Following Hamas’s attacks on Israel on October 7th 2023, Israel suspended the entry of approximately 200,000 Palestinian workers into its labor market. Nearly one year later, the suspension largely holds. Its longevity has not only borne economic consequences, but also raised fundamental questions about the future of Israel’s colonial strategy.
Since the early years of its military occupation (1967-1970), Israel has focused on creating and sustaining Palestinian dependence on its economy, using labor and trade channels to that effect. Serving three functions, Palestine’s dependence furnished Israel with a mechanism for controlling and subjugating Palestinian populations, de-developing the Palestinian national economy, and boosting the Israeli economy.
Mindful of these benefits, segments of Israel’s economic and political elite have, in the post-October 7th period, warned against revising the arrangements which foster Palestinian economic dependence. Businessmen in a number of sectors (construction especially) have pressured Benjamin Netanyahu’s coalition government to reissue labor permits to Palestinian workers, cognizant that their profit rates hinge on the exploitation of Palestinian labor. High ranking members of security establishment, including senior personnel from the Army and Civil Administration (Israel’s governing authority for the occupied territories), have also encouraged the government to lift the suspension, seeing Palestinian employment in Israel as a way of staving off greater unrest in the West Bank.
Nevertheless, the far-right coalition government has proven impervious to their lobbying, even initiating plans for importing labor from Asia. Leading the rejectionist camp are the stalwarts of Israel’s New Right—Bezalel Smotrich, Itamar Ben-Gvir and their allies in Likud. A complex configuration, Israel’s New Right is united by religious zeal, the conviction that Jewish sovereignty should be extended to all of historic Palestine, and shared opposition to liberal values (more generally) and secularism’s separation of state from faith (more specifically). Ideologically, the New Right draws upon a diversity of sources, including Kahanism, Kookism, and classic religious Zionism.[1] Socially, it retains a significant base amongst the Hardalim (ultra-orthodox nationalists) and the wider settler community. On the question of labor permitting, the New Right’s champions frame Palestinian workers as a national security threat. Their posture suggests that the current suspension may not be a temporary wartime measure, but the opening gambit of a new long-term plan. It also highlights an ideological divide within Israel’s political class. Rejecting the traditional colonial governance approach, the New Right favors a more direct and exclusionary stance on the Palestine issue. Instead of using economic tools to maintain political control, they focus on territorial expansion, violent repression, and population transfer.
In light of this, we must ask whether Israel, today dominated by its ascendant New Right, will retain economic dependence as a tool necessary for maintaining Palestinian subjugation.
Palestinian Labor Migration to Israel: A Short History
On the eve of October 7th, 2023, Palestinian workers in Israeli workplaces comprised 22.5% of the West Bank workforce. These workers earned an average of USD 80 per day, more than twice the wage of those employed within the West Bank, where the daily rate is approximately USD 30. Set in relative terms, the earnings of Palestinian workers in Israel represented nearly 24% to the West Bank’s GDP. As such, despite being subjected to exploitative conditions in Israel (and in Israeli settlements), these workers’ contributions to economic life in the West Bank is beyond contention.[2]
While market dynamics stemming from Palestine’s uneven integration into the Israeli economy do serve to pull Palestinian workers into Israeli workplaces, they are not the primary driver. Israel’s colonial strategy is.
From 1967 on, Israeli governments recognized that the entry of Palestinian workers into Israel could be used as a tool for controlling the Palestinian population and managing them as non-citizen subjects. The efficacy of this tool required that the Palestinian population not have recourse to opportunities within the occupied territories themselves. Hence, the systematic undermining of the Palestinian economy—a process Sara Roy calls “de-development”: a deliberate process by which Israel undermines the Palestinian economy through stripping it of its ability to grow or become self-sufficient. Materially, de-development is achieved through dispossession; systems for restricting access to machinery, primary goods, and financing; controls on external trade; and forced exposure to Israeli products..[3] Over the course of many decades, this process left substantial portions of Palestinian society—working- and lower-middle-class individuals from cities, villages, and refugee camps across the West Bank especially—without any way of meeting their basic needs apart from employment inside Israel. With unemployment rates in Palestinian territories nearing 18%[4]—and rising to as high as 40% during the ongoing war—work in Israel has often been seen as a “privilege.”
For the Israeli security and intelligence services, the belief is that the dependency created by these policies ensures that many Palestinians prioritize access to Israeli workplaces over participation in resistance movements or engagement in political activities aimed at liberation.[5] As noted by Shlomo Gazit, Israel’s first military coordinator of the occupied territories, labor migration serves not only economic interests but also political and security purposes within the broader context of the Israeli colonial rule in the occupied Palestinian territories.[6] This strategy is reinforced by Israel’s use of military force to suppress Palestinian resistance, often deploying collective punishments, home demolitions, and stringent closures of Palestinian areas.
