The employment of Palestinians, including refugees, is one of the main problems that must be solved if the stability of the region is to be ensured. This is particularly the case