The Dynamics of Unemployment among the Arabs in Israel: Evidence from Panel Data
By Dr Sami - September 27, 2022
In the present article I will examine unemployment among the Arabs in Israel and the reasons it has increased since 1996. The probabilities that individuals will change their labor-market situation, computed on the basis of the micro-panel data of the labor force surveys conducted by the Central Bureau of Statistics for 1990–2004,1 provide important insights into why unemployment rose more among Arabs than Jews in the second half of the 1990s. The study reaches two important conclusions. First, based on calculations of the annual probabilities that an individual will move between the three labor-market states—employment, unemployment, and non-participation— unemployment was found to be higher among Arabs than among Jews. This is
because of the greater likelihood that Arabs will become unemployed and the lower likelihood that they will escape that situation. These trends became stronger over time. The second conclusion is that young uneducated Arabs employed in traditional sectors are more likely to lose their jobs than are older persons, or those with an education or working in advanced sectors. This is because of the change in the sectoral composition of the economy in the mid-1990s, when the traditional sectors shrank and the demand for uneducated workers decreased; the massive entry of foreign laborers into traditional sectors also reduced the demand for Arab workers.
The sharp rise in unemployment in Israel between 1996 and 2004 has sparked serious interest among economists. The importance of studying unemployment stems on the one hand from its consequences, in terms of economic losses and social damage, and on the other from the fact that it is an indicator of the quantity and nature of unexploited economic resources. The information obtained from such research is used by decision-makers who set the economic policies needed to eliminate unemployment. Many studies of the topic have indicated that extremely high unemployment rates in Israel are found mainly in development towns, in the Arab sector, and among women and new immigrants. This situation, in which unemployment is higher among certain sectors of the population, indicates that the problem involves not only the individual characteristics of unemployed persons within each group, but also demand and other factors (see, for example, Achdut et al. 2000; Zeira 2004).
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