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<title>FAFO Report 166</title>
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<small>(Chapter 2)</small><p>
<b><font size=+1>Future labour-force scenarios</font></b>
<p>
This section presents scenarios for future labour supply in Gaza based on
results from the current data set. Alternative projections from the Work-Force
and Labour Modules of the World Bank's macro-economic model for the Occupied
Territories will also be presented<a href="notes_2.html#7"><small><sup>7</sup></small></a>. Finally, we will sum up
the findings of this chapter, focusing on the effects of the border closure and
Palestinian adaptations to it.<p>
<b><a name="labour">Labour-force scenarios for Gaza</a></b>
<p>
<i><a href="apx3_11.html">See table 2.63 in appendix 3 as reference to the discussion in this section.</a></i>
<p>
The "Work-Force Module" (Module a), of the World Bank model projects
population growth and demographic change with associated changes in labour-force
participation. Here we will present scenarios for future labour supply using
the World Bank's estimates for the future size of the labour force as a
baseline.<p>
In the Gaza Strip, our sample represents all types of localities in one
coherent geographical entity. The sample from the West Bank refugee camps,
by contrast, represents 19 separate refugee camps throughout the West Bank
and in Arab Jerusalem. Many camps are situated adjacent to other localities,
but all camps are physically separated from each other. Thus there would
be little point in presenting separate scenarios for the West Bank refugee
camps. In the subsequent discussion we will present labour-force scenarios
for the Gaza Strip only.<p>
Mathematically, the size of the labour force may be calculated as the sum
of population groups defined by age and gender, multiplied by the labour-force
participation rate of each group. The size and composition of the population
at any point in time will depend on the size of so-called "base population",
and developments in fertility, mortality and migration.<p>
The population figures used in the World Bank's labour-force projections
are based on official Israeli population projections for the Occupied Territories.
<a href="notes_2.html#8"><small><sup>8</sup></small></a>
According to the same source, fertility rates began to increase in the mid-1980s
after showing a declining tendency in previous years. Mortality continued
to decline throughout the period. Migration flows changed from net emigration
in the 1970s and 1980s, to net immigration after the 1991 Gulf War.<p>
Referring to these developments, the World Bank applied the highest CBS
projection for natural population growth, assuming future fertility to remain
at the 1982 level and net migration to be zero.<p>
Most migration in previous years had economic motives. <a href="notes_2.html#9"><small><sup>9</sup></small></a>
A continuation of
this tendency in the future may lead to two separate migration patterns,
with opposite effects for Gaza. First, general economic development in Gaza
may stimulate a return of Palestinians currently living abroad. Second,
lifting current restrictions on internal migration may lead to substantial
population movements from Gaza to the more prosperous West Bank and Arab
Jerusalem.<p>
At present it is hardly possible to assess which effect will dominate. A
future net migration rate of zero in the Occupied Territories thus seems
as reasonable as any other assumption.<p>
Most independent researchers have argued that the official Israeli projections
underestimate the true population. The population count in the 1967 census
is said to be too low, and it is alleged that there has been an under-recording
of (surviving) infants in the subsequent years.<p>
Hence, the World Bank adjusted the 1992 level of population projections
for the Occupied Territories upwards by 12%. This augmentation provides
for the largest plausible estimate of the under-recording of the population.
