Anyone who has walked into a supermarket, garage, or shopping center recently can clearly feel that the system is no longer functioning as it used to.
Orders are delayed, service is slow, and business owners are forced to perform three jobs at once, while customers have little patience left. This is not a temporary glitch or the result of summer vacations or weather conditions. It is a deep and ongoing labor crisis in the trade and services sector.
Since the war broke out in October 2023, hundreds of thousands of workers have left the labor market. Some were drafted, others left on their own, and many simply did not return. On top of this, more than 100,000 Palestinian workers who had been employed in Israel have been barred from entering.
Every sector of the economy has been affected, but trade and services has borne the brunt. In addition, even before the war, this sector was already facing a severe labor shortage. The reason is clear. Trade and services include many jobs that Israeli workers are unwilling to do, such as cleaners, shelf-stockers, freight handlers, and dishwashers.
This is especially true when, fortunately for Israel, unemployment is at a record low, allowing Israeli workers to choose other occupations. All of this has created an acute shortage of manpower that threatens entire industries.
The immediate solution, as is common around the world, is to employ foreign workers. The equation here is simple: For the market to function, it needs workers, and for workers to come, the state must allow businesses to bring them in. Instead, the state is making it harder.
Business owners willing to finance recruitment themselves, employ workers legally, and offer them regulated jobs encounter bureaucratic barriers, hesitant policies, and a refusal to acknowledge the scale of the crisis. Even when the state, encouraged by the Economy and Industry Ministry and the Prime Minister’s Office, decides to allocate foreign workers to trade and services, it does so in small quantities, in a slow drip, which increases costs for employers and makes recruitment more difficult.
The numbers speak for themselves: The state controls the allocation of foreign workers to all sectors, but because it releases quotas in very small batches, progress has been minimal. So far, only about 700 workers have actually arrived, and another 2,000 are still waiting to board flights.
The scale of the gap becomes even clearer when looking at the most recent figures.
The Economy and Industry Ministry recently issued another call for applications to employ foreign workers in trade and services, with room for only about 4,300 workers. Yet according to data presented to the Knesset Special Committee on Foreign Workers, that call drew more than 45,000 requests from over 1,500 employers. The difference between what businesses need and what the state provides could not be starker.
An important step forward
THIS PAST week, however, brought an important step forward. Following consistent pressure from the Federation of Israeli Chambers of Commerce, and with the support of the Economy and Industry Ministry, the government approved an increase in the quota for foreign workers in trade and services to a total of 25,000. This is a significant jump from the previous quota of 12,800 and includes an additional 12,200 workers.
Of the total quota, 25% will be recruited privately and another 25% through bilateral agreements, raising that share from 3,200 to 6,250 workers. The immediate impact is that 13,350 allocations are being distributed to employers who submitted applications in the June call for proposals, compared to only 4,200 before the decision.
The remaining 6,250 will be distributed once Israel signs bilateral agreements with relevant countries, or, if such agreements are delayed, through private recruitment. This is an important achievement for our sector and the economy as a whole, and while it will not solve the shortage entirely, it will provide much-needed breathing room and allow many businesses to keep operating and growing.
Yet, the consequences of the shortage remain severe. Small- and medium-sized businesses, which form the backbone of the economy, are still unable to recruit workers. Some are cutting back operations or closing entirely. When they close, we all feel it in prices, service availability, and quality of life. Even large companies are closing branches, halting expansion, and reducing service quality solely because of the lack of manpower.
Those who oppose bringing foreign workers into these sectors, often based on mistaken claims of protecting jobs for Israelis, ignore both the facts and the broader systemic consequences. This is not about any specific business; it is a matter of national resilience.
The equation is simple: When there are no workers, the public pays more, gets less, and the economy suffers. The result? Either decision-makers continue to act to resolve the crisis, too little and too late, or we will all end up paying the price of neglect. The next business to close will not be able to wait for decisions that come two months too late.
The writer is CEO of the Federation of Israeli Chambers of Commerce.