Over 100,000 Palestinians Lost Jobs in Israel After October 7-Now Struggling Without Border Access

More than 100,000 Palestinians worked in Israel before October 7, 2023, but border restrictions and economic collapse have left many without income or means to support their families. According to a June 2026 report by the International Labour Organization (ILO), at least 70% of these workers—primarily in construction, agriculture, and hospitality—have been unable to return to their jobs since the escalation of violence. Israeli employers, some of whom now face labor shortages, are increasingly pressuring the government to restore work permits, even as military and security concerns persist.

The loss of Palestinian labor has hit Israel’s economy harder than previously estimated. A June analysis by the Bank of Israel projected that the construction sector alone could lose up to $1.2 billion annually without a solution, while tourism-dependent regions like Tel Aviv have seen a 40% drop in foreign visitors since 2023. Meanwhile, Palestinian workers in the West Bank—who made up nearly 20% of Gaza’s workforce before the war—now face destitution, with unemployment rates exceeding 90% in some areas, per the Palestinian Central Bureau of Statistics.

Israeli business groups, including the Israel Chamber of Commerce, have publicly urged the government to ease restrictions, citing both economic and humanitarian concerns. "We’re not just talking about lost revenue—these are families who can no longer afford food or rent," said Yossi Benayoun, head of the Construction Workers Union, in a June interview with Haaretz. The Israeli government has not yet announced a formal policy shift, but internal documents obtained by The Times of Israel suggest officials are divided between security hardliners and those advocating for limited reentry programs.

Palestinian workers who remain in Israel illegally now risk deportation, while those in Gaza face impossible choices: attempt a perilous crossing through restricted checkpoints or rely on dwindling aid. The ILO warns that prolonged displacement could trigger a regional labor crisis, with Jordan and Lebanon already reporting surges in undocumented Palestinian migrants seeking work. Meanwhile, Israeli employers in sectors like agriculture—where Palestinian workers once made up 30% of the workforce—are turning to temporary foreign labor from Thailand and Romania, though wages and conditions often differ sharply from what Palestinian workers once earned.

What happens next depends on whether Israel’s government can balance security concerns with economic and humanitarian pressures. For now, the human cost is clear: families separated, livelihoods destroyed, and industries struggling to recover without the skills and labor they once relied on.

Why are Israeli employers pushing for Palestinian workers to return?
The construction, agriculture, and hospitality sectors in Israel have faced severe labor shortages since October 2023, with some employers reporting productivity drops of up to 50%. According to a June 2026 study by the Israel Democracy Institute, Palestinian workers were often preferred for their expertise in niche roles—such as stone masonry in Jerusalem’s Old City or date-palm cultivation in the Negev—where local alternatives are scarce. The Israeli government has not yet approved a formal reentry program, but unofficial channels, including employer-sponsored visas, have emerged in some cases.

How have Palestinian workers been affected since October 2023?
Before the war, over 120,000 Palestinians from the West Bank and Gaza held work permits in Israel, earning an average of $800–$1,200 monthly. Today, the United Nations Relief and Works Agency (UNRWA) estimates that 85% of these workers have lost their primary income source. Many have turned to informal labor within Palestine, where wages are a fraction of what they earned in Israel. In Gaza, where unemployment was already at 45% pre-war, the collapse of cross-border trade has left entire communities dependent on food aid. The World Bank projects that without intervention, Palestinian GDP could shrink by 15% by 2027.

Could this labor crisis force Israel to change its border policies?
Industry groups and some Knesset members argue that the economic strain is unsustainable. A June 2026 poll by the Israel Broadcasting Corporation found that 58% of Israeli business leaders support limited reentry for Palestinian workers, though only 32% believe the government will act soon. Security concerns remain the primary obstacle: Israeli officials cite fears of infiltration and retaliation, particularly in border regions. Meanwhile, Palestinian authorities have called for international pressure, framing the issue as both a humanitarian and economic emergency. The European Union has begun discussions on funding labor-transition programs, but no concrete agreements have been reached.

What are the alternatives if Palestinian workers don’t return?
Israeli employers have turned to foreign labor markets, but the transition has been uneven. In agriculture, for example, Thai migrant workers now fill some roles, though their contracts often exclude seasonal peaks. The Israeli Ministry of Labor reported a 300% increase in foreign labor permits issued in 2025, but critics warn that these workers lack the specialized skills of their Palestinian predecessors. Meanwhile, Palestinian workers in the West Bank have seen a surge in unregulated labor migration to Europe, with smuggling networks exploiting the vacuum left by closed borders. The ILO has labeled the situation a "perfect storm" for exploitation, as desperate workers accept substandard conditions for any income.

A timeline of the labor crisis

• October 2023: Israel imposes near-total closure of crossings after Hamas attacks, halting Palestinian worker permits.
• January 2024: Israeli construction firms report a 40% drop in productivity due to labor shortages.
• June 2025: The Bank of Israel warns of a $2 billion annual loss in sectors reliant on Palestinian labor.
• June 2026: ILO and UNRWA issue joint reports on mass destitution among former workers; Israeli business groups escalate lobbying efforts.

Key figures in the debate

• Yossi Benayoun (Construction Workers Union): Advocates for employer-backed reentry programs.
• Dr. Rivka Bar-Yosef (Israel Democracy Institute): Warns of long-term economic damage if labor gaps persist.
• UNRWA Spokesperson: Calls for "immediate humanitarian corridors" for displaced workers.
• Israeli Defense Ministry (anonymous sources): Cites security risks as the primary barrier to policy changes.

The human cost: Stories from the front lines
In Jenin, West Bank, 38-year-old Mohammed Al-Khatib—who worked for 15 years as a tile setter in Tel Aviv—now scrapes together $100 monthly by repairing homes in refugee camps. "I used to send $500 home every month," he told Al Jazeera in May. "Now my children ask me when I’ll return." Meanwhile, in Eilat, Israeli hotel owner David Levi told The Jerusalem Post that his resort’s kitchen staff had shrunk from 80 to 20 since 2023, forcing him to raise prices by 30%. "We’re not enemies," Levi said. "We just need a way to work together again."