Israel Faces Job Losses as Production Shifts Abroad

Israel's export growth is masking a concerning trend where a significant portion of goods sold internationally are no longer physically produced within the country, potentially impacting the domestic job market. Approximately 40% of Israeli companies' trade operations now involve products manufactured outside Israel and shipped directly to overseas buyers, a phenomenon that has rapidly increased since before 2023.

This shift means that while Israeli companies may retain management, engineering, and intellectual property domestically, the actual manufacturing jobs are being created abroad. This trend is particularly concerning for traditional industries, as the relocation of a factory can also lead to a loss of business for local suppliers, logistics firms, and related industries that depend on large-scale production.

Data from Israel's Central Bureau of Statistics shows that in the second quarter of 2026, these offshore operations amounted to about $11.2 billion. This contrasts sharply with the pre-2023 period when such operations constituted only about 9% of товарный экспорт (merchandise exports). In 2025, the total volume of these operations reached approximately $16.1 billion for the entire year.

Several factors contribute to this trend, including the high cost of doing business in Israel, such as labor costs, taxes, and regulations. A strong shekel also makes local production less competitive when companies earn revenue in foreign currencies but incur expenses in shekels. Additionally, post-October 2023, political and reputational risks have led some companies to consider production in third countries.

While successful companies can still contribute to Israel's economy through profits and taxes, the diminishing number of on-site manufacturing jobs poses a significant challenge, especially for regions heavily reliant on industry. Rebuilding these production chains once they are moved abroad is considerably more difficult.