​Summary:

  • The labor market was affected by the surge in demand in 2007 and was characterized by the marked expansion of employment, the significant contraction of unemployment alongside the reduction of its depth, and a rise in the real wage. 
  • The improved chances of finding employment encouraged persons who had not been part of the labor force to join it; thus, the participation rate rose, and the number of discouraged workers fell. 
  • Employment expanded this year in industries that are human-capital intensive as well as in those employing less-educated workers, and wages rose in almost all industries. The unemployment rate among educated workers neared its ‘natural’ rate, and the situation of workers with 11–12 years of education improved, although the unemployment rate remained high for persons with a low level of education. 
  • Unit labor cost rose for the first time since the emergence from the recession at the beginning of the current decade. This was the result of the slowing of the growth rate of labor productivity, and attests to the fact that the economy is approaching capacity utilization of the factors of production. 
  • After an extensive decline in the cyclical component of unemployment, most of the remaining unemployment reflects a mismatch between the level of human capital required and that offered. The employment rate of persons with less than 12 years of schooling rose slightly, but they continued to leave the labor force despite the policy measures adopted to encourage them to move ‘from welfare to work.’ 
  • The government’s policy in the labor market focused on implementing the labor laws, subsidizing employment, and increasing remuneration for work through the long-term reform of income tax. At the end of the year the earned income tax credit reform legislation was adopted, and will initially be introduced in certain regions. On the other hand, the policy regarding foreign workers weakened, and the number of these workers even increased in 2007. In spite of the measures introduced, the rate of government expenditure on active labor market policy is only 0.21 percent of GDP, compared with an average of 0.7 percent in the OECD countries.


The Labor Market - Full File