(Chapter 2)

Future labour-force scenarios

This section presents scenarios for future labour supply in Gaza based on results from the current data set. Alternative projections from the Work-Force and Labour Modules of the World Bank's macro-economic model for the Occupied Territories will also be presented7. Finally, we will sum up the findings of this chapter, focusing on the effects of the border closure and Palestinian adaptations to it.

Labour-force scenarios for Gaza

See table 2.63 in appendix 3 as reference to the discussion in this section.

The "Work-Force Module" (Module a), of the World Bank model projects population growth and demographic change with associated changes in labour-force participation. Here we will present scenarios for future labour supply using the World Bank's estimates for the future size of the labour force as a baseline.

In the Gaza Strip, our sample represents all types of localities in one coherent geographical entity. The sample from the West Bank refugee camps, by contrast, represents 19 separate refugee camps throughout the West Bank and in Arab Jerusalem. Many camps are situated adjacent to other localities, but all camps are physically separated from each other. Thus there would be little point in presenting separate scenarios for the West Bank refugee camps. In the subsequent discussion we will present labour-force scenarios for the Gaza Strip only.

Mathematically, the size of the labour force may be calculated as the sum of population groups defined by age and gender, multiplied by the labour-force participation rate of each group. The size and composition of the population at any point in time will depend on the size of so-called "base population", and developments in fertility, mortality and migration.

The population figures used in the World Bank's labour-force projections are based on official Israeli population projections for the Occupied Territories. 8 According to the same source, fertility rates began to increase in the mid-1980s after showing a declining tendency in previous years. Mortality continued to decline throughout the period. Migration flows changed from net emigration in the 1970s and 1980s, to net immigration after the 1991 Gulf War.

Referring to these developments, the World Bank applied the highest CBS projection for natural population growth, assuming future fertility to remain at the 1982 level and net migration to be zero.

Most migration in previous years had economic motives. 9 A continuation of this tendency in the future may lead to two separate migration patterns, with opposite effects for Gaza. First, general economic development in Gaza may stimulate a return of Palestinians currently living abroad. Second, lifting current restrictions on internal migration may lead to substantial population movements from Gaza to the more prosperous West Bank and Arab Jerusalem.

At present it is hardly possible to assess which effect will dominate. A future net migration rate of zero in the Occupied Territories thus seems as reasonable as any other assumption.

Most independent researchers have argued that the official Israeli projections underestimate the true population. The population count in the 1967 census is said to be too low, and it is alleged that there has been an under-recording of (surviving) infants in the subsequent years.

Hence, the World Bank adjusted the 1992 level of population projections for the Occupied Territories upwards by 12%. This augmentation provides for the largest plausible estimate of the under-recording of the population. For Gaza, the size of the new 1992 "base population" amounts to 800,000 persons. The highest CBS population growth rate of 4% in Gaza is then applied, yielding a population level of 1,184,000 persons by the year 2002.

To simplify the discussion concerning future labour-force scenarios, FAFO originally desired to use the same base population and population growth rates as the World Bank's "Work-Force Module". Most regrettably, however, FAFO did not have access to adjusted population projections for Gaza broken down by gender and age.

For the Gaza labour-force scenarios, FAFO has thus used the World Bank's 1992 "base" population of 800,000 as a baseline. From this starting point, the Gaza population is assumed to increase at a constant annual rate of 4% towards the year 2000. The labour force scenarios are based on the assumption that the composition of the population by gender and age remains unchanged, as calculated by the FALUP 93 survey.

As for the labour force participation rate, most economic models for labour markets assume it to be endogenously determined. Further, this rate is assumed, at least at an aggregate level, to increase with increasing wage levels.

Much evidence indicates a highly segmented supply side in the labour market of the Occupied Territories, that is, the supply of labour for various groups of individuals is targeted to specific job types and job locations. In addition to the usual variations according to age and gender, the relation between supply of labour and wages also varies substantially across different socio-economic groups and regions. Except for the tendency of labour supply to increase with wages, it is not simple to assess the exact nature of the relationship between the supply of labour and wage rates for different groups.

