Israel's unemployment rate fell to an all-time low of 4.8% in June this year. There are those who cast doubt on the official figures published by the Central Bureau of Statistics each month, and who argue that the official definition of unemployment is too narrow and restricted, and so the figures do not reflect the real unemployment picture and the main problems in the Israeli labor market. In his weekly review, published today, the chief economist in the Ministry of Finance rebuts these arguments and comes to the conclusion that even on a broader definition of unemployment, Israel's labor market is in a good state by international comparison and relative to the past.
First of all, the chief economist explains the concepts used by the Central Bureau of Statistics in calculating the unemployment rate. For example, an employed person is someone who has worked in any kind of job for at least one hour in the previous week. The category of employed persons includes those serving in the IDF (both in compulsory service and in career posts) and people who generally work but were temporarily absent from work during the week in which the survey was carried out.
Unemployed persons are defined as people who did not work at all and who actively sought work during the four weeks before the survey date (involuntary unemployed). The Central Bureau of Statistics' definitions, it should be pointed out, are those used in all the OECD countries.
The Central Bureau of Statistics calculates the official unemployment rate by dividing the number of unemployed persons by the number of active participants in the workforce, that is, the number of people in work plus the number unemployed.
The chief economist presents five other definitions, and demonstrates that if they are applied Israel's situation is still good relative to the rest of the world. For example, one definition includes in the unemployment rate those actively seeking work and those who have given up seeking work. On the basis of this definition, Israel's unemployment rate jumps to 5.9%.
The rate rises to 8.1% when the category of unemployed is broadened to include people available for work and wanting to work but who do not participate in the workforce, that is to say, they have not actively sought work and are not employed.
The broadest definition of unemployment covers persons actively looking for work, those who have given up looking for work, those available for work and wanting to work but who do not participate in the workforce, and those who involuntarily work part-time, either because they looked for full-time employment but could not find it, or because they looked for and failed to find additional work. On the basis of this definition, the unemployment rate in Israel rises to 10.6%.
Finally, the chief economist compares the unemployment rate in Israel with that in the other OECD countries under the various definitions of unemployment. The comparison shows that the unemployment rate in Israel is especially low when unemployed persons are defined as those who have looked for work for at least three months. It remains comparatively low, in the lowest third among OECD countries, when persons working part-time involuntarily are included in the unemployed figure.
Published by Globes [online], Israel business news - www.globes-online.com - on August 22, 2016
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