Israeli closures in 1995-96. In 1996, MAS evaluated employment-generation projects funded by UNRWA, Save the Children Foundation, UNDP, and the World Bank.1 The study found that some programs had successfully focused on transferring resources to poor households. However, other projects that mixed employment generation with improvements to the infrastructure base had less direct benefits in terms of poverty alleviation, but perhaps more significant long-term benefits because they improved the value of capital assets.

The authors concluded that, for employment-generation projects to become more effective, a trade-off must be made: employment and poverty benefits versus asset creation. If the goal is to employ many people, the tasks have to be kept simple. If, on the other hand, the goal is to build capital assets, it should be done without an extra effort to maximize labor content, which would otherwise lead to an increase in project costs.

1 See Al-Botmeh and Sayre (1996).

Regarding the public sector, employment has already been expanded to a level that threatens fiscal sustainability. Central government current expenditure is high as a percent of GDP, the wage bill accounts already for more than half of current expenditure, and it is likely that expenditure on education, health, and operations and maintenance has already been compressed below desirable levels, with negative repercussions on the productive capacity and growth potential of the Palestinian economy.

1

Palestinian employment in Israel and the settlements is defined here to include Palestinians working in Israeli industrial zones.

2

Half of the population is of working age—defined by the PCBS as over 15 years of age—but out of these only about 40 percent are active in the labor force, that is to say fully employed, underemployed, or unemployed. In 1998, around 85 percent of the labor force was employed, implying that every worker, on average, supported six people.

3

The employment data for 1993, collected by the ICBS are not directly comparable with the data for 1998 collected by the PCBS.

4

There is also a lack of effective regulation relating to safety and general work conditions, which has a negative impact by increasing the potential for accidents and allowing poor work conditions. The lack of a formal unemployment insurance or comprehensive social safety net means that there is little cushion for families following the loss of income due to unemployment.

5

Israel placed administrative impediments to new investment when it was feared that their output would compete with Israeli firms (Arnon and others, 1997).

6

In the early 1990s, one-third of the Palestinian labor force was working in Israel.

7

While total investment is relatively high, most private sector investment has been in residential housing.

8

Prior to the Oslo Accords, Palestinian workers in Israel were required to have a labor exchange permit. Gaza residents, as well as West Bank residents, who at any time had been detained by Israel were also required to have a special entry permit for Israel. As many as two-thirds of Palestinian workers in Israel, however, worked without these permits (Freeman and others, 1993). After the Oslo Accords, all Palestinians were required to have a permit to enter or transit through Israel. A large number of Palestinians, however, work in Israel without permits, as can be deduced from the PCBS employment statistics.

9

Israeli employers are required to report to the NII and pay the mandatory contributions on behalf of all their workers. Palestinian workers are eligible for benefits in the event of work-related accidents but not to child allowances and unemployment insurance (Freeman and others, 1993).

10

Given that the data on the police force in the West Bank and Gaza are compared with data on the armed forces (excluding the police force) in neighboring countries, the relative differences may be somewhat exaggerated.

11

The relatively good health and educational standards in the West Bank and Gaza also support this view.

12

See, for example, Lindauer and Nunberg (1994).