Article VI, Item 2 of the 1993 Oslo accords concluded between Israel and the Palestinians states, “After the entry into force of this Declaration of Principles and the withdrawal from the Gaza Strip and Jericho area, with the view to promoting economic development in the West Bank and Gaza Strip, authority will be transferred to the Palestinians in the following spheres: education and culture, health, social welfare, direct taxation and tourism.”

The Oslo accords also established the Palestinian Authority (PA), the quasi-government that is now responsible for health, social welfare and education in the Occupied Territories, as well as “security” in enclaves thereof. But the aim of “promoting economic development” has proven elusive in the post-Oslo period. Instead, the economic conditions facing the Palestinians have become far harsher, as recorded in numerous reports by both the World Bank and the United Nations. Palestinians have experienced rapidly rising poverty rates and unprecedentedly high unemployment rates, and the only thing rescuing them from widespread hunger is the large inflow of foreign aid. Particularly after 2000, when the second intifada erupted, the situation deteriorated considerably, with poverty rates shooting up from 20 to 60 percent within the space of two years and unemployment rates rising from 14 to 31 percent. While unemployment has declined slightly — in 2005, the Palestinian Central Bureau of Statistics (PCBS) estimated the rate at 23 percent — the economic conditions remain critical, particularly in Gaza. Unemployment estimates do not include the underemployed (those working fewer hours or under-utilizing their skills) or those who have quit looking for work. The World Bank believes that unemployment rates would be 5 percent higher if these discouraged workers were counted.

While this economic hardship is well documented, there has been far less focus on who is bearing the brunt of it and why. One small gain of the Oslo period was the creation of the PCBS, whose data can offer a window upon this question. Examination of labor force surveys provides a detailed analysis of who works where and how employment patterns have changed from 1996, when the Oslo accords were still being implemented (and the first year for which PCBS data are available) and ten years later, when all hope that Oslo could succeed had died.

In Decline

In the 1980s and 1990s, most Palestinians worked in the construction, agriculture, sales or manufacturing sectors. Tens of thousands of Palestinian men earned their livelihoods in construction, mostly inside Israel and in Jewish settlements in the Occupied Territories. But PCBS statistics show that, between 1996 and 2006, the percentage of Palestinian men who identified their occupation as construction declined from 24 to 18. Furthermore, in 2006 32 percent of all construction workers reported being unemployed (as compared to 23 percent in 1996). As a result, by 2006 construction work was providing jobs to only 14 percent of Palestinian men. There has been a similar decline in manufacturing, particularly in the apparel industry. While just under 6 percent of Palestinians identified themselves as garment workers in 1996, that number had dropped to 2 percent by 2006, with 22 percent of those workers reporting being out of work. The decline in the construction sector has mostly affected men, but the shrinking clothing industry has mostly cost women their jobs. In 1996, almost 13 percent of women depended on this industry for their employment, but by 2006 only 6 percent did.

Less visible groups have also become more economically vulnerable. One example is fishermen. While fishermen are only 1 percent of all Palestinian workers, fishing has historically been an important source of income for a small group of families in Gaza — and fish have long been an important source of protein for Gazans. But between 1996 and 2006 the proportion of men who identified as fishermen (no women reported doing this work) fell from just over 1 percent to 0.14 percent, almost a tenfold decline, with over one quarter of all fishermen reporting being unemployed in 2006.

Another industry that is in decline is tourism. It is difficult to pinpoint who is dependent on tourism by examining labor force data, since employment data are coded by industry (e.g., manufacturing) or occupation (e.g., manager) and someone involved in manufacturing or retail, for example, could be servicing tourists or locals, but one sector that relies heavily on tourism is the hotel industry. There has never been a large cohort of Palestinians working in hotels — in 1996, about 3 percent of all workers, mostly men, were so employed. But ten years later that number had dropped to 1.8 percent. And hotel workers are only a small slice of the labor force associated with the tourist industry. A 2004 UN report states that before 2000 18 percent of Bethlehem-area residents were employed in tourism-related jobs.

Following the Oslo accords, and as excitement mounted for the millennium, many Palestinians anticipated that tourism would fuel significant economic growth, particularly in cities with resonance for the world’s Christians, like Bethlehem and Jericho. These high hopes led to a flurry of hotel construction. While the millennium did indeed bring a spike in tourism-related employment, UN data suggest a rapid decline since then. In 2000 the average number of visitors to Bethlehem was over 90,000 per month, while in 2004 just over 7,000 tourists per month were coming. Today, those few tourists who do come to Bethlehem typically arrive in large, guarded buses that unload only briefly at the Church of the Nativity and other holy sites before crossing back over the Green Line, whereas in the 1980s and 1990s the thousands of tourists who came were likely to wander the streets of Bethlehem for hours if not days. The earlier tourists were far more likely to stay in Bethlehem hotels and stop at the array of shops and restaurants dotting the road leading to Jerusalem. After the millennium, the hotel occupancy rate, already low at 22 percent, plummeted to 1.2 percent in 2003, rising only one percentage point in the following year. The number of visitors to Jericho has bottomed out as well. So few people visit Hisham’s Palace, the Umayyad hunting lodge north of the city, that in 2006 I had to hunt down the caretaker to request that the site be opened. In the late 1980s this archaeological site was teeming with tourists.