For Gaza, the size of the new 1992 "base population" amounts to 800,000
persons. The highest CBS population growth rate of 4% in Gaza is then applied,
yielding a population level of 1,184,000 persons by the year 2002.<p>
To simplify the discussion concerning future labour-force scenarios, FAFO
originally desired to use the same base population and population growth
rates as the World Bank's "Work-Force Module". Most regrettably, however,
FAFO did not have access to adjusted population projections for Gaza broken
down by gender and age.<p>
For the Gaza labour-force scenarios, FAFO has thus used the World Bank's
1992 "base" population of 800,000 as a baseline. From this starting
point, the Gaza population is assumed to increase at a constant annual rate
of 4% towards the year 2000. The labour force scenarios are based on the
assumption that the composition of the population by gender and age remains
unchanged, as calculated by the FALUP 93 survey.<p>
As for the labour force participation rate, most economic models for labour
markets assume it to be endogenously determined. Further, this rate is assumed,
at least at an aggregate level, to increase with increasing wage levels.<p>
Much evidence indicates a highly segmented supply side in the labour market
of the Occupied Territories, that is, the supply of labour for various groups
of individuals is targeted to specific job types and job locations. In addition
to the usual variations according to age and gender, the relation between
supply of labour and wages also varies substantially across different socio-economic
groups and regions. Except for the tendency of labour supply to increase
with wages, it is not simple to assess the exact nature of the relationship
between the supply of labour and wage rates for different groups.<p>
The labour supply function in the Occupied Territories seems to depend heavily
on gender and position in the household. Local cultural attitudes about
"socially acceptable" work location and work types are crucial for female
labour supply. Travel restrictions between Gaza and the West Bank/ Arab
Jerusalem further allow for substantial geographical segmentation of the
relations between labour supply and wages.<p>
As elsewhere, the relationship between supply of labour and wages in the
Occupied Territories can also be assumed to depend on the availability of
alternative sources. Particularly important are non-labour income sources
like public and private transfers. One hypothesis assumes that the labour
supply function for (registered) refugees differs from that of other groups,
due to the elements of a social security system provided by UNRWA.<p>
Figure 2.49 presents four different scenarios for the development of the
Gaza labour-force towards the year 2000. Let us now discuss some of the
assumptions leading to these scenarios.<p>
<I>Figure 2.49 Labour force scenarios, Gaza year 2000. 1000 persons</I><br>
<img src="bilder/249.gif">
<p>
Despite of the considerations concerning the endogenously determined labour-force
participation presented above, we have lowered our ambitions as to constructing
such a complex model. The size of the labour force for any given year is
thus exogenously determined. Within each scenario, gender-specific products
of population size and constant labour-force participation rates are added
up, to give the total labour-force. The four scenarios vary substantially
in terms of their assumptions about gender-specific labour-force participation
rates. As a background for the scenarios, table 2.2 presents five gender-specific
participation rates for Gaza from alternative sources.<p>
<I>Table 2.2 Gaza labour-force participation rates, by gender and source</I>.<br>
<table border="1">
<tr>
<td> </td>
<td align=center>Gaza
FAFO 93
</td>
<td align=center>Gaza
FAFO adj. 93
</td>
<td align=center>Gaza
FAFO 92
</td>
<td align=center>Gaza CBS
92
</td>
<td align=center>Gaza
WB/CBS 91
</td>
</tr>
<tr>
<td><b>Estimates:</b></td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
</tr>
<tr>
<td>Percentage of total
population in LF</td>
<td align=center>13
</td>
<td align=center>18
</td>
<td align=center>20
</td>
<td align=center>17,5
</td>
<td align=center>17,4
</td>
</tr>
<tr>
<td>n</td>
<td align=center>3535
</td>
<td align=center>3535
</td>
<td align=center>958
</td>
<td align=center>NA
</td>
<td align=center>NA
</td>
</tr>
<tr>
<td>Percentage of total
population, 15 years or more</td>
<td align=center>49
</td>
<td align=center>49
</td>
<td align=center>50
</td>
<td align=center>49,7
</td>
<td align=center>50.7
</td>
</tr>
<tr>
<td>n</td>
<td align=center>3535
</td>
<td align=center>3535
</td>
<td align=center>958
</td>
<td align=center>NA
</td>
<td align=center>NA
</td>
</tr>
<tr>
<td>Percentage of adults in
labour force</td>
<td align=center>26
</td>
<td align=center>38