Economic Inclusion as a means of political exclusion : Since 1967, Israeli colonial policymaking was premised upon the notion that the “economic inclusion” of Palestinian workers will contribute to their “political exclusion”. Over the five-plus decades of the Israeli occupation, the process of managing Palestinian economic inclusion would evolve into a complex system administrated and overseen by the Civil Administration and the Israeli army and based on a permit regime. The permit regime operates as a mechanism to control the movement of Palestinian workers, regulating their labor through taxes, statistics, and quotas. It also serves as a tool for monitoring and controlling the political and social behavior of Palestinians, with permits contingent on personal profiles that ensure individuals are politically “clean” and meet specific criteria related to age, gender, and place of residence.[7] The permit system is maintained through two primary mechanisms. First, a mobility-control infrastructure has been established. It consists of a network of checkpoints, crossing gates, the mandatory installation and use of the Israeli Al-Munassiq app., and the routinization of worker flows akin to frontier-style border crossings, where thousands of Palestinians queue each morning. Leila Farsakh posits that this system of spatial and infrastructural control has, in conjunction with the de-development of the Palestinian economy, contributed to the bantustanization of Palestinian territories and the transformation of Palestinian workers into labor reserves for the Israeli economy.[8] The second mechanism sustaining the permit regime is the bureaucratic process for permit issuance. The process is overseen by the Civil Administration but intertwined with a web of brokers, supervisors, recruiters, and black-market permit sellers. These actors fragment and diversify the channels handling Palestinian labor flow into Israel. Together with Israel’s system of infrastructural control, they serve as a disciplinary force for Palestinian workers while also reinforce the broader colonial framework of governance.[9]After 2006, Israel adopted a dual approach toward Palestinian territories. In the West Bank, Israel maintained the strategy of deepening Palestinian economic dependency, making it increasingly difficult for Palestinians to extricate themselves from their reliance on the Israeli labor market. Contrarily, in Gaza, Israel has pursued a policy of collective punishment, which has entailed depriving Gazan residents of employment opportunities inside Israel.[10] In 2022, Israel introduced a shift in its Gaza policy by initiating a pilot program allowing 20,000 Gazans to work in Israel. However, the events of October 7 marked a decisive turning point for this experiment, bringing its future into question.
As intimated in the introduction, fostering Palestinian economic dependency generated economic as well as political gains for Israel. For the Israeli private sector, imported Palestinian workers provided huge savings on wage payments while also furnishing a source of skilled labor otherwise unavailable in the domestic market. Amongst other things, this enhanced the global competitiveness of Israeli products and significantly lowered housing costs. With time, however, key industries such as construction, agriculture, and certain manufacturing and service sectors grew heavily reliant on Palestinian labor: Although unintended, the imposition of Palestine’s economic dependence on Israel led the Israeli economy to develop its own dependency on the daily flow of low-wage Palestinian workers.
It was by virtue of their dependence on Palestinian workers that leading firms in the construction and agrifood sectors coalesced to form an influential lobby for Palestinian labor mobility.[11] The scale of their reliance on Palestinian labor can be gleaned through a few data points. Prior to the October 7th attacks, Palestinian workers constituted 29% of Israel’s construction workforce. According to the Knesset committee for foreign workers—which held a special session to address the losses from the post-October 7th suspension of Palestinian labor entry—the state’s non-permitting of Palestinian construction workers has led to a 35% reduction in the sector’s monthly output in 2024. In nominal terms, the loss is USD 650 million. In agriculture, the suspension of Palestinian labor permits has caused a 12% workforce reduction, leading to a 19% decrease in output (equivalent to USD 116 million).[12] To date, efforts to replace Palestinian workers with laborers recruited from India, Africa, and east Asia have yielded no fruits.[13]
Israel’s debate over Palestinian labor migration
The prolonged suspension of Palestinian labor since October has generated economic repercussions on both sides of the greenline, highlighting the centrality of Palestinian labor to both the Palestinian and Israeli economies. (The role Palestinian labor plays for the two economies is, of course, vastly different). Regardless, Israel’s New Right remains steadfast in its opposition to lifting the suspension on labor permitting. Kingmakers in Netanyahu’s coalition, their opposition has largely paralyzed the government from taking action.
Selective Restoration of Labor Permits: As an exceptional measure, roughly 8,000 workers were allowed into Israel for urgent wartime service work (such as digging graves or hotel service) during the early months of the Gazan genocide. Additionally, around 10,000 workers were permitted to continue working in Israeli industrial zones located within the West Bank (i.e. not inside Israel proper[1]). For more than a hundred thousand other workers, however, the labor market remains closed at the time of writing, leading to the suspension of half of all construction projects in Israel and a worsening of the country’s fiscal and growth performance with each passing day.