Cut Off

What caused this endemic job loss, and were there compensatory gains in employment of other types? How are the Palestinians who formerly worked in the dying sectors making a living today?

A number of analysts have shown that the loss of construction sector jobs was closely linked to the Israeli policy of restricting Palestinian access to Israel. In the 1980s and 1990s, Israel relied heavily on Palestinians to work not only in construction, but also in agriculture and the service sector. But in the post-Oslo period both Gaza and the West Bank have been subject to increasingly stringent closures, with Israel arguing that such steps are necessary to maintain security. As a result, Israel turned to importing Southeast Asians and Eastern Europeans to fill the jobs that had previously been filled by Palestinians.

The falling numbers of Gazan fishermen also correspond to a series of Israeli policy changes that have nearly cut off Palestinian access to the Mediterranean Sea. The Oslo accords stated that Palestinians could fish up to 20 miles offshore, but according to the UN, Israel reduced the range to 12 miles in 2002, to six miles in 2007 and down to a mere three miles in 2009. The impact of such restrictions on total employment is not large, but the sudden loss of their livelihoods has hit fishing families in Gaza extremely hard, at a time when few economic alternatives exist. (In addition, there have been numerous reports of fishermen being attacked and either killed or injured by the Israeli military.)

As for tourism, Israeli checkpoints and, more recently, enormous “border” terminals have strongly discouraged foreign visitors from traveling to the West Bank. According to the UN, a total of “78 physical obstacles” surrounded Bethlehem in 2004. The obstacles make travel difficult even in quiet times, but during Israeli military operations in the West Bank they are a means of shutting off the influx of tourists entirely, as Palestinian towns are declared “closed military zones.” Gaza is almost completely closed off to tourism, as Israel requires all visitors to undergo a bureaucratic process of applying to enter and these permits are often denied. Since 2005, the practice has been to deny entry to anyone who cannot demonstrate to Israel’s satisfaction that they work for a humanitarian or news organization. And there have been extended periods, such as during Israel’s Operation Cast Lead, when no visitor is allowed in for any reason.

The disappearance of garment work is a more complicated story. Many apparel jobs were subcontracted work carried out by Palestinian women in their homes for Israeli companies. Although they were very poorly paid for such piecework, many less educated Palestinian women had few other options for earning money. The system of roadblocks and checkpoints may have been one factor that discouraged Israeli capitalists from utilizing cheap Palestinian labor in the post-Oslo period, since moving the raw and finished products back and forth became more costly. But another important reason why the Palestinian manufacturing sector has shrunk is the policies of Washington. [1] As a carrot to the Jordanian and Egyptian governments for participating in the peace process, the United States granted these nations preferred trading status on products made in cooperation with Israeli capital. Between 1999 and 2003, Jordanian exports to the US rose from $2 million to $567 million, with much of the increase being exports in clothing. US imports of apparel from Egypt have also increased substantially in recent years. At the same time, garment jobs began disappearing from the West Bank and Gaza Strip, suggesting that Israeli firms that previously found it appealing to subcontract to Palestinian women now prefer workers further afield. This shift in investment has brought considerable foreign exchange into Jordan and Egypt, and, no doubt, hefty profits to an Israeli, Jordanian and Egyptian elite, but otherwise its economic benefits to those countries are unclear. It certainly has not meant much increased employment for Jordanians (or Palestinians in Jordan), since the rising export-oriented apparel industry in Jordan has imported many of its workers from places such as Bangladesh and then subjected them to atrocious working conditions. [2] In addition, the Palestinians have been pushed to open up their borders to imports, and have been flooded with Chinese imports, further eroding the local textile and apparel manufacturers’ base.

What, if any, jobs have replaced those that were lost? The data suggest that the sectors that have grown since 1996 are transportation, agriculture and services. The transportation sector nonetheless remains fairly small, making up only 6 percent of all jobs for men (and almost none for women). Jobs in transportation have multiplied primarily because Israel has erected so many new checkpoints and roadblocks — according to the World Bank, the number in the West Bank rose from 300 to more than 600 between 2000 and 2008 — meaning that travelers have to transfer from one vehicle to another, rather than staying in a single one for their entire journey. And, of course, the roadblocks are a huge economic impediment in other ways, so their overall impact on Palestinian employment is scarcely positive.

