comprised a reserve army of commuter laborers, employed as temporary and casual workers in jobs with low wages, poor work conditions, frequent violations of workers’ rights, and high occupational insecurity (Rosenhek 2003; Semyonov and Lewin Epstein 1987).
An important turning point occurred in 1967 following the Six-Day War and the Israeli occupation of the West Bank and Gaza Strip. Having gone through a short-term recession in the mid-1960s, in the years immediately after the war the Israeli economy enjoyed a renewed boom, buttressed by the entry of a large reservoir of unprotected and cheap workers from the newly occupied territories and by a substantial growth in military industries. Concomitantly, the dual composition of the labor force was deepening. Like Israeli Palestinians, noncitizen Palestinians commuted daily to their places of employment, returning at night or at weekends to their families and communities. But unlike Palestinian Israelis, who by now enjoyed greater freedom of movement and some basic, if limited, state services, the noncitizens had no political or social rights. For the next twenty years, until the outbreak of the first intifada in 1987, large-scale employment of noncitizen Palestinians remained largely unregulated despite some attempts to change this; their routine border crossings arguably served the political interest of the state to naturalize the territorial continuity of Israel with the occupied territories (Rosenhek 1999). More directly, they served the demand of Israeli employers, including the Histadrut in its capacity as a major employer, for cheap, unprotected labor. Noncitizen Palestinian commuters replaced the dwindling supply of Israeli menial workers and helped keep in check the wages of workers in the primary sector. Under conditions of full employment in the aftermath of the 1967 war (Rosenhek 1999) younger generations of Mizrahi Jews were now aiming for less precarious and more rewarding employment. Israeli Palestinians too were boosted by the entry of their noncitizen brethren and, with the annulment of the military rule and later also their gradual admission to the Histradrut, they started to enjoy better job selection and better employment conditions.
Less than a decade later, in the aftermath of the following war in October 1973, the economy started to slow down. Local production was not meeting the state’s rising military expenditure, and global economic restructuring also started to exert its effect. Four years after the war the Labor party lost power, for the first time in the state’s history. Stagnation deepened during the late 1970s and early 1980s, inflation was rising rapidly and threatened political stability; meanwhile the big banks and conglomerates were actually getting richer (Shalev 1999).
Finally, in 1985 a national unity government signed an emergency economic stabilization program. That year marks the starting point of a far-reaching process of economic liberalization and deregulation, which continues ever more vigorously today. It includes a transition of the major business groups from the ownership of the state and the Histadrut to private capital, downsizing factories and outsourcing production to poorer countries, and selling mega-concerns to private hands, thus generating massive pressure to liquidate organized labor in them. Instead of the labor-intensive industries, which were the hallmark of the Israeli economy in the early decades, the state has taken to investing in high-tech industries, often in close association with the military industries, and to making it a priority to attract private foreign investments.
All this has led to a swelling volume of unorganized labor, accompanied by an increase in individual employment contracts, greater fragmentation among workers between and within different economic sectors, ever-widening wage gaps, growing numbers of workers who are employed through manpower agencies and subcontractors, more part-time workers, and diminishing legal labor safeguards (Maman and Rosenhek 2012; Filc 2004). Parallel to the progressive weakening of labor rights for citizens, the Israeli economy has incorporated a huge number of migrant workers.
In 1993, in an attempt to reduce its dependence on noncitizen Palestinians and despite its official commitment to allow the labor movement to be part of the peace process, the state started recruiting large numbers of migrant workers, primarily from Thailand, Romania, and the Philippines to work in agriculture, construction, and nursing, respectively (Bartram 1998; Raijman and Kemp 2004). This trend, which started small, grew dramatically in the following two decades. For example, between 1992 and 1996 the number of licenses for migrant workers increased from 10,000 to 95,000; this figure was nearly doubled by unauthorized workers, who in 1999 were estimated to number about 80,000 (Rosenhek 1999). By 2010 the estimated number of authorized and unauthorized migrant workers combined was 211,500, or 10 percent of the local labor force. This placed Israel at the top of the industrialized economies most heavily dependent on foreign labor (Raijman and Kushnirovich 2012). Officially authorized or not, migrant workers have been subject to a high degree of regulations and atypical employment relations. Fixed-term contracts, the binding system enforcing the migrants’ direct dependence on manpower agencies and employers, and the threat of automatic deportation have made for a particularly harsh system that sometimes even degenerates into a human trafficking industry (Raijman and Kemp 2011). Besides introducing into the local labor force a large group of particularly cheap, flexible, exploitable, and expendable workers, this state of affairs has created shock waves that have left their mark on citizen workers as well.
A direct outcome of the economic developments over the last three decades is a huge increase in social inequalities. While Israeli society has never been egalitarian, the rising living standards of the population as a whole and the extraordinary affluence that economic liberalization has brought for a small, select group have opened yawning socioeconomic gaps. The following indications, taken from the Adva Center’s annual report (Swirski and Konor-Attias 2012), are unambiguous: the Gini index, which measures inequalities in income distribution, has risen by almost 14 percent since the mid-1980s, so that Israel now scores fifth highest among member states of the Organization for Economic Co-operation and Development (OECD). The middle class has shrunk even faster than in other postindustrial countries. In 2011, top senior executives average wage was about sixty times higher (!) than the national average wage. The incidence of poverty has been steadily on the rise, placing Israel next to worst in the OECD club, above only Mexico. Its incidence among Arabs is almost three times higher than among Jews; other marked groups, notably the ultra-Orthodox, old people, and women, are also particularly vulnerable.
This brings us to the issue of welfare. Israel has been known as a relatively strong welfare state, at least during the first four or five decades of its existence. Some observers (e.g., Doron 2007: 92) regard the Israeli welfare state as a universalistic distribution mechanism that “reflects the institutional expression of the modern state’s commitment to the welfare of all its citizens and their integration into the national community.” A similar presumption regarding the state’s equalizing intentions is implied in other studies as well (Lewin-Epstein et al. 2003; Zehavi 2012). By contrast, critical scholars argue that the Israeli welfare system is an important stratificatory mechanism and has been so from its inception (Maman and Rosenhek 2012; Levi-Faur 1998). Rosenhek (1999) even goes so far as to argue that the role of Israeli welfare in buttressing social stratification is not an anomaly, noting that welfare states operating in capitalist societies exclude subordinate groups as part and parcel of their inner logic.
In Israel, total exclusion from the welfare state has applied to noncitizen workers, first Palestinians from the West Bank and Gaza, and later migrant workers. Palestinian citizens have been partially excluded, with some variations over time. In the earlier decades of the state this was done by channeling important benefits through nonstate Zionist agencies (notably the Histadrut), thus bypassing the ostensible commitment to universal attainment, or by physically preventing the Palestinian citizens from collecting benefits such as the child allowance, through restricting their movement under the military government (Rosenhek 1999). In later years some of these institutionalized forms of discrimination were eliminated or reduced;2 still, the effectiveness of welfare benefits in getting people above the poverty line remains grossly biased in favor of the Jewish citizens.3 Studies have shown consistent patterns of discrimination against the Palestinian citizens in the de facto transfer of welfare benefits, indicating that state welfare was and remains a major tool for ethnonational stratification (Rosenhek 1998, 1999, 2003; Lewin and Stier 2002, 2003; Lewin, Stier, and Caspi-Dror 2006).
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