The debate over allowing Palestinian workers back into Israel is animated by a New Right agenda which seeks to end Israel’s dependence on the Palestinians.[14] As conceived by extremist figures like Likud’s Moshe Saada, decoupling from Palestine (and Palestinians) is a moral imperative as much as anything else. Finance Minister Bezalel Smotrich has been essential to the advance of the New Right’s agenda—and his leveraging of security concerns has been key. Following the deadly Palestinian attack in Ra’anana in mid-January 2024, Smotrich publicly declared that in stopping the return of tens of thousands of Palestinian workers to Israel, he would “prevent future attacks”. Brushing away warnings from economists and the construction industry about the devastating impact this could have on Israel’s economic growth, the Finance Minister vowed not to succumb to “external pressure”.
The New Right’s obstinacy has painted Benjamin Netanyahu into a corner. Even with Knesset committee chairman Eli Revivo raising concerns over the economic losses incurred by the suspension on labor permitting as early as December of last year, the Prime Minister’s need for Smotrich and Ben-Gvir’s support has dictated that he stay the course.[15] With the New Right likely in the driver’s seat going forward, this points to a possible change to Israel’s larger colonial strategy.
From the early days of the occupation (1967–1970), Israel employed a “carrot-and-stick” strategy to govern the Palestinian population, combining economic incentives with coercive measures. As covered, the main “carrot” was the economic integration of Palestinian workers into Israel’s labor market, overseen by the Israeli Civil Administration. By allowing Palestinians to work in Israel, the administration fostered economic dependency, which Israel viewed as a tool for reducing conflict intensity while maintaining control over the population. The “stick”, meanwhile, consisted of military force, intensive surveillance, and enclosure, the latter deployed most aggressively during periods of unrest (such as the second intifada). With force alone never sufficient to fully subdue Palestinian resistance, over time, a highly complex approach evolved, blending tools of repression with limited economic and social measures. At the level of highest abstraction, the approach can be classified as “conflict management”. In objective, conflict management set out to retain Israel’s sovereignty over all of Mandate Palestine—and as such, to prevent the establishment of an independent Palestinian states on the lands occupied after 1967—and to do so without conveying citizenship onto the Palestinians of the occupied territories (as the latter would threaten the Jewish character of the Israeli state). In method, conflict management required deploying carrots and sticks in such a manner as to prevent the conflict from taking on existential stakes. The Judaization of Palestinian lands continued as did expansions to existing settlements. By keeping the possibility of Palestinian statehood nominally alive, exploiting economic dependence, and repressing pockets of resistance, however, systemic challenges to the status quo could be averted.
In both practice and strategy, Israel’s New-Right leadership is taking a different line in the West Bank. Concerning practice, the extremities of the Israeli army’s violence in the West Bank in recent times, particular since October 7th, makes clear that the New Right draws no redlines in administering the state’s destructive powers: The current leadership favors sticks, nearly to the exclusion of carrots, in dealing with the West Bank. On strategy, meanwhile, the current governing coalition looks to be unconvinced by “conflict management”—regardless of its efficacy.[16] Preferring a more direct approach, they instead angle for a final resolution to the Palestine question, economic consequences (and political blowback) be what they may.
Indeed, for Bezalel Smotrich and his fellow travelers on the New Right, the answer to the question of Palestine (and the Palestinians) centers on exclusion and territorial expansion. Theirs is an outlook rooted in the belief that Jewish and Palestinian national aspirations cannot co-exist within the same territory. Derived from such a belief, Smotrich’s plan, often referred to as the “Decisive Plan”[17], advocates for the full annexation of the West Bank and official extension of Israeli sovereignty. This he frames as a victory and peace plan, arguing that the latter can only be achieved through the complete defeat of Palestinian nationalism.
For the Palestinian people of the occupied territories, Smotrich plan presents two options. Those willing to abandon national ambitions may remain in the “Israeli West Bank” as residents without citizenship; those unwilling to do so will be encouraged to emigrate with financial incentives. Ipso facto, Smotrich’s plan is grounded in a rejection of the two-state solution and a commitment to the “redemption” of the West Bank through the expansion of Jewish settlements. It is also explicitly premised upon population transfer.
Conclusion
While the “Decisive Plan” is most closely associated with Smotrich and religious Zionism, it is important to recognize that its objectives are accepted across Israel’s New Right, which includes large segments of the Likud party. In the eyes of this camp, a colonial strategy based upon conflict management and Palestinian economic dependence might have merits, but it ultimately left Israel’s economy in a vulnerable condition while failing to extinguish Palestinian national aspirations. In view of their outlook, while allowing Palestinian workers back into the Israeli labor market is obviously the most practical short-term option, it seems like that the current coalition government will resist taking it for as long as possible. Instead, they will continue seeking out alternative labor imports from India, Africa, and east Asia.
