Worker absence due to war poses main hurdle for manufacturers – survey

Factories are resuming operations but are short-staffed due to mobilization of reserve soldiers and displacement of residents from communities along borders with Gaza and Lebanon

Sharon Wrobel is a tech reporter for The Times of Israel.

Haifa's industrial area. (Avishag Shaar Yashuv/Flash90)
Haifa's industrial area. (Avishag Shaar Yashuv/Flash90)

As Israel attempts to regain its balance after the deadliest onslaught in its history on October 7 and factories slowly start to resume operations, the absence of workers is posing an acute problem, according to a survey by the Manufacturers Association of Israel on the war impact in the first six weeks of the war.

Since war erupted in the aftermath of the October 7 atrocities perpetrated by the Hamas terror group, which killed 1,200 people in southern Israel, mostly civilians, and abducted over 240, the portion of factories that ground to a halt narrowed from 29 percent in the first week of the fighting to 6% in the fourth week and 1% in the sixth, according to weekly surveys carried out by the Manufacturers Association among a sample of more than 100 businesses.

Of the factories surveyed during the week ending November 12, about 18% said they returned to full operations, up from 12% in the first week of the war.

The Israeli army has called up more than 350,000 reservists to join the fighting, aiming to topple the Iran-backed Hamas that has ruled the Gaza Strip since 2007, and bring back the hostages. Meanwhile, he continued rocket barrage by Hamas from Gaza and increasing exchanges of fire between the Israel Defense Forces and the Hezbollah terror group in Lebanon led to the displacement of as many as 200,000 people from areas along the country’s southern and northern borders.

As a result, about 764,025 Israelis, or 19% of the total workforce, are absent from work, according to report by the Labor Ministry released on November 13. The absence of workers — reservists, those evacuated from their homes near the borders, and parents caring for children as schools are only partly functioning — has put a major strain on manufacturing industries, though there has been some recovery.

During the first week of the war, about a third of the factories, or 29%, reported that more than half of their staff was absent from work. The percentage decreased to 12% as of the week ending November 12. During the same period, the percentage of companies reporting an absence of up to 15% of their employees increased from 32% to 54%.

Smoke billows in Ashkelon on October 7, 2023, as barrages of rockets were fired from the Palestinian enclave into Israeli territory (AHMAD GHARABLI / AFP)

When asked during the first six weeks of the war to identify the biggest challenge they were facing, 62% to 70% of the factories responded that they were grappling with the absence of employees at work. Out of the surveyed, 74% said employees were absent from work due to reserve duty call-up.

About 20% of the manufacturers cited the absence of Palestinian workers who were not granted employment permits since the outbreak of the war. Israel relies on some 111,000 Palestinian workers with a permit from the West Bank working mainly in construction and agriculture, according to data cited in the survey.

In addition, many foreigners working in agriculture have left the country. Some were killed or abducted by Hamas during the October 7 atrocities.

Asked how the disruptions in operations during the war period was affecting their business, 45% of the manufacturers reported that up to 25% of their sales had been affected, and 13% said up to 75%. Over a fifth of the war-affected factories in the survey said that they had or were considering putting employees on unpaid leave.

Earlier this month, the government approved a compensation aid package that includes grants to businesses across the country that have suffered indirect damages due to the war, a salary reimbursement program, and relief measures for employees put on unpaid leave. The cost of the package is estimated at NIS 15 billion ($4 billion).

The war with Hamas, which is costing Israel at least NIS 1 billion per day, is estimated to have a price tag of as much as NIS 150 billion to NIS 200 billion, equal to up to around 10% of gross domestic product.

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