Israel to bring thousands more foreign workers to tackle high living costs

The Israeli government announced in late April a plan to bring thousands of workers from India and China to lower the high cost of living in the country.

The workers will be assigned mainly to two fields. Some will be caregivers, where a major gap exists between families who need full-time assistance, and others will be employed in construction.

The high cost of living is one of Israel’s most pressing issues.

According to the Central Bureau of Statistics (CBS), the consumer price index has risen consistently in recent months. One of the biggest drivers of that increase is the price of housing in the country.

A recent survey conducted by the Israel Democracy Institute showed that 40% of Israelis are mostly concerned with the issue of price hikes.

Israel's steps to increase presence of foreign workers

The current government, aware of public sentiment and the major issue at their doorstep, is trying to take steps to mitigate the cost of living.

One of those steps is to increase the number of foreign workers allowed in the country.

According to the Israel Population and Immigration Authority (PIBA), there are currently 115,000 foreign workers in the country. The majority of them are caregivers. After that, the large bulk of workers are in the agriculture and construction fields. A smaller portion of workers are employed in hotels and high-tech.

There are also approximately 140,000 Palestinians, mainly from the West Bank, who have permits to work in Israel mainly in construction and services.

“For the past two years, there has been a major increase in the quotas for foreign workers allowed to enter Israel according to varying needs,” said Inbal Mashash, director of the Foreign Worker Administration at PIBA. “Each industry has a different and meaningful contribution to the economy.”

“We hear claims about a shortage of workers in many fields,” Mashash told The Media Line. “Our policy is to bring skilled workers to places in which there is a lack of local workers while taking a wide look at how this impacts the economy.”

Last week, Mashash participated in an Israeli delegation to China in which 5,000 Chinese candidates were tested for work in Israel. Earlier this month, Israeli Foreign Minister Eli Cohen signed agreements with India that will see the entrance of 34,000 Indian workers into the construction business and another 8,000 as caregivers in private homes and nursing institutions.

“A constant flow of workers to the industries in need is highly important,” said Mashash. “This gives a response to industries and is important for the growth of the Israeli economy.”

One of the main issues targeted is the severe housing crisis that Israel has been facing for over two decades. As the population continues to increase at one of the fastest paces in the developed world and housing prices consistently rise, there is an acute need for more housing units to be built.

“We need to build a lot more, a lot faster. This is done also by increasing the number of workers; this is where we come in,” Mashash added.

Many experts do not see the increase in workers as the main remedy for this major ailment.

“As an entrepreneur, I don’t think the solution lies in the amount of manpower available,” said Ofek Meir, CEO of M.B. Beita Real Estate, a company specializing in urban renewal mainly in central Israel. “It’s a step, but not in the right direction. I’m doubtful this will have any impact on the market.”

Isaac Gurvich is the deputy director general and head of the Manpower, Economy, and Taxation Department at the Israeli Contractors and Builders Association. He describes a chronic shortage of manpower throughout the whole production chain in the construction field that will only be partially met by the new quotas. He estimates a shortage of an additional 15,000 workers, even after the latest move by the government.

Historically, Israelis are reluctant to fill many of those jobs, especially in the wet working sector such as ceramic tilers and molders, but not only. Part of this is also due to the high cost of living and the desire of Israelis to work in higher-paying jobs than construction, traditionally a lower-paying profession.

“Israeli workers alone cannot fill the gap,” said Gurvich. “But, in addition to our efforts, a major government investment that will allow contractors to reach the high housing goals that the country needs is required.”

The main cause of Israel’s housing crisis is the huge gap between the low supply of properties and the increasingly large demand. The government, which remains the main owner of lands in Israel, is slow in releasing those lands for construction. But also, cumbersome bureaucracy has plagued the industry for decades.

“Urban renewal is an engine for growth in high-demand areas and in Israel, there is a need for reform in regulation and speeding up approval processes,” said Meir, who points to a business cycle of between six to eight years until the simplest construction project is completed.

“It's always good to have more skilled manpower, but a much wider change is needed and there are a lot of solutions out there,” he added.

“The government wants housing prices to come down and is trying to present this ‘candy’ for contractors by increasing quotas for foreign workers,” said Dr. Ran Ben-Malka, a lecturer in the Economics Department at Sapir Academic College. “This will not incentivize more construction.”

Israel’s currently high interest rate, at 4.75%, has led to a stagnate situation by which many contractors do not want to begin construction since it is not a buyer’s market. Data from the CBS show a major reduction in construction beginnings in 2022 in high-demand areas. With prices not going down and interest rates hiking, nothing is moving.

For many complex reasons, Israel has not managed to bridge the gap and experts estimate that there is a shortage of tens of thousands of housing units, which increases every year.

“Any decrease in housing prices we may see, will not be a result of major corrections and improvements in the supply,” said Ben Malka, “It is only because of the interest rate, which means the real price of housing hasn’t really gone down.”

Adding workers will not be a quick fix for this.

For many families, the increase in the number of foreign workers allowed to enter for caregiving will be a source of relief.

“Unlike workers for other fields which is good for the economy, here it is often a matter of life and death,” said Mashash from PIBA.

Yet, it is also a complex issue that will not be easily solved.

During the pandemic, when travel was severely restricted, families of the elderly and other people in need of full-time care experienced a major shortage of caregivers. Even though the skies are now open, this issue is also tied to the high cost of living in the country.

Hagit Edri, who councils and accompanies families as they take care of elderly relatives, estimates that hiring full-time care costs over $2,000 monthly, a significant chunk of the average salary in Israel. The lack of workers has led caregivers, looking for the most favorable work conditions possible, to demand higher wages. They are also less incentivized to work in peripheral areas.

“This market works like any other market: When there is less supply, the price increases,” she told The Media Line.

Social security benefits do not cover the whole expense, leading many families to hospitalize their relatives in institutions, often in less than desirable conditions.

“There is definitely a need to bring more workers,” said Edri. “We are looking at a shortage of at least 20,000 workers. This is an ongoing problem for many years.”