Israeli Labor Report Shows Stagnant Employment Among Ultra-Orthodox Men Amid High Demand for Workers
The Israeli Ministry of Labor's 2025 labor market report reveals a sharp rise in labor demand, reducing the adjusted unemployment rate to about 3.5%, one of the lowest historically. Employment rates hovered around 60.3%, slightly below the pre-‘Resistance War’ level of 61%, with declines mainly among young adults aged 25-40 and residents of northern communities affected by recent conflicts. In northern border towns, employment dropped from 77.6% before the war to 74%, with northern men experiencing the steepest decline from 79% to 64% in mid-2025.
The report highlights challenges in growth towns reliant on manufacturing, construction, and agriculture, sectors struggling to maintain employment during crises. Despite high labor demand, with 152,000 job vacancies (4.6%), real wages rose only 0.3%, largely due to a 1.6% wage drop in the public sector and wage restraint in low-paying industries. The Ministry notes that expanding foreign worker quotas, which reached about 230,000 by late 2025, eased shortages in construction and other sectors but raised concerns about local employment opportunities and wage impacts.
The high-tech sector expanded by 2.3%, employing around 405,000 workers, driven by a 4% increase in core technological roles, while peripheral roles like marketing and administration declined. For the first time in a decade, software developers shifted from a labor shortage to a surplus. The report attributes rising demand for AI and data-related jobs to increased AI adoption, which also requires workers to update their skills rather than face job losses.
However, the report points to a decline in new computer science students, possibly due to labor market challenges, though graduate-level enrollment remains stable, reflecting demand for more skilled tech workers. A significant concern is the stagnant employment rate among ultra-Orthodox men, which remained around 53% from 2015 to 2025, with young ultra-Orthodox men’s employment at only 47.3%, below all other demographic groups and lower than a decade ago. This stagnation casts doubt on the government’s 65% employment target for 2030.
Rubi Shemesh, CEO of the Ministry of Labor, emphasized the labor market's relative stability despite security challenges, noting significant structural changes including AI’s impact, high-tech sector shifts, and increased foreign labor. He stressed the need to invest in human capital and improve worker productivity to adapt to the rapidly changing market.
