Israel: What is the labor situation in the construction sector and the labor market?

The growing share of foreign workers, who work higher average hours, has helped mitigate the decline in total hours worked compared to the pre-conflict period (-4%). Given the sustained demand for construction, the Chief Economist of the Israeli Ministry of Finance (MoF) estimates, however, that there is still a shortage of 38,000 workers in the sector.

This gradual recovery is the result of a restructuring of the sector’s workforce, illustrated in particular by the increase in the number of foreign workers.

The MoF notes a significant increase in their share in construction (+121% compared to Q3 2023). They come mainly from the Indian subcontinent and China via private or bilateral channels. The private channel, through which Israeli companies directly recruit workers abroad, has been encouraged by the Ministry of Construction and Housing. The initial quota of 20,000 foreign workers was increased by 5,000 positions in December 2024 and again in February 2025, bringing the total authorized workers to 30,000. The government has also relaxed entry criteria, for example, allowing 50% of recruitments to be exempt from practical tests.

The bilateral channel, which is based on intergovernmental agreements, has undergone some changes. The most recent agreements concern India (November 2023), Sri Lanka (November 2023–January 2024), and Thailand (renewal and extension between late 2024 and early 2025). Previous agreements also exist with European countries such as Moldova and Romania, the Philippines, and China.

In March 2017, Israel signed a bilateral agreement with China allowing the reception of up to 20,000 Chinese workers in the construction sector, but this quota was never reached due to security tensions and the war. However, following the relaunch of the recruitment process in May 2025, 4,000 new Chinese workers are expected to join construction sites.

Finally, Israel is developing a third labor channel: foreign construction companies operating directly on its soil with their own staff. An initial call for tenders in April 2025 from the Ministry of Construction and Housing selected four companies, including two from Singapore and Vietnam, authorized to work on large-scale residential projects and benefiting from a five-year renewable license.

The increase in the number of Israeli workers is barely offsetting the departure of Palestinians.

Palestinian workers, who numbered 109,000 before the war, now number 21,000, mostly employed in settlements in the occupied West Bank. Although insufficient, the increase in Israeli workers (Arab and non-Arab) is notable, with their share expected to increase by 11% and 28% respectively between the third quarter of 2023 and the first quarter of 2025.

This is the result of financial incentives and government programs (accelerated skills training, hiring subsidies for employers). At the same time, the Histadrut (General Federation of Israeli Trade Unions) has played a central role in wage negotiations with employers.

It secured a significant increase in the basic monthly wage in the construction sector, rising from 5,300 NIS to approximately 6,300 NIS, projected by December 2025 (+19%).

Source: French Embassy in Israel