From Education to Unemployment: How the Structural Crisis in the Palestinian Labor Market Was Formed? ... "The Palestinian Economy Transformed from a Job-Producing Economy to a Labor-Exporting Economy"

While Palestinian universities continue to graduate tens of thousands of young people annually, the circle of unemployment widens and the economy's ability to absorb many of them declines, turning a university degree for many from a gateway to employment into a long waiting station on the lists of job seekers. In the academic year 2022/2023, Palestinian higher education institutions graduated more than 45,000 male and female graduates, at a time when the Palestinian economy is unable to provide job opportunities that absorb many of these energies and competencies, which widens the gap between education and employment year after year.

To understand this paradox, it is not enough to look only at unemployment figures and graduates; rather, one must look at the nature of the Palestinian labor market itself. Historically, the Palestinian workforce has been concentrated in three main sectors: public employment in national authority institutions and security agencies, the Palestinian private sector, and work within the Green Line. These paths were formed under exceptional political and economic conditions imposed by the occupation over decades, where a large part of employment and income became linked to factors that the Palestinian economy cannot control.

Today, it is clear that the core of the crisis lies not only in the number of graduates or the quality of specializations, but in the nature of the labor market that has been shaped over decades of economic dependency, to the extent that the Palestinian economy has become unable to absorb a large part of its human capital, despite the urgent need for it in the path of national development.

Re-engineering the Palestinian Labor Market

Since 1967, the impact of the occupation has not been limited to imposing restrictions that limited the growth of the Palestinian economy, but extended to reshaping the structure of the labor market itself. While productive sectors, especially agriculture and industry, experienced a continuous decline as a result of control over land and resources and the imposition of restrictions on investment, increasing numbers of Palestinian workers were employed in the Israeli labor market, especially in construction, agriculture, and services.

With the increasing reliance of Palestinian families on income from work within the Green Line, the importance of developing local productive paths capable of employing the growing workforce declined. Thus, the Israeli occupation contributed to redirecting work and income paths in a way that strengthened economic dependency and weakened the local market's ability to create sustainable job opportunities.

The Permits Economy and the Exposure of the Economic Model's Fragility

The impact of working within the Green Line was not limited to providing job opportunities and higher wages; over time, it led to the emergence of what can be called the "permits economy," where access to income sources became dependent on work permits subject to considerations and procedures outside the control of the Palestinian economy. Thus, a permit was no longer merely an administrative document to regulate the movement of workers, but transformed into an influential tool in shaping the labor market and distributing employment opportunities.

Before 2023, approximately 200,000 Palestinian workers were employed within the Green Line and settlements, making the income of a wide segment of Palestinian families dependent on continued access to this market. With the expansion of this pattern, the impact of the permit extended beyond the worker himself to affect families' economic decisions, consumption levels, and the financial stability of wide sectors of society.

If the West Bank has been subject to an economic model based on dependency on the Israeli labor market, the Gaza Strip represents the harshest face of this intervention, where the siege and systematic destruction of productive capacities have turned it into a hotbed of the highest unemployment rates in the world, making the challenge there go beyond the employment crisis to the erosion of the very foundations of production and life.

The events after October 7, 2023, also constituted a real test for this model; with the suspension of most work permits and the prevention of workers from accessing their workplaces, and the sanctions imposed by the seizure and looting of clearance funds, tens of thousands lost their sources of income in a short period. The repercussions extended to local markets, the private sector, and consumption movement, and the crisis was revealed by job losses, showing the extent of reliance on income sources outside the control of the Palestinian economy and its self-production and employment capacity.

The Gap Between Education and Employment: When Investment in Humans Has No Horizon

The transformations witnessed in the Palestinian labor market affected employment and income, and extended to the mechanisms that guide investment in education and skills. Under normal circumstances, the labor market sends economic signals that encourage individuals to acquire the knowledge and skills needed by the economy, by linking education and productivity to wage levels and career advancement opportunities, but the existence of job opportunities for Palestinians outside the local economy gradually weakened this relationship.

The Palestinian employment crisis does not reflect a lack of education or competencies as much as it shows the limited ability of the economy to invest in them. Therefore, phenomena such as high unemployment among graduates, the expansion of the informal economy, and the increasing reliance on individual and marginal work have become indicators of a growing gap between what the educational system produces and what the economy can actually absorb.

This gap has widened due to the prevailing societal culture towards education and work, where a university degree is still often seen as the most guaranteed path to professional success, while vocational and technical education does not receive the status commensurate with its economic importance. Families also play an influential role in guiding children's educational choices, which makes some educational decisions closer to social considerations than to the needs of the labor market and future employment opportunities.

Towards a More Sustainable Economic Model

The Palestinian experience reveals that the employment crisis is not limited to a lack of job opportunities, but rather stems from the nature of the economic model that has been shaped over the past decades. Numerous studies have shown that growth in the Palestinian economy has not been accompanied by parallel growth in productive sectors capable of generating long-term employment opportunities, but a large part of employment and income in Palestine has been concentrated in the Israeli labor market. Data from the Palestinian Economic Policy Research Institute (MAS) indicates that remittances from Palestinian workers in Israel constituted approximately 13% of the Palestinian GDP in 2017, and increased in the years leading up to the war to approach 17%, reflecting the significant reliance on labor within the Green Line to support economic activity.

Therefore, addressing the employment crisis requires more than providing alternative job opportunities or temporary employment programs; it calls for redirecting economic policies to build a national productive base capable of creating job opportunities, by directing investments towards sectors linked to local demand, promoting modern industry and agriculture, developing production chains, supporting small and medium enterprises, and linking education and training to the needs of priority sectors.

Building a resilient economy does not depend solely on government policies, but requires establishing a societal culture that recognizes the close link between consumption, production, and employment; every expenditure on a local product or service contributes to supporting a Palestinian establishment, provides income for a worker, and enhances the circulation of capital within the national economy. Therefore, supporting national products is a tool to expand the productive base and enhance employment opportunities. The transformation required today is not to replace one source of income with another, but to restore the basic function of the Palestinian economy as a producer of jobs, not a source of labor or unemployment, which necessitates a gradual transition towards an economic model based on production, skills, and added value, and relies on expanding the local productive base and enhancing the ability of economic sectors to invest in Palestinian human capital; the greater the contribution of productive sectors to GDP, and the higher the economy's ability to meet its needs independently, the greater the opportunities for job creation and achieving sustainable and more independent development.