Labour market performance and migration flows - European ...

European CommissionOccasional Paper 60, Volume IPalestinians “Circular Migration” to Israel:A Test Case for the Impact of Remittances on the EconomyA very special and unique case, but at the same time a very interesting case-study of circular (daily)migration and for the impact of migration on labour markets in countries of origin, is the case ofPalestinian workers in Israel between the late 1970s and the late 1990s. Until the outbreak of thesecond intifada in year 2000, the main source of employment for the Palestinian labour force was theIsraeli labour market, where they engaged in daily commuting to and from Israel to work mainly inthe construction and agriculture sectors and where they could typically earn an average of 26€ a day,for 14€ a day in the local Palestinian labour market. In 1999, the number of Palestinian workers inIsrael reached 114.000, more than 20% of the labour force (150.000 according to other sources), andremittances received by Palestine amounted to close to 1bn US$ a year.In 2000, an important proportion of those workers lost their jobs and their ability to move freely and tocontinue enjoying legal work in Israel and so the rights of compensation and other allowances. This gaverise to i) more ‘irregular’ employment in Israel where workers had no special Israeli permits for work,although this phenomenon has too started to decline since Israel started building the Expansion andAnnexation Wall, ii) a steep increase in unemployment in the Palestinian Territories (in particular in theGaza Strip, where the ban to cross to Israel to work has been total), iii) an increase in poverty rate and acollapse of demand in the Palestinian Territories, with an indirect effect on production and economicactivity, iv) an extension of the informal economy, including of women, to make up for this loss ofemployment and income, v) an increase in public sector employment, particularly in the Gaza Strip, vi) anincrease in the engagement of women in economic activities, often in the informal sector.By 2008, the number of Palestinians working in Israel has been reduced to 74.000, 30.000 of themfrom Jerusalem (who are subject to less strict regulations than PT Palestinians allowing them to work andmove freely in Israel). Remittances have stabilized at around 600 million US$ a year, a 30% decrease inrelation to the peak year of 1999.The estimated losses of Palestinian labour due to the closure of the Israeli labour market during thefirst 27 months of the second intifada was 1.3 billion US$, in addition to 28 billion US$ of workcompensation for Palestinian workers in Israel. The latter figure represented more than 50% of PalestinianGDP before the outbreak of the intifada (PCBS, 2005. Palestinian Labour Force in Israel and Settlements(1995-2003). Ramallah-Palestine).National Background Paper on PalestineMustapha Khawaja and Mohammad Omari (2009)However, high level of remittances as a factor in explaining the low labour participation rates ofwomen in AMCs is far from proven. Female labour participation rates are lower throughout AMCs,regardless of the level of remittances these countries receive, and they are much lower in AMCs thanin other developing countries with similar levels of remittances. So this points rather to cultural factorsas the key to low female participation. Jordan supports this point. Most economically-active women inJordan come from mid-to-high socio-economic backgrounds and have high educational attainment. Itis among less educated women from poorer socio-economic backgrounds that economic activity ratesare extremely low. Importantly, remittances in Jordan accrue mostly to prosperous households withhigh educational attainment (World Bank 2007). This suggests that remittances are not a major factorin decreasing Jordanian women’s labour market participation.Average wages do not seem to be affected by remittances either; they seem to be determined by thelegal minimum wage on one side of the spectrum (with informal sector wages under the minimumwage) and by public sector wages on the other (see Section 2.3). The high prevalence of78