Knesset passes stimulus bill to pay businesses thousands to bring back workers

Knesset passes stimulus bill to pay businesses thousands to bring back workers

Package will grant employers up to NIS 7,500 for each employee who returns to work after being laid off due to the coronavirus crisis, economic restrictions

People walk past closed stores in the Mahane Yehuda market in Jerusalem, May 4, 2020. (Yonatan Sindel/Flash90)
People walk past closed stores in the Mahane Yehuda market in Jerusalem, May 4, 2020. (Yonatan Sindel/Flash90)

The Knesset in the early hours of Tuesday morning approved a stimulus bill to grant funds to businesses that bring back workers who were placed on unpaid leave due to the coronavirus crisis.

The measure will provide up to NIS 7,500 ($2,150) for each employee who returns to work in the month of June, and NIS 3,500 ($1,000) for each worker who came back in May.

The bill will cost some NIS 5.5 billion ($1.5 billion), the Walla news site reported. It will apply to Israeli citizens between the age of 18 and retirement who earn at least NIS 3,300 per month, and so will include part-time workers.

The payment to businesses will be divided into four monthly installments to ensure the workers remain employed, starting in July.

The state has already allocated tens of billions of shekels in compensation for business and the self-employed, as well as having to pay out billions of shekels in unemployment benefits.

The plan was first announced in late May.

Hundreds of thousands of Israelis remain unemployed due to the pandemic, most of them put on unpaid leave and collecting state benefits. The unemployment rate in Israel skyrocketed to over 27 percent in late April due to virus restrictions, equaling over 1 million people out of work.

Israelis, some wearing protective face masks and some not, sit at an eatery in Tel Aviv on June 9, 2020. (by Miriam Alster/Flash90)

According to the Employment Service, nearly 300,000 have returned to work since mid-April, when the economy began resuming activity, but over 100,000 others lost their jobs.

The service has ceased to publicize the updated unemployment rate since late April, reporting only those who rejoined the workforce. The Ynet news site last week placed the number of currently unemployed at 950,000, down from 1.2 million in April.

According to reports last week, Israel’s budget deficit rose to 6% of GDP in May, up from 4.8% in April.

Israel’s economy contracted by 7.1% in the first quarter of 2020 due to the coronavirus pandemic, the sharpest decline in 20 years, according to an estimate based on partial data released by the Central Bureau of Statistics in late May. The bureau noted that the contraction of the economy was more severe than after the 9/11 attacks and the 2008 global financial crash.

The area of the economy that saw the most damage was in private consumption — according to the numbers, the only area of personal spending to see an increase was in food, beverage and tobacco, which rose by 5.8% compared to the previous first quarter. All other areas — clothing, household goods, cars, small electrical goods, furniture and jewelry — saw a decrease in consumer spending.

According to a government survey in late May, nearly half of Israelis say they are worse off financially since the coronavirus pandemic and more than one in seven are afraid they will lose their home or say they have to cut back on food consumption.

Prime Minister Benjamin Netanyahu and Finance Minister Israel Katz last week said purchase taxes on a series of products, including electronics and clothing, would be canceled to help Israelis cope financially with the pandemic.

The plan, announced in a joint statement, will see duties and taxes for the following products lifted: cellphones, electronics, clothing, shoes, home appliances and lighting, toys, cosmetics, baby products, and glasses.

The cost of the waiver to the state coffers is projected at NIS 1.45 billion, with taxes on most of the products hovering around 12% to 15%, and rising up to 30% for some entertainment equipment.

The statement said the slashing of the taxes was permanent. Both Katz and Netanyahu “were presented with an effective evaluation which showed that the temporary cancellation of duties and purchase taxes led to a significant drop in the prices of consumer goods over time, also in comparison to trends in other countries,” it said.

In addition, Netanyahu and Katz agreed to extend the eligibility of Israelis placed on unpaid leave to receive state unemployment benefits for another 35 days, to account for the nationwide lockdown imposed by the government for around that amount of time.

Jerusalemites wearing face masks on June 11, 2020. (Olivier Fitoussi/Flash90)

On June 1, the government announced a stimulus package for Israel’s ailing tourism sector to help hotels reopen and function without the income they normally receive from hosting foreign tourists.

The aid package will total NIS 300 million ($85 million), the Finance Ministry said in a statement.

On Monday, thousands of people from the arts and culture world demonstrated outside the Finance Ministry, demanding the government offer financial aid to their industry.

Large gatherings, particularly in closed spaces, are still banned. This has left theaters, concert halls and other venues shuttered and kept artists, producers and support staff out of work. Some 200,000 people work in the industry.

After a sustained drop in new cases, the number of daily infections in Israel has been on the rise in recent weeks, and topped 200 one day late last week before dipping slightly over the weekend.

On Monday, officials said 182 new infections were reported over the past day.

According to Health Ministry figures published Monday evening, there were 3,520 active COVID-19 cases in Israel, with 19,237 recorded since the start of the pandemic.

Among the sick, 35 people were in serious condition, 25 of whom were on ventilators. Another 45 were in moderate condition and the rest were displaying mild symptoms.

The ministry data said 8,840 coronavirus tests were conducted on Sunday, well below Israel’s testing capacity.

No additional fatalities were recorded since Monday morning, keeping the death toll at 302.

Much of the resurgence of COVID-19, the disease caused by the coronavirus, has been blamed on the education system, which has seen hundreds of cases in schools and kindergartens. The entire education system was shuttered for two months during the lockdown that began in mid-March.

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