</td>
<td align=center>39
</td>
<td align=center>35,3
</td>
<td align=center>34,3
</td>
</tr>
<tr>
<td>n</td>
<td align=center>3535
</td>
<td align=center>3535
</td>
<td align=center>958
</td>
<td align=center>NA
</td>
<td align=center>NA
</td>
</tr>
<tr>
<td>Percentage of males in
sample</td>
<td align=center>49
</td>
<td align=center>49
</td>
<td align=center>50
</td>
<td> </td>
<td align=center>50,3
</td>
</tr>
<tr>
<td>n</td>
<td align=center>3549
</td>
<td align=center>3549
</td>
<td align=center>*
</td>
<td align=center>NA
</td>
<td align=center>NA
</td>
</tr>
<tr>
<td>Percentage of adult males
in LF</td>
<td align=center>47
</td>
<td align=center>52
</td>
<td align=center>72
</td>
<td align=center>70,3
</td>
<td align=center>68,4
</td>
</tr>
<tr>
<td>n</td>
<td align=center>1744
</td>
<td align=center>1744
</td>
<td align=center>477
</td>
<td align=center>NA
</td>
<td align=center>NA
</td>
</tr>
<tr>
<td>Percentage of adult
females in LF</td>
<td align=center>6
</td>
<td align=center>24
</td>
<td align=center>7
</td>
<td align=center>1,7
</td>
<td align=center>1,7
</td>
</tr>
<tr>
<td>n</td>
<td align=center>1792
</td>
<td align=center>1792
</td>
<td align=center>481
</td>
<td align=center>NA
</td>
<td align=center>NA
</td>
</tr>
<tr>
<td colspan="6">NA = Not available (CBS
figures partially calculated by FAFO from
"Statistical Abstract of Israel"; 1993 using <i>unadjusted</i>
population totals.<p>* The sex rate
in the FALCOT 92 report was fixed to 50% male/ female.
(The gender of the Randomly Selected Individual had to be
pre-selected due to a number of questions which required
female interviewers to interview female respondents.)
</td>
</tr>
</table><br><br>
The 1992 labour-force participation rates of FAFO and the CBS seem to be
approximately the same. Higher female participation rates for the FAFO survey
are most likely due to various aspects of survey implementation. To gain
the confidence of female respondents, FAFO used female interviewer pairs
for interviewing women. The FALCOT 92 report was also carefully designed
to obtain more accurate statistics on women's activities.<p>
Comparing 1993 FAFO results with FAFO and CBS/ World Bank figures for previous
years, we note that the participation rate for adult males seems to have
dropped dramatically. However, this rate for Gaza in 1993 is most likely
a temporary rather than a permanent phenomenon. Heightened requirements
as to formal education and productivity during an economic recovery period
may, however, prevent future adult male labour-force participation rates
from regaining their pre-closure levels.<p>
For women, the CBS/ World Bank labour-force participation rate would seem
implausibly low. Decreased fertility and/ or fewer cultural restrictions
with regard to socially "acceptable" work locations and types of work
for women could lead to a substantial increase in the future supply of female
labour. One possible indication of such a development is the already high
labour-force participation rate among the most highly educated women in
the FAFO survey population.<p>
FAFO's 1993 study found a relatively widespread engagement in household
income-generating activities, in particular among middle-aged and older
women. Most previous labour-force surveys in the Occupied Territories have
not managed (or tried) to record this type of labour activities in statistical
terms, even though it is formally covered by the ILO definitions for labour-force
participation.<p>
To cope with this challenge, FAFO experimented with an "expanded" labour-force
definition applied to the 1993 FALUP data set. Following this definition
the "labour-force" comprises all adults who are either labour-force
participants according to answers to the "standard" employment module
in the questionnaire, or who are engaged in household income-generating
household activities (excluding food processing) .<p>
Using this expanded definition almost quadruples the size of the female
labour-force. The male labour-force, however, increases by only 10%.<p>
As can be seen from figure 2.48, the resultant inflation of the labour force
is particularly dramatic for women between 30 and 60 years of age, and less
so for younger women. A possible explanation is that many of these women
are students or too occupied with child-bearing and rearing to engage in
extra income-generating household activities.<p>
<I>Figure 2.48 Labourforce in Gaza including those active in household production, by age. Percentage of all persons in Gaza</I><br>
<img src="bilder/248.gif">
<p>
Four different scenarios were elaborated for the development of the size
of the Gaza labour-force until the year 2000. In the first and the most
conservative scenario presented in figure 2.49, both male and female labour-force
participation rates (using the "standard" definition) stay unchanged