The labour supply function in the Occupied Territories seems to depend heavily on gender and position in the household. Local cultural attitudes about "socially acceptable" work location and work types are crucial for female labour supply. Travel restrictions between Gaza and the West Bank/ Arab Jerusalem further allow for substantial geographical segmentation of the relations between labour supply and wages.

As elsewhere, the relationship between supply of labour and wages in the Occupied Territories can also be assumed to depend on the availability of alternative sources. Particularly important are non-labour income sources like public and private transfers. One hypothesis assumes that the labour supply function for (registered) refugees differs from that of other groups, due to the elements of a social security system provided by UNRWA.

Figure 2.49 presents four different scenarios for the development of the Gaza labour-force towards the year 2000. Let us now discuss some of the assumptions leading to these scenarios.

Figure 2.49 Labour force scenarios, Gaza year 2000. 1000 persons

Despite of the considerations concerning the endogenously determined labour-force participation presented above, we have lowered our ambitions as to constructing such a complex model. The size of the labour force for any given year is thus exogenously determined. Within each scenario, gender-specific products of population size and constant labour-force participation rates are added up, to give the total labour-force. The four scenarios vary substantially in terms of their assumptions about gender-specific labour-force participation rates. As a background for the scenarios, table 2.2 presents five gender-specific participation rates for Gaza from alternative sources.

Table 2.2 Gaza labour-force participation rates, by gender and source.
  Gaza FAFO 93 Gaza FAFO adj. 93 Gaza FAFO 92 Gaza CBS 92 Gaza WB/CBS 91
Percentage of total population in LF 13 18 20 17,5 17,4
n 3535 3535 958 NA NA
Percentage of total population, 15 years or more 49 49 50 49,7 50.7
n 3535 3535 958 NA NA
Percentage of adults in labour force 26 38 39 35,3 34,3
n 3535 3535 958 NA NA
Percentage of males in sample 49 49 50   50,3
n 3549 3549 * NA NA
Percentage of adult males in LF 47 52 72 70,3 68,4
n 1744 1744 477 NA NA
Percentage of adult females in LF 6 24 7 1,7 1,7
n 1792 1792 481 NA NA
NA = Not available (CBS figures partially calculated by FAFO from "Statistical Abstract of Israel"; 1993 using unadjusted population totals.

* The sex rate in the FALCOT 92 report was fixed to 50% male/ female. (The gender of the Randomly Selected Individual had to be pre-selected due to a number of questions which required female interviewers to interview female respondents.)

The 1992 labour-force participation rates of FAFO and the CBS seem to be approximately the same. Higher female participation rates for the FAFO survey are most likely due to various aspects of survey implementation. To gain the confidence of female respondents, FAFO used female interviewer pairs for interviewing women. The FALCOT 92 report was also carefully designed to obtain more accurate statistics on women's activities.

Comparing 1993 FAFO results with FAFO and CBS/ World Bank figures for previous years, we note that the participation rate for adult males seems to have dropped dramatically. However, this rate for Gaza in 1993 is most likely a temporary rather than a permanent phenomenon. Heightened requirements as to formal education and productivity during an economic recovery period may, however, prevent future adult male labour-force participation rates from regaining their pre-closure levels.

For women, the CBS/ World Bank labour-force participation rate would seem implausibly low. Decreased fertility and/ or fewer cultural restrictions with regard to socially "acceptable" work locations and types of work for women could lead to a substantial increase in the future supply of female labour. One possible indication of such a development is the already high labour-force participation rate among the most highly educated women in the FAFO survey population.

FAFO's 1993 study found a relatively widespread engagement in household income-generating activities, in particular among middle-aged and older women. Most previous labour-force surveys in the Occupied Territories have not managed (or tried) to record this type of labour activities in statistical terms, even though it is formally covered by the ILO definitions for labour-force participation.

