MAS Study: Calls for Stimulating the Construction Sector to Address the Rising Unemployment Crisis in Palestine

SadaNews - The Palestinian Economic Policy Research Institute (MAS) has issued a new study titled "The Capacity of the Construction Sector in the West Bank to Absorb Palestinian Workers Displaced from the Israeli Labor Market Following the War on the Gaza Strip." The study aimed to diagnose the reality of the construction sector in Palestine amid current political and economic conditions, and explore the possibility of reintegrating workers laid off from the Israeli labor market, who have become part of the ranks of the unemployed, into the local labor market in the West Bank, which is already suffering from high unemployment rates. 

The study indicates that the closure of the labor market to around 150,000-200,000 Palestinian workers, most of whom work in the construction sector, has led to an unprecedented rise in unemployment rates in the West Bank, escalating from 13% in the third quarter to 32% in the fourth quarter of 2023. The construction sector has been the most affected, with unemployment rates among its workers rising from 15% in the fourth quarter of 2022 to 68% in the corresponding quarter of 2023, coinciding with a sharp contraction in economic activity and a decrease in the sector's added value by 27% in 2023 compared to 2022, followed by an even larger decline of 38% in 2024 compared to 2023.

The study shows that the construction sector faces complex challenges, including weak demand for housing and construction projects, rising construction costs, and decreased purchasing power among households, alongside limited banking finance and difficulties for contractors to obtain the necessary loans to execute new projects. Additionally, the majority of workers in the sector possess limited skills, which further complicates their reintegration into the local labor market. 

The study emphasizes that despite government initiatives through programs such as "Bader" and "Tamheer" and digital employment platforms, the current response remains of limited impact and has not risen to the level of systematic developmental responses capable of creating large-scale job opportunities or stimulating the private sector. The absence of integrated operational policies linking laid-off workers with large projects and the weak coordination between the public and private sectors deepens the gap between the scale of the crisis and the available absorptive capacity.

The study recommends adopting a strategic approach that stimulates investment in housing and infrastructure projects, providing investment incentives for contractors and real estate developers, activating the role of the banking sector through the provision of guarantees and credit facilities for major projects, as well as integrating the construction sector into national developmental plans and adopting specialized vocational training programs that enhance workers' skills and keep pace with the latest developments in the construction sector. 

The study concludes that the capacity of the construction sector to absorb displaced workers will remain limited in the short term unless comprehensive investment and regulatory strategies are adopted to address the roots of the crisis. It also affirms that addressing the escalating unemployment crisis requires not relying solely on the construction sector, but rather directing part of the workforce towards other sectors more capable of absorbing unskilled labor, particularly agriculture and industry, while focusing on developing value chains and sub-sectors capable of overcoming the challenges of occupation, meeting local demand, and expanding into regional markets.