As jobless soar amid virus, experts urge government to invest in training
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As jobless soar amid virus, experts urge government to invest in training

Extended unemployment benefits could get people used to staying at home, economists warn; $184m. earmarked for 2020 training programs still unspent, Finance Ministry data shows

Shoshanna Solomon is The Times of Israel's Startups and Business reporter

A man wearing a protective mask walks by a sign stating the number of unemployed in Israel, alongside the word 'Enough!!' in Tel Aviv, on July 22, 2020 (Miriam Alster/Flash90)
A man wearing a protective mask walks by a sign stating the number of unemployed in Israel, alongside the word 'Enough!!' in Tel Aviv, on July 22, 2020 (Miriam Alster/Flash90)

As Israeli policymakers struggle to get the economy back on track amid the havoc wrought by the deadly coronavirus, economists say the best way forward is to set up vocational training programs to help people get access to a greater variety of jobs.

And yet, of NIS 625 million ($184 million) the Finance Ministry has earmarked for vocational training this year, no money has actually been spent to date, indicating that there are no programs running at the moment.

The coronavirus pandemic has hit the country’s weakest and the youngest, and even as the economy, locked down to stem the pandemic, has gradually reopened, unemployment in Israel was still a high 21.6 percent as of August 11. In all, a total of 878,906 people are seeking jobs; 562,279 of them are workers furloughed because of the pandemic, according to the Employment Service data.

Israel’s economy is expected to contract in 2020 by some 6.2%-8.3% compared to last year, an OECD report said in June. Unemployment, which was below 4% before the onset of the crisis, could, in a worse-case scenario be as high as 15% at the end of this year, according to a Finance Ministry forecast for 2020-2023, based on data that includes furloughed workers. The number of jobless people may prove the biggest obstacle on Israel’s road to recovery, experts fear.

Israelis protest against Prime Minister Benjamin Netanyahu outside his official residence in Jerusalem on August 8, 2020. (Olivier Fitoussi/Flash90)

To create a sense of income security and to make sure consumer spending continues in order to keep the economy chugging along, the Knesset last month extended through June 2021 the eligibility of unemployment benefits. The government has also approved a controversial grants program of a total of NIS 6.7 billion ($1.96 billion) handed out to citizens, allocated according to the number of children in a family.

The grants program is part of a total economic coronavirus rescue package that has ballooned to NIS 135 billion ($39.6 billion), according to January-July budget data published by the Finance Ministry in August, from an original NIS 80 billion ($23.5 billion) package announced in March.

The biggest fear, however — one that stems from the experience in Europe from the 2008 financial crisis — is that the extended unemployment benefits, not linked to any vocational programs or incentives, might actually make things worse, and many of those who are out of work today may not actually make it back to the workplace anytime soon.

Research has shown that “people start to get used to staying at home and doing nothing. We don’t want that to happen,” said Elise Brezis, a professor of economics at Bar-Ilan University, in a phone interview. “We have some 800,000 people looking for work — the best is to give them something to do.”

And that something, if there are not enough jobs around, is training, she said. “You want them to go and learn, you want to take them out of the house.”

Illustrative image of a man`s legs in checkered pajamas (natasaadzic; iStock by Getty Images)

In Israel, vocational training is not something that has taken off, said Daphna Aviram Nitzan, director of the Center for Governance and the Economy at the Israel Democracy Institute (IDI) think tank. And that is because, unlike in European countries, it carries a negative stigma.

Vocational training programs in Israel are perceived as a place for “people who fail,” she said. The best-qualified go to university or college, whereas weaker members of society get sent to vocational training. This perception results in lower salaries for the latter, as well.

Around the world though, things are different, Aviram Nitzan noted. In Germany, for example, those who study to become technicians are called a “meister,” she said — a professional in their field. They garner respect and get good pay.

What differentiates Israel from the rest of the world, however, is the compulsory army service, which does, in some way, give vocational training to young recruits. Indeed, the best and the brightest of Israel’s thriving tech scene have graduated from the IDF’s elite intelligence units.

Illustrative. IDF soldiers from the C4I Corps work in a command and control center. (IDF Spokesperson’s Unit)

Even so, said Aviram Nitzan, the army service does not do enough to close the gap between what is needed in the industry and the business sector and what the nation’s youth can provide, even after their service.

The IDF is “not synchronized with the needs of the business sector,” she said, and doing the service does not necessarily help non-tech army graduates find jobs later.

Israeli skills are below that of OECD nations

The resilience and adaptability of an economy’s labor market are key to absorb and adjust to economic shocks and make the most of new opportunities that open, according to the OECD. Israel, however, scores below the OECD average in all of the three key indicators of labor market resilience and adaptability: the unemployment cost of a decline in GDP, labor productivity growth and share of low-performing students, the 2018 report said.

Literacy proficiency of adults in Israel is below that of OECD nations, according to a 2016 OECD report, as is numeracy, the ability to use numerical and mathematical concepts.

More than one in three adults in Israel score at the lowest levels in literacy, numeracy or both, and a large proportion of adults shows poor proficiency in using common computer applications. Of OECD countries, Israel shows one of the strongest positive associations between skills proficiency and high wages, and one of the largest wage penalties associated with a skills mismatch.