To cope with this challenge, FAFO experimented with an "expanded" labour-force definition applied to the 1993 FALUP data set. Following this definition the "labour-force" comprises all adults who are either labour-force participants according to answers to the "standard" employment module in the questionnaire, or who are engaged in household income-generating household activities (excluding food processing) .

Using this expanded definition almost quadruples the size of the female labour-force. The male labour-force, however, increases by only 10%.

As can be seen from figure 2.48, the resultant inflation of the labour force is particularly dramatic for women between 30 and 60 years of age, and less so for younger women. A possible explanation is that many of these women are students or too occupied with child-bearing and rearing to engage in extra income-generating household activities.

Figure 2.48 Labourforce in Gaza including those active in household production, by age. Percentage of all persons in Gaza

Four different scenarios were elaborated for the development of the size of the Gaza labour-force until the year 2000. In the first and the most conservative scenario presented in figure 2.49, both male and female labour-force participation rates (using the "standard" definition) stay unchanged at the level of the FALUP 93 survey. In this case the Gaza labour-force will reach 142,000 by the year 2000, of whom 125,000 will be males. Applying the "expanded" labour-force definition to the FALUP 93 data set scenario number two yields a Gaza labour-force of 204,000 by the year 2000, of whom 138,000 will be males.

A third projection based on labour-force participation rates from the FALCOT 92 report, but with the same population size as above, yields a Gaza labour-force by the year 2000 of 213,000. As many as 192,000 of these workers will be males. The third scenario consequently yields about the same total labour-force as scenario number two, but is radically different with regard to gender composition.

If the Gaza Strip experiences an economic recovery, the adult male participation rate may be expected to approach the FALCOT 92 report level rather than the level of the FALUP 93 survey. Let us now further assume that the "expanded" labour-force definition used in the FALUP 93 survey manages to picture a "reserve army" of potential female workers.

Combining the "expanded" FALUP 93 labour-force participation rate for females with that of males in the FALCOT 92 report yields the most radical scenario for the Gaza labour-force. Under these assumptions, by the year 2000 the Gaza labour-force may comprise as many as 259,000 persons, of whom 192,000 will be males.

How do the FAFO scenarios concerning the future size of the Gaza labour-force compare with the World Bank's Work Force Module? Assuming that no changes take place in labour-force participation rates, the World Bank presents a projection of the Gaza labour-force of 171,000 persons by the year 2000. Less than 5000 of these workers will be females.

What conclusions can be drawn from the comparison of future labour-force scenarios for the Gaza Strip? Based on constant labour-force participation rates, the FAFO labour-force scenarios show considerable variance with the World Bank figures. Our contention is thus that the future labour supply is a rather uncertain variable.

Secondly, if we assume that beliefs and behaviour emanate among the upper social strata and spread downward, a possible future scenario may be an increased desire for employment also among females with less education. This would imply a marked increase in the aggregate desire for employment among women in the future. For any total size of the future population, we thus believe that women will represent a greater share of the labour force than estimated by World Bank projections.

Concluding remarks

The introductory chapter described the large and possibly permanent adverse change in household income which has hit the Occupied Territories after the March 1993 border closure. The employment situation was expected to deteriorate, due to the loss of jobs in Israel and to the decrease in the local demand for labour following the drop in income.

The two main aims of this chapter were: 1) to investigate and if possible document the loss of employment in Gaza and the West Bank refugee camps after the border closure; 2) to contribute to an understanding of the mechanisms at work among individuals and households with regard to response and adaptation to the post-closure situation. Our unit of analysis has been adult individuals.

First of all we saw a dramatic drop in the 1993 adult male labour-force participation rate compared to that of FALCOT 1992. The FALUP 93 survey has found that in Gaza this reduction amounts to 1/3 of the males in the 1992 labour-force. In the West Bank refugee camps the reduction amounts to 1/4.

We have showed that the reduction in male labour-force participation reflects widespread under-utilization of labour in the survey area. Regular unemployment rates do not capture the magnitude of labour under-utilization, and have remained roughly unchanged since 1992. These unemployment rates must consequently be supplemented with the number of "discouraged workers" and the number of employed persons who state that they want more work.

The indirect employment effects of the border closure on local employment do not emerge clearly with the indicators used in the survey. Many locally employed workers, however, have expressed a desire for more work, which may indicate that income levels (not measured by the survey) have dropped between 1992 and 1993.

The direct employment effects of the border closure are illustrated by the finding that only half the persons employed in Israel in 1992 were still working there in 1993. Of those who lost employment in Israel, two thirds now express a desire for more work.

Less than one fourth of those who lost their work in Israel have found new employment in the Occupied Territories. Their employment characteristics indicate a group of marginal workers, employed in low status jobs with high instability and insecurity. There are no indications that these workers have squeezed out other workers in local employment.

In Gaza, the border closure seems to have affected non-refugees more than refugees. The FALCOT 92 report showed that Greater Gaza City, where non-refugees are over-represented, had the least difficult employment situation at the time. The border closure has seemingly equalized regional differences in Gaza, bringing all localities in the Gaza Strip up to the same high levels of labour under-utilization.

Many Israeli restrictions following the border closure have specifically targeted young, unmarried men. Not surprisingly, the documented reduction in employment is also strongest among these individuals.

Most women in both areas are inactive in the labour market, and do not express the desire to work more or to start working because they are either housewives, students or old/ill. A breakdown by age and education however, indicates that women's desire for work may increase in the future.

All this shows that the loss of employment among Palestinians in Gaza and the West Bank refugee camps after the border closure can be clearly documented.

Our second goal in this chapter was to contribute to an understanding of the mechanisms with regard to post-closure responses and adaptation. Here we found that labour-force participation is primarily determined by factors such as gender, age, marital status and position within he household. This may indicate that individual response and adaptation strategies are closely coordinated with household coping strategies, at least with regard to labour activities.

Second, we found nothing to indicate that persons outside the labour force are more active in so-called household income-generating activities than labour-force participants. Neither the non-active nor the "under-utilized", nor those who lost employment in Israel between 1992 and 1993 were found to be more involved in household production than the average population. Household production seems to be a supplement rather than an alternative to formal labour activity; such activities do not seem to play any compensatory role with regard to individual adaptation to loss of formal employment.

Third, it seems misleading to take the low and comparably stable open unemployment rates as indicating that the labour market in the Occupied Territories has adjusted quickly to reduced labour demand through lower wages. We found that the reduction in formal employment is much larger if we take into consideration both unemployment rates and the large number of "discouraged workers".

Because the survey did not measure wages directly, we cannot tell whether the substantial reduction in employment is due to a greater decrease in the labour demand than has been assumed by the CBS/ the World Bank, or to a less pronounced downward change in workers' reservation wages (i.e. the lowest wage where employment is accepted) than could be expected.

The high number of "discouraged workers" may support the latter explanation. The reservation wage of these workers still seems to be above the wage level they can obtain in the Occupied Territories. Many persons can still "afford" to be inactive while looking for an "acceptable" job. The search for any kind of local employment at any wage level has not yet been launched.

One possible explanation for the apparently low downward change in workers' reservation wages would be that the population expects the employment situation to improve in the near future. The large proportion of male "discouraged workers" who cite "security" related reasons for not seeking work may support this assumption.

If the border closure is regarded as being temporary, then employment in Israel is expected to become available eventually, and workers may prefer to await developments. Such expectations have solid foundations in the experience of numerous fluctuations between tighter and more relaxed border restrictions in recent years. Another factor which may explain why workers' reservation wages do not seem to have declined very much is the expectation of an economic revival in the Occupied Territories through foreign aid.

In any case, the seemingly low downward change in of workers' reservation wages may be a temporary phenomenon. In the long term, minimum consumption expenditure requirements and depleted savings may force households to implement all possible compensatory measures. Sources of income other than formal labour activities and the household's access to capital will be crucial to the development in workers' reservation wages, and hence the supply of labour in the future.


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