Immediately after Oslo, there were high hopes that agriculture, like tourism, would thrive through booming exports. The increasing number of workers in the agricultural sector suggests instead a return to subsistence agriculture. Most of the agricultural workers identified in the PCBS data are self-employed and reports by various Palestinian agencies suggest that agricultural exports have been limited, because of bureaucratic restrictions and travel constraints imposed by Israel. [3] The conventional definition of economic development is that an economy moves from primarily agrarian production to industrial and service-based production over time. In the Occupied Territories, the opposite is happening. In 2006, 15 percent of men and 38 percent of women report working in agriculture, as compared to 11 and 27 percent, respectively, in 1996. These figures suggest a new twist on what Sara Roy has called Palestinian “de-development.” [4]

Have-Littles and Have-Nots

The growth in service jobs has taken place primarily in the public sector, as the PA has rapidly expanded its payroll to staunch the hemorrhaging of the Palestinian economy. The PA is now the largest employer in the Occupied Territories. Ninety-five percent of all PA jobs are in public administration, education and health, and the public sector accounts for most employment in all three of these fields. In 1996 public administration consisted of 5 percent of all jobs, but by 2006 that number had risen to 15 percent. About 5 percent of all working women are in this field, a number that has barely changed in ten years, but the proportion of men in such positions has risen considerably, from 5 to 17 percent. Similarly, whereas education jobs represented about 6 percent of total employment in the 1990s, by the mid-2000s, almost 10 percent of all workers were in education, with the proportion of both women’s and men’s employment in this sector increasing over time (from 21 to 27 percent among women and from 4 to 7 percent among men).

A large public sector is not necessarily a bad thing, but in the Palestinian case its size is clearly linked to chronic economic crisis. It is a stopgap measure that is unsustainable without the continued generosity of the international community to the PA, and so is hostage to political events, such as the Hamas takeover of the Gaza Strip, which generated threats of non-payment of salaries to PA employees in Gaza. Also noteworthy is which individuals are benefiting most from this public-sector job growth. The average education level in the fields of education and public administration is 14.6 and 12 years, respectively, suggesting that many of the newly created public-sector jobs are going to highly educated Palestinians, while those losing jobs have less formal schooling. The average education level among all working women is 10.1 years, while the average among female apparel workers is 7.8. Although the gap is less stark among men, male construction workers also tend to be less educated than most male workers — 9.2 versus 10.4 years, respectively. Fishermen have some of the lowest levels of education among male workers, averaging only 7.6 years of schooling. Given the link between education and economic status, the data suggest that those who have suffered the largest job losses are less educated and poorer working-class men and women. Less educated women, in particular, are out of luck, since men with less education may be able to find work either in transportation or the Palestinian security apparatus. The unemployment data support the conclusion that the least educated have fared worst, for those with education levels of between 5 and 11 years are among those most likely to suffer unemployment. Although, in general, educated Palestinians have lower unemployment rates, it is also noteworthy that a quarter of all four-year college graduates reported being unemployed in 2006 (up from 16 percent in 1996), with the majority of those being under the age of 26.

So how are Palestinians surviving? Foreign aid is one factor keeping them from starving. According to the World Bank, in 2000 14 percent of national income was made up of aid, but by 2005 that figure had risen to 25 percent. Remittances are also indispensable for many Palestinians, with about 18 percent of national income coming from relatives living abroad in 2000. Despite the inflow of these two forms of aid, malnutrition rates have risen in recent years, and school attendance rates have dropped, both signs of the increase in economic hardship facing Palestinians.

It is also important to point out the stark difference in economic wellbeing between the West Bank and Gaza Strip. The ongoing siege of Gaza, enforced by Israel and Egypt, and with the complicity of the US government and the PA presidential office in Ramallah, has crippled an already very weak economy and illustrates, again, how vulnerable Palestinians are to the whims of external forces. The differential treatment of the Gaza Strip and West Bank has also widened the gaps between the Palestinian haves, have-littles and have-nots, since poverty rates were already higher in Gaza than in the West Bank, even before the siege was tightened in 2006. It is Gazans who have suffered the most acutely from the slow strangulation of the Palestinian economy in the post-Oslo years, but the PCBS numbers also show that across the Occupied Territories, less educated men and women, as well as educated youth, have watched their economic horizons grow ever dimmer.


[1] Jennifer Olmsted, “Post-Oslo Palestinian (Un)Employment: A Gender, Class and Age Cohort Analysis,” Economics of Peace and Security Journal 3/2 (2008).
[2] New York Times, May 3, 2006.
[3] A report by PalTrade, the Palestine Trade Center, titled The Palestinian Agricultural Sector: Cash Crops Sector Brief 2006, for example, states that agricultural exports were on average at less than 60 percent of capacity due to Israeli restrictions, even before the current blockade.
[4] Sara Roy, The Gaza Strip: The Political Economy of De-Development (Washington, DC: Institute for Palestine Studies, 1995).

How to cite this article:

Jennifer Olmsted "Locked In, Locked Out of Work," Middle East Report 253 (Winter 2009).

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