The status of the Palestinian labor market in Israel has been seen as a function of changing levels of regional tension, depending particularly on Israel's security/punitive policy of border closure and work permits. But this is not the whole picture. The decline of the Palestinian labor market in Israel is not exclusively related to peaks of violence, although no doubt affected by them. If one takes into account the fact that the Israeli economy between 1967 and 1987 owed much of its prosperity to Palestinian labor, the decline of the latter's role in Israel probably warrants a more complex explanation than just violence.

Indeed, a closer look indicates that various economic interests curbed Palestinian employment in Israel as early as 1992-1993. The most significant development has been the growing import of cheap labor power from Asia, Africa, Eastern Europe, and South America. The devastating effect of the current Intifada on Palestinian labor inside Israel is better described as a final blow to a patient that was already terminally ill. The current context of globalization involves massive relocation of production to low-expense regions, mass transfer of cheap labor power, the concomitant high rates of local unemployment amongst blue-collar workers, and the extended asymmetrical relations of power between stronger and weaker economies. The case of the Israeli and Palestinian economies is one more case among many, in which a strong first world economy borders on a weak reposition of cheap labor power. The decline of the Palestinian labor market and the grave problems facing the Palestinian economy at large are thus also indicative of a global process.

An Irreversible Blow?

While since 1967 Palestinian labor power has contributed to Israeli prosperity, its status has often been extremely unstable due to a host of local and regional factors. Until the first Intifada of 1987, Palestinian laborers had been employed by Israel (including in the occupied territories) and by Arab oil-producing countries. This Intifada, eventually fading during the 1991 Gulf War, had raised a serious question as to the future of this important sector. Foreign laborers (mainly Asian and Egyptian) had occupied many jobs in the Arab countries. In Israel, foreign workers were East Asians, Africans, South Americans, and East Europeans. For the regional markets the new laborers have had three major advantages over Palestinian labor power: they have been cheaper, stable (less prone to political turmoil) and temporary.
After the establishment of the PNA (Palestinian National Authority) in 1993, many Palestinian laborers could work both in Israel and the PNA. However, the second Intifada (2000) has again inflicted a blow upon this market. Considering the present Israeli economic trends, this blow may now be irreversible. The economic functioning of the PNA has not been a success story. Between the first Intifada (1987-1991) and the second (2000) Intifada Palestinian consumption has decreased significantly and since September 2000 the violent events have caused additional damage and the future does not look rosy. It can now be assumed that a settlement that includes some kind of political "independence," has become less realistic than it looked just a few years ago. Nonetheless, even if this eventually occurs, Palestinian economic "independence" seems more and more problematic.
Many factors suggest that the Palestinian economy may have to fight against poverty and instability in unfavorable circumstances. First, there are the effects of years of continuous Israeli occupation including economic domination over the Palestinian consumption and labor markets. The current crisis of the peace process has further exasperated the situation, with rise in violence and the Israeli policy of closure, as well as massive destruction of Palestinian infrastructure. As a result, there is an increasing gap between the developed "globalizing" Israeli economy and the somewhat pre-industrial Palestinian economy.
In aspects like export and import, it is likely that the Palestinian economy will continue to depend on the Israeli economy, involving actual and potential risks to the Palestinian economy. However, these risks are minor compared to those inherent in Palestinian dependence on the Israeli labor market. This market had contributed half of the Palestinian GNP prior to October 2000.