at the level of the FALUP 93 survey. In this case the Gaza labour-force
will reach 142,000 by the year 2000, of whom 125,000 will be males. Applying
the "expanded" labour-force definition to the FALUP 93 data set scenario
number two yields a Gaza labour-force of 204,000 by the year 2000, of whom
138,000 will be males.<p>
A third projection based on labour-force participation rates from the FALCOT
92 report, but with the same population size as above, yields a Gaza labour-force
by the year 2000 of 213,000. As many as 192,000 of these workers will be
males. The third scenario consequently yields about the same total labour-force
as scenario number two, but is radically different with regard to gender
composition.<p>
If the Gaza Strip experiences an economic recovery, the adult male participation
rate may be expected to approach the FALCOT 92 report level rather than
the level of the FALUP 93 survey. Let us now further assume that the "expanded"
labour-force definition used in the FALUP 93 survey manages to picture a
"reserve army" of potential female workers.<p>
Combining the "expanded" FALUP 93 labour-force participation rate for
females with that of males in the FALCOT 92 report yields the most radical
scenario for the Gaza labour-force. Under these assumptions, by the year
2000 the Gaza labour-force may comprise as many as 259,000 persons, of whom
192,000 will be males.<p>
How do the FAFO scenarios concerning the future size of the Gaza labour-force
compare with the World Bank's Work Force Module? Assuming that no changes
take place in labour-force participation rates, the World Bank presents
a projection of the Gaza labour-force of 171,000 persons by the year 2000.
Less than 5000 of these workers will be females.<p>
What conclusions can be drawn from the comparison of future labour-force
scenarios for the Gaza Strip? Based on constant labour-force participation
rates, the FAFO labour-force scenarios show considerable variance with the
World Bank figures. Our contention is thus that the future labour supply
is a rather uncertain variable.<p>
Secondly, if we assume that beliefs and behaviour emanate among the upper
social strata and spread downward, a possible future scenario may be an
increased desire for employment also among females with less education.
This would imply a marked increase in the aggregate desire for employment
among women in the future. For any total size of the future population,
we thus believe that women will represent a greater share of the labour
force than estimated by World Bank projections.<p>
<b><a name="concluding">Concluding remarks</a></b>
<p>
The introductory chapter described the large and possibly permanent adverse
change in household income which has hit the Occupied Territories after
the March 1993 border closure. The employment situation was expected to
deteriorate, due to the loss of jobs in Israel and to the decrease in the
local demand for labour following the drop in income.<p>
The two main aims of this chapter were: 1) to investigate and if possible
document the loss of employment in Gaza and the West Bank refugee camps
after the border closure; 2) to contribute to an understanding of the mechanisms
at work among individuals and households with regard to response and adaptation
to the post-closure situation. Our unit of analysis has been adult individuals.<p>
First of all we saw a dramatic drop in the 1993 adult male labour-force
participation rate compared to that of FALCOT 1992. The FALUP 93 survey
has found that in Gaza this reduction amounts to 1/3 of the males in the
1992 labour-force. In the West Bank refugee camps the reduction amounts
to 1/4.<p>
We have showed that the reduction in male labour-force participation reflects
widespread under-utilization of labour in the survey area. Regular unemployment
rates do not capture the magnitude of labour under-utilization, and have
remained roughly unchanged since 1992. These unemployment rates must consequently
be supplemented with the number of "discouraged workers" and the number
of employed persons who state that they want more work.<p>
The indirect employment effects of the border closure on local employment
do not emerge clearly with the indicators used in the survey. Many locally
employed workers, however, have expressed a desire for more work, which
may indicate that income levels (not measured by the survey) have dropped
between 1992 and 1993.<p>
The direct employment effects of the border closure are illustrated by the
finding that only half the persons employed in Israel in 1992 were still
working there in 1993. Of those who lost employment in Israel, two thirds
now express a desire for more work.<p>
Less than one fourth of those who lost their work in Israel have found new
employment in the Occupied Territories. Their employment characteristics