Illustrative image of books, literacy (FabrikaCr; iStock by Getty Images)

Now, in light of the havoc generated by the coronavirus pandemic, whole swaths of the population in the hardest hit areas of the economy — such as tourism or entertainment and leisure — may not be able to get back to work at until after a vaccine against the virus is widely distributed.

The IDI’s Aviram Nitzan believes Israel must thus help those who are jobless get out of the rut, by providing them with incentives to get training.

“For many, it is not clear that in the coming year there will be work to get back to — whether these are self-employed people in the field of culture and events, ground and air stewards and hostesses, tour guides, and travel agents,” she said. Israel must give them quick professional retraining, she said, so they can earn a wage during this time and give them “a sense of purpose.”

“You cannot just sit down and say, okay, my profession is not relevant anymore, I will sit and get unemployment from the state. We must pay them unemployment benefits, but we must send them to courses and encourage them [to attend],” Aviram Nitzan said — possibly by conditioning one on the other.

Along with the full unemployment benefits, people attending training classes should get added incentives, such as money to cover babysitting costs, she said.

Daphna Aviram-Nitzan, Director of the Center for Governance and the Economy at the Israel Democracy Institute (Courtesy)

Even if the courses don’t immediately translate into jobs, Aviram Nitzan added, at the end of the day — and at the end of the pandemic — Israel will be able to benefit from a more skilled workforce.

Online courses should be provided for older and at-risk populations, she added, and all courses should be done in close consultation with the business sector, to make sure training matches the skills for which there is demand.

The government could also provide subsidies to employers to train workers, for a certain period of time, in sectors in which employers feel there could be unmet demand for workers, Amiram Nitzan said. Production lines that are not utilized to their maximum at the moment could now be used to train people.

She added that because of the shortage of workers in the health sector, which is on the frontlines of the pandemic battle, unemployed people could be retrained to work as epidemiological testers. Laid off pilots, who are highly skilled and highly intelligent professionals, could be used by tech firms in brainstorming sessions to advance their developments in a whole variety of fields.

Small business owners should be trained in setting up websites to sell their products online, and digital skills should be improved all around, Aviram Nitzan added, including proficiency in English. Tour guides should be helped to set up online tours, and entertainers encouraged to sell tickets for online shows.

Israelis protest their financial situation and the governments lack of financial aid, at the Azrieli junction in Tel Aviv, June 29, 2020 (Tomer Neuberg/FLASH90)

The IDI has set up a proposed vocational training model and estimates the cost of implementing it to be roughly NIS 1 billion ($293.7 million) for every 100,000 people undergoing vocational training. The estimate includes the costs of running the training programs, with a significant portion of the training conducted online, and for providing financial bonuses to employees who sign up and to those who complete the courses.

The plan may even end up reducing the cost of unemployment benefits, according to an IDI paper on the subject, if employers do not opt to send their workers to unpaid vacation but instead use this period to give vocational training to those workers.

No clear plans, and not much money either

The Israeli government is apparently aware of the importance of vocational training to help the nation battle unemployment. Indeed, an inter-ministerial team is at the moment working on a plan to get vocational training programs up and running, TheMarker financial paper reported earlier this month. The Finance Ministry confirmed by email that an inter-ministerial committee is discussing the matter and recommendations will be submitted to the finance minister soon.

Yaniv Bar, research economist, at the economics department at Bank Leumi Le-Israel Ltd. (Kfir Sivan)

Meanwhile, Finance Ministry data published in July shows that the government has allocated NIS 625 million ($183.5 million) in 2020 for vocational training programs, of which no amounts to date have been paid out in practice.

“There is no explanation regarding what these programs include, and it is not clear what this means,” said Yaniv Bar, a research economist at Bank Leumi, in a phone interview.

The fact that the sum has been allocated indicates that the government understands the need for such training, Bar said, but the amount allocated, which represents less than half a percent of the total rescue package of some NIS 135.5 billion ($39.8 billion) provided to the economy, may prove to be too little.

“It is not enough to give out checks” to citizens, Bar said. While providing immediate and short-term solutions to ease the pressure on households, the government must also present a program to indicate what should be the way forward and “how to exit this crisis,” he said.

Vocational training is one way to exit the crisis, he stated. It helps prepare workers for structural changes like digitalization and the introduction of new technologies, which were already taking place in the workforce before the coronavirus pandemic struck.

“The virus has sped up these changes,” he said, adding that this requires workers to have “a more technological approach.”

The government should waste no time and immediately identify those who are most eligible for training, he said, to help them get back in a job as soon as a vaccine has been found.

Fast and efficient implementation is key, said IDI’s Aviram Nitzan. “The problem is not the budget, but implementation.

“We don’t need to reinvent the wheel,” she added, saying programs should be set up immediately, using existing training firms and willing employers.

“In times of emergency you must work as a situation room in a war,” Aviram Nitzan said. “There is no choice. Each month that passes is a waste, because people are just getting unemployment and are not doing anything to get themselves a better future.”

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