Options for the Palestinian Labor Market

In fact, the fragility of this sociologically and economically important resource has become clear as the Israeli policy of closure carried out since October 2000 has practically done away with Palestinian labor in Israel. True, this is not the first time that Palestinian laborers have been denied employment in Israel. But the present political and economic circumstances, and especially Israeli interests, may indicate that the Palestinian economy, or rather what is left of it, will not be able to depend upon the Israeli labor market any longer.
On the Palestinian side, there are voices that argue (or hope) that Israel and the Palestinian state (if and when it is established) will eventually maintain close economic contacts, including the resumption of employment of Palestinian labor in Israel. Others, however, consider alternative employment options for the Palestinian laborers who used to work in Israel prior to the recent Intifada, including their re-exportation to Arab countries, especially the oil-producing ones. At any rate, it is evident that at the time of writing (early 2002) employment opportunities for a significant number of Palestinian laborers both in the PNA and in Israel are poor. Current international and regional conditions and power relations do not indicate that the Palestinian party can reverse this trend.
What is the Israeli interest? Some scholars and publicists claim that stability in the region will largely depend on Palestinian economic independence. But there are no signs at all that Israel would be willing to provide the necessary conditions for a settlement in that spirit. Moreover, in the Israeli press the term 'unilateral separation', which had been prominently bandied about since the first months of the al-Aqsa Intifada, was used as a euphemism. Behind the slogan was concealed a policy of economic severance, political pressure and collective punishment, heralding-the continuation of control over the Palestinians. Israeli 'economic independence' in this context means, among other things, the denial of employment for Palestinians in Israel. Taking into account the interests that are currently evolving within Israeli economy and policies, this is more likely to be a long-term strategy than a transitory tactic.
On the one hand, the agricultural and construction sectors (supported by some ministries within the Israeli government) are in urgent need of unskilled labor, since Palestinians were shut out as a result of the closure. However, the current situation seems to have ultimately confirmed the absolute advantage of cheaper imported (foreign) laborers over a Palestinian labor force prone to political instabilities. Needless to say, manpower firms, which have mushroomed in Israel in the last decade, also share this interest.

Inclination to Globalization

On the other hand, some particularly influential sectors within the Israeli government and the private sector, all expressing in the last decade increasing inclinations toward globalization and international markets, would probably wish to diminish those sectors producing solely for the internal market, especially agriculture. They have indeed been trying to minimize the number of illegally imported laborers. Apparently, this trend does not distinguish between nationalities or countries of origin: it refers both to Palestinian as well as to other foreign laborers. For quite another reason, this orientation also corresponds with the intentions of various strong real-estate lobbies, mainly contractors and landowners. These have a vested interest in minimizing local agriculture in favor of commercial shopping malls, toll highways, and other profitable concrete-laden projects. At the present moment the state and these lobbies, which exert strong political influence, seem to be much more powerful than the potentially "redundant" agricultural sectors.
Israeli interest in the Palestinian import market, however, does not seem to diminish, as "unilateral economic separation plans" refer almost exclusively to labor power. It seems inevitable, though, that a profound and prolonged crisis in Palestine, with persistent unemployment and poverty, will also affect Israeli exports to the PNA. Israel may have to deal with this difficulty by allowing a part of the Palestinian labor force back into Israel or simply by siphoning off international aid money given to the Palestinians.
In another facet of the globalization process, as local agricultural production becomes less profitable, pressures to turn fertile land into real estate are increasing. Ironic as it may seem, the fate of the Palestinian agricultural labor market in Israel appears, at least to some extent, to be bound up with the fate of Israeli agriculture which once used to be a cornerstone of the Zionist project.
If the present violence continues, the Palestinian economy can anticipate a severe and long-standing crisis. Under such circumstances, it seems likely that the only option for employment will have to be based on the re-exportation of Palestinian labor power to the Arab oil producing countries. Whether this option is realistic or not will be determined by regional and global factors the discussion of which is generally beyond the scope of this article. Nonetheless, the Arab oil-producing countries actually face problems with imported labor power, indicating that even this solution may not be feasible.
On November 21, 2000, i.e. when serious signs of economic depression in the Palestinian territories had already become alarming, representatives of the PNA went to Cairo to ask the Arab Ministers of Labor to increase their quota for Palestinian laborers. The ministers pointed out that a reduction in oil production is constantly decreasing the need for foreign labor, a trend that could rise if Iraq is allowed to resume its oil production. In fact, Palestinian workers already find themselves at a disadvantage in competing with Egyptian, Jordanian, and Yemenite workers in a constantly shrinking market.
In conclusion, it remains uncertain whether, in the short run, the Palestinian labor market and the Palestinian economy will be able to make progress. But in the long run, it should be understood that a complete collapse of the Palestinian economy could undermine the stability, the interests and security in the region and in the international context.