In the absence of regulated solutions from the Israeli government, it appears that many employers have chosen to take control of their financial destinies by implementing employee furloughs. This trend is particularly noticeable in labor-intensive industries such as restaurants and event halls, echoing the measures taken during the COVID-19 pandemic.
The scope of this phenomenon is expected to continue expanding, and currently, neither the Employment Service nor the National Insurance Institute can accurately gauge its extent. Furthermore, the aviation industry is bracing itself for significant challenges, as major Israeli companies are poised to begin a process of downsizing next week. The root cause of this decision lies in the diminished demand for air travel, coupled with the mounting uncertainty within the Israeli tourism sector.
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It's worth noting that Finance Minister Smotrich has voiced his opposition to these measures, at least for the time being. His rationale is that most individuals who intended to enter or exit Israel have already done so, and the current limited number of flights is deemed sufficient. As a result of these circumstances, it's estimated that at least 1,000 employees of Israeli airlines have embarked on strikes, amplifying the economic impact.
Adding to the complexity, there's a second tier of the aviation industry that's also feeling the brunt of these challenges. This includes travel agents, hotel staff, and various service providers closely tied to the tourism industry, all of whom are not presently receiving financial support from the state.
Just this week, El Al, one of Israel's prominent airlines, issued a profit warning in the wake of the recent conflict in Gaza. The company anticipates a reduction in the number of flights during the fourth quarter of this year due to the hostilities. El Al, however, acknowledges the uncertainty surrounding the exact extent of the financial damage it will incur in the final quarter of the year.
Meanwhile, the Ministry of Finance is diligently crafting an economic aid plan that's expected to include a flexible framework aimed at incentivizing businesses to retain their workforce. Addressing the issue during a discussion in the Finance Committee, Finance Minister Bezalel Smotrich expressed his reservations about the current proposed outline, deeming it unsuitable. He emphasized that the government is committed to addressing the needs of both employers and employees in light of the ongoing challenges.
The Bank of Israel is making broad efforts to keep the shekel from depreciating further as it manages market instability as a result of the ongoing conflict with Hamas in Gaza.
ā The Jerusalem Post (@Jerusalem_Post) October 17, 2023
By @ZachyHennessey | #Israel | #economy https://t.co/glxlDkTFTb
In the interim, Finance Minister Smotrich and his ministry's leadership convened with representatives from the business sector to engage in a constructive dialogue regarding the evolving compensation plan. The minister reassured participants that he is actively working to finalize the plan swiftly, aiming to minimize bureaucratic hurdles. The ultimate goal is to provide adequate economic support to both employers and employees while ensuring the preservation of a vibrant economy.
