When Workers Are Removed from the Equation... How Does the Economy Suffocate?

Palestinian workers have never been just a social class seeking job opportunities; rather, they have formed one of the unannounced pillars of the Palestinian economy over the past years. Their presence in the labor market within the Green Line and settlements was not just a matter of employment, but a decisive factor in the equation of liquidity, total demand, and market stability. Thus, what we are experiencing today cannot be described as a "labor crisis" in the traditional sense, but as a structural imbalance that has affected the essence of the existing economic model.

Before the war, the number of Palestinian workers employed within the Green Line and settlements ranged between 180,000 to 200,000 workers. These were not merely a source of livelihood for their families but an active financial channel pumping liquidity daily into the arteries of the local economy. The average monthly wage for a single worker ranged between 6,000 to 8,000 shekels, meaning that the total monthly income flowing into the Palestinian economy from this source alone was about 1.2 to 1.5 billion shekels, which is approximately 14 to 18 billion shekels annually under normal conditions.

These figures do not just reflect individual incomes, but represent a moving cash flow that was rapidly recycled within the local market. Estimates indicate that more than 70% of workers' income was spent within the Palestinian economy on food, housing, education, transportation, services, and loan repayments. Thus, workers' income became one of the most important drivers of total demand, an indirect lever for trade, and a silent means of supporting economic stability.

With the near-total interruption of workers' activities, there was not only an income shock at the household level, but a widespread liquidity shock at the level of the entire economy. The loss of more than one billion shekels monthly in cash flows quickly reflected on the markets, where consumption declined, cash circulation slowed, and signs of recession appeared even in sectors where workers were not directly employed. Here, the crisis transitioned from homes to retail stores, then to supply chains, and finally to the financial sector.

This sharp decline in liquidity did not only strike commerce but also extended to the banking sector. A significant proportion of workers were committed to consumer and housing loans and regularly met their obligations based on a steady income. With this income halted, the risks of default increased, and restructuring operations surged, putting additional pressure on banks already suffering from liquidity bottlenecks and accumulated cash crises. In contrast, government indirect revenues declined, as the consumption funded by workers' income generated value-added taxes and local fees, estimated to incur losses today of hundreds of millions of shekels annually.

The most dangerous aspect of the situation is that the Palestinian worker has not only become unemployed but has turned into a forced economic burden that was not accounted for in any equation. The worker, who was self-reliant, supporting their family and easing the pressure on the state, suddenly found themselves outside the productive cycle, needing social support at a time when the government is already struggling with chronic financial deficits and delays in salary payments. Indicators suggest that unemployment rates in the West Bank have exceeded 25%, with much higher rates among the youth, threatening to erode the middle class and broaden the scope of social fragility.

This crisis is fundamentally different from its predecessors. In earlier stages, the workers' issue was managed with a temporary logic: permits were opened and closed, income decreased and then returned, allowing the economy to catch its breath. Today, we are facing a prolonged interruption, political ambiguity, and a lack of a clear perspective for return, meaning the economy has lost one of its most important sources of liquidity without having internal alternatives capable of compensating in terms of size or speed.

The biggest mistake is to continue treating the issue of workers as merely a livelihood or humanitarian concern. At its core, it is a sovereign economic issue par excellence. An economy that relies on its labor force outside its borders, without control over the terms of that reliance, is inherently fragile. When this workforce is suddenly withdrawn, we are not talking about transient unemployment, but about a forced reshaping of the economy, pushing it toward contraction, freezing investment, and shifting economic activity from production to survival management.

The long reliance on workers' income has created an illusion of stability, but it has concealed deep fragility in the structure of the local economy, which has never developed productive sectors capable of absorbing this volume of labor or compensating for this massive liquidity loss. Therefore, a return to the previous situation, if it occurs without radical review, means a return to the same fragile cycle.

In conclusion, when a small and constrained economy like the Palestinian economy loses more than 14 billion shekels annually in income and simultaneously bears additional social and financial burdens, we are not merely facing a labor crisis, but a structural malfunction in a complete economic model. The real question today is no longer: When will the workers return? But rather: Will we continue to build our economy on sources over which we have no control, or will we finally begin to reshape the foundation based on local production, employment policies, and genuine economic sovereignty?