The absence of thousands of workers from their jobs due to the ongoing war with the Hamas terror group has been costing the Israeli economy an estimated NIS 2.3 billion ($600 million) a week, or about 6 percent of the weekly GDP, according to a research report released by the Bank of Israel on Thursday.
In the report, the central bank’s research department analyzed the weekly cost of the drop in labor supply in the first three weeks of the war, which broke out on October 7. The absence of employees at their workplace was attributed to three factors: the massive mobilization of reserve soldiers, evacuation of residents in the south and north, and the closure of the education system, making it hard for parents to work and be productive.
More than 200,000 people have been displaced from communities along the southern and northern borders in the aftermath of the October 7 atrocities perpetrated by Hamas, which killed over 1,400 people, a majority of them civilians, including babies, children and the elderly after some 3,000 terrorists burst into the country from the Gaza Strip by land, sea, and air.
The Israeli army has called up more than 300,000 reservists – many of whom work in global tech companies and other types of businesses – to join the fighting. Israel is vowing to eradicate the Iran-backed Hamas that has ruled the Gaza Strip since 2007 and has been targeting all areas where the group operates, while seeking to minimize civilian casualties.
The Bank of Israel’s analysis is focused on the calculation of the economic cost of the absence of workers in terms of labor costs and not in terms of loss of product.
The central bank clarified that the calculation does not reflect the total damage and costs to the labor market and the economy resulting from a drop in demand and consumption during the war period. It does not include the cost of the many workers who were furloughed, and the absence of Palestinian and foreign workers.
The Bank of Israel’s weekly cost estimate is based on the following breakdown: NIS 1.25 billion ($325 million) is the cost attributed to the absence of workers and decline in productivity due to the complete closure of educational institutions, NIS 590 million ($154 million) is the cost stemming from the absence at work of 144,000 evacuated residents from war-affected areas, and about NIS 500 million ($130 million) is the cost resulting from the extensive recruitment of about 360,000 reserve soldiers.
The complete closure of the education system during the first two weeks of the war is estimated to have led to 310,000 parents missing work, in addition to 210,000 employees who can work from home but with reduced efficiency as they are taking care of their children, the central bank said in the report. The partial opening of the education system in recent days may reduce the cost, the central bank noted.