Israel’s war in the Gaza Strip is transforming its economy and that of the West Bank, as the decision to bar more than 100,000 Palestinian workers from entering Israel has shrunk the pool of low-cost labor and disrupted many sectors and businesses.
The war, which began on October 7 when Hamas launched a massive rocket attack on Israel, killing more than 19,000 civilians, has entered its third month with no sign of a ceasefire or a political solution. The war has caused widespread death and destruction in Gaza, where over 19,000 Palestinians have been killed and over 1,800,000 have been displaced, according to the UN. The war has also claimed the lives of over 100 Israeli soldiers and civilians, and disrupted the daily life of millions of Israelis who live under the constant threat of rocket fire.
The war has also had a significant economic impact on both sides, as well as on the West Bank, which is controlled by the Palestinian Authority and has been relatively calm during the conflict. According to the Bank of Israel, the war is costing the Israeli economy $600 million a week due to work absences, reduced consumption, and increased defense spending. This is equivalent to about 6% of the weekly GDP. The war has also damaged Israel‘s tourism, trade, and foreign investment, as well as its international reputation and relations.
One of the most affected sectors of the Israeli economy is the construction industry, which relies heavily on Palestinian labor from the West Bank and Gaza. According to the Israel Builders Association, before the war, there were about 120,000 Palestinian workers in Israel, of whom 65,000 were employed in the construction sector. These workers accounted for about 15% of the total labor force in the sector, and about 40% of the unskilled labor force.
All Arabs Effected
However, after the war broke out, Israel suspended the entry permits of all Palestinian workers, citing security reasons. This decision has created a severe shortage of workers in the construction sector, which was already facing a housing crisis and a high demand for new projects. The shortage has led to delays, cancellations, and increased costs of construction, as well as a loss of income and livelihood for the Palestinian workers and their families.
Nir Yanushevsky, the head of a real estate and construction firm north of Tel Aviv, said that the war has upended his business, which had about 1,000 employees before the war, of whom 400 were Palestinian workers. “We had to stop many of our projects because we don’t have enough workers. We also had to raise our prices because the cost of labor has gone up. We are losing money and customers every day,” he said.
Yanushevsky said that he tried to hire Israeli workers, but they were either unavailable, unqualified, or demanded higher wages. He also tried to hire foreign workers, but they were either too expensive, too bureaucratic, or too risky. He said that he hoped that the war would end soon and that the Palestinian workers would be allowed to return. “We need them. They are hardworking, skilled, and loyal. They are not our enemies. They are our partners,” he said.
The Palestinian workers, who earn an average of $70 a day in Israel, compared to $20 a day in the West Bank, also expressed their desire to resume their work in Israel. Mohammad Abu Awwad, a 35-year-old construction worker from Hebron, said that he had not worked since the war started and that he was struggling to support his wife and four children. “I have no other source of income. I have no savings. I have debts. I don’t know how to survive,” he said.
Abu Awwad said that he did not support Hamas or the war, and that he wanted to live in peace and dignity with the Israelis. “I have nothing against the Israeli people. I have many friends and colleagues in Israel. I just want to work and feed my family,” he said.
The war has also affected other sectors of the Israeli economy that depend on Palestinian labor, such as agriculture, manufacturing, and services. According to the Manufacturers Association of Israel, before the war, there were about 25,000 Palestinian workers in the industrial sector, mainly in the metal, food, textile, and chemical industries. These workers contributed to about 7% of the industrial output and about 10% of the exports.
The war has also impacted the West Bank economy, which is closely linked to the Israeli economy through trade, remittances, and aid. According to the Palestinian Central Bureau of Statistics, before the war, the Palestinian workers in Israel and the settlements accounted for about 11% of the total employed population in the West Bank, and about 13% of the total household income. The war has also reduced the trade and movement of goods and people between Israel and the West Bank, as well as the tax revenues and donor assistance that the Palestinian Authority receives from Israel and the international community.