The political consequences of Israel’s ongoing genocide of the Palestinians are yet to be determined. What is clear at our current juncture is that conservative and far-right factions are gaining power and influence within Israel with each passing day. They presently hold key positions not only in Netanyahu’s cabinet but in the Army and Civil Administration, which are increasingly dominated by Smotrich, Ben-Gvir and their faithful lieutenants. Their ascendance points in only one direction: to more radical and violent approaches to the Israeli-Palestinian conflict.
This publication has been supported by the Rosa-Luxemburg-Stiftung. The positions expressed herein do not necessarily reflect the views of Rosa-Luxemburg-Stiftung.
[1] Daniel Mahla, “Convergence of fundamentalisms? Ultra-Orthodox Nationalists (Hardalim) in Israel, Zeitschrift fur Religion, Gesselschaft und Politik 7 (May 2022).
[2] IMF, “West Bank and Gaza,” International Monetary Fund, Middle East and Central Asia Dept. 2023, no. 327 (September 2023): 1, doi:10.5089/9798400253843.002.
[3] Leila Farsakh, Palestinian Labour Migration to Israel: Labour, Land and Occupation, The Routledge Political Economy of the Middle East and North Africa Series 3 (Abingdon [England] ; New York: Routledge, 2005).
[4] PCBS, “Labour Force Survey: (January- March, 2022) Round, (Q1/2022),” press release (Ramallah: Palestinian Central Bureau of Statistics, 2022), online.
[5] Tariq Dana, “Dominate and Pacify: Contextualizing the Political Economy of the Occupied Palestinian Territories Since 1967,” in Political Economy of Palestine, ed. Alaa Tartir, Tariq Dana, and Timothy Seidel (Cham: Springer International Publishing, 2021), 25–47, doi:10.1007/978-3-030-68643-7_2.
[6] Gabi Siboni, Kobi Michael, and Anat Kurz, eds., Six Days, Fifty Years: The June 1967 War and Its Aftermath, Memorandum No. 184 (Tel Aviv: Institute for National Security Studies, 2018).
[7] Yael Berda, The Bureaucracy of the Occupation: The Permit Regime in the West Bank, 2000–2006 (Jerusalem: Van Leer Institutie, 2012).
[8] Leila Farsakh, “Independence, Cantons, or Bantustans: Whither the Palestinian State?,” The Middle East Journal 59, no. 2 (April 1, 2005): 230–45, doi:10.3751/59.2.13.
[9] Walid Habbas, “Palestinian Workers in the Israeli Market: The Labour Permit Brokerage System,” Roundtable (Ramallah: Palestine Economic Policy Research Institute (MAS), 2020), http://dx.doi.org/10.13140/RG.2.2.28131.68647.
[10] Raja Khalidi, “What Is the ‘Palestinian Economy’?,” in Between State and Non-State: Politics and Society in Kurdistan-Iraq and Palestine, ed. Gülistan Gürbey, Sabine Hofmann, and Ferhad Ibrahim Seyder (New York: Palgrave Macmillan, 2017), 123–39.
[11] Walid Habbas, “Upending the Israeli Border Function During COVID-19: The Case of Construction Labour,” Borders in Globalization Review 1, no. 3 (forthcoming 2020).
[12] Knesset, “During a Discussion on the Entry of Palestinian Laborers into Israel, It Became Clear: While There Is No Permission for the Entry of Workers from the Palestinian Authority into Agriculture in Israel, There Is Permission for the Entry of Workers into Judea and Samaria,” Knesset, January 10, 2024, online.
[13] Yehouda Sharoni, “Bank of Israel Report: The Government Should Approve the Entry of Palestinians into the Construction Industry,” Maariv, March 31, 2024, online.
[14] Knesset, “During a Discussion on the Entry of Palestinian Laborers into Israel, It Became Clear: While There Is No Permission for the Entry of Workers from the Palestinian Authority into Agriculture in Israel, There Is Permission for the Entry of Workers into Judea and Samaria.”
[15] Yehouda Sharoni, “Bank of Israel Report: The Government Should Approve the Entry of Palestinians into the Construction Industry,” Maariv, March 31, 2024, online.
[16] In the case of the West Bank, it could certainly be argued that the conflict management approach has been highly beneficial to Israel. Eschewing it to pursue total enclosure (including denial of all worker entry), akin to the policy in Gaza, would seem to carry enormous risk for relatively few rewards.
[17] Bezalel Smotrich, “Israel’s Decisive Plan” (Jerusalem, 2017), online.