indicate a group of marginal workers, employed in low status jobs with high
instability and insecurity. There are no indications that these workers
have squeezed out other workers in local employment.<p>
In Gaza, the border closure seems to have affected non-refugees more than
refugees. The FALCOT 92 report showed that Greater Gaza City, where non-refugees
are over-represented, had the least difficult employment situation at the
time. The border closure has seemingly equalized regional differences in
Gaza, bringing all localities in the Gaza Strip up to the same high levels
of labour under-utilization.<p>
Many Israeli restrictions following the border closure have specifically
targeted young, unmarried men. Not surprisingly, the documented reduction
in employment is also strongest among these individuals.<p>
Most women in both areas are inactive in the labour market, and do not express
the desire to work more or to start working because they are either housewives,
students or old/ill. A breakdown by age and education however, indicates
that women's desire for work may increase in the future.<p>
All this shows that the loss of employment among Palestinians in Gaza and
the West Bank refugee camps after the border closure can be clearly documented.<p>
Our second goal in this chapter was to contribute to an understanding of
the mechanisms with regard to post-closure responses and adaptation. Here
we found that labour-force participation is primarily determined by factors
such as gender, age, marital status and position within he household. This
may indicate that individual response and adaptation strategies are closely
coordinated with household coping strategies, at least with regard to labour
activities.<p>
Second, we found nothing to indicate that persons outside the labour force
are more active in so-called household income-generating activities than
labour-force participants. Neither the non-active nor the "under-utilized",
nor those who lost employment in Israel between 1992 and 1993 were found
to be more involved in household production than the average population.
Household production seems to be a supplement rather than an alternative
to formal labour activity; such activities do not seem to play any compensatory
role with regard to individual adaptation to loss of formal employment.<p>
Third, it seems misleading to take the low and comparably stable open unemployment
rates as indicating that the labour market in the Occupied Territories has
adjusted quickly to reduced labour demand through lower wages. We found
that the reduction in formal employment is much larger if we take into consideration
both unemployment rates and the large number of "discouraged workers".<p>
Because the survey did not measure wages directly, we cannot tell whether
the substantial reduction in employment is due to a greater decrease in
the labour demand than has been assumed by the CBS/ the World Bank, or to
a less pronounced downward change in workers' reservation wages (i.e. the
lowest wage where employment is accepted) than could be expected.<p>
The high number of "discouraged workers" may support the latter explanation.
The reservation wage of these workers still seems to be above the wage level
they can obtain in the Occupied Territories. Many persons can still "afford"
to be inactive while looking for an "acceptable" job. The search for
any kind of local employment at any wage level has not yet been launched.<p>
One possible explanation for the apparently low downward change in workers'
reservation wages would be that the population expects the employment situation
to improve in the near future. The large proportion of male "discouraged
workers" who cite "security" related reasons for not seeking work may
support this assumption.<p>
If the border closure is regarded as being temporary, then employment in
Israel is expected to become available eventually, and workers may prefer
to await developments. Such expectations have solid foundations in the experience
of numerous fluctuations between tighter and more relaxed border restrictions
in recent years. Another factor which may explain why workers' reservation
wages do not seem to have declined very much is the expectation of an economic
revival in the Occupied Territories through foreign aid.<p>
In any case, the seemingly low downward change in of workers' reservation
wages may be a temporary phenomenon. In the long term, minimum consumption
expenditure requirements and depleted savings may force households to implement
all possible compensatory measures. Sources of income other than formal
labour activities and the household's access to capital will be crucial
to the development in workers' reservation wages, and hence the supply of
labour in the future.<p>
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