Amit Acco, Partner |
As of the latest update on January 17, 2024, Israel’s construction industry grapples with an unparalleled personnel shortage, predominantly stemming from the closure of crossings for Palestinian workers. Despite government initiatives and agreements with countries like India and Sri Lanka, not a single foreign worker has been deployed to Israel, leading to the closure of nearly 50% of construction sites. This crisis could potentially inflict a substantial economic setback, with estimates suggesting a significant impact on the annual GDP.
The Initial Impact and Magnitude of the Crisis:
Following the outbreak of the “Iron Swords” war, the abrupt halt in the entry of Palestinian workers created a sudden deficit of approximately 100,000 construction workers. Even before the conflict, there was a persistent shortage of 40,000 workers compared to industry needs, bringing the current deficit to about 140,000 workers. Consequently, nearly half of construction sites are now closed, with operational sites working at only 30% productivity.
Economic Ramifications
Given the anticipated prolonged shortage, the real estate industry is particularly affected, with contractors and real estate entrepreneurs demanding compensation for delays and potential increases in apartment prices due to higher foreign worker salaries.
Attempts at Remediation
The government has taken various steps to address the crisis, including increasing the quota of construction foreign workers under bilateral agreements, allowing a “private route” for fast-tracking foreign worker entry, and expanding the activities of foreign construction companies.
Despite these efforts, the actual implementation has been sluggish, with delays in bringing foreign workers under the new bilateral agreements with India, Sri Lanka, and Uzbekistan. The private route is expected to witness the first influx in the coming weeks, but challenges in execution persist and it is not clear if the “private route” for fast-tracking foreign worker entry will even continue after February 2024,
In addition, the government’s initiatives also include efforts to attract Israeli workers to the construction industry, with over 1,100 individuals signing up for training programs within weeks. However given past experience, may of the industry are extremely pessimists about this.
Potential Solutions and Future Outlook
While government decisions aim to alleviate the crisis, the return of Palestinian workers, especially those aged 45 and older, is being considered. However, security concerns and geopolitical effects such as the attack in Ra’anana, carried out by Palestinioans from the West Bank, may impede their swift reinstatement.
KTA Solution for Interim period and the Future
In an effort to address the ongoing challenges in the construction industry, Kan-Tor & Acco is taking proactive steps in the public domain. Tsvi Kan-Tor, Joint Head of the Foreign Employees Committee at the Israel Bar Association, and Amit Acco, Director at the Israeli Chambers of Commerce, are collaborating to enable foreign contractors engaged in multinational projects, such as factories and public utilities, to efficiently bring in foreign staff to contribute to timely project completion.
The core concept is the introduction of a “Private Route” tailored for these contractors, streamlining the process for recruiting foreign construction employees. Despite the expedited nature, employers must adhere to all existing requirements imposed on foreign employees in the industry, including salary levels. Currently, Kan-Tor & Acco recommends the utilization of the B-1 non-academic process to bring in foreign staff. However, depending on the nature of the work and project, the government may exercise discretion, contending that there are qualified Israeli employees available for the job. The proposed initiative aims to strike a balance between the urgent need for skilled workers and the government’s concerns about the domestic labor market.
Kan-Tor and Acco urge interested clients to promptly reach out for potential participation in pilot programs. For inquiries, please contact Amit at amit@ktalegal.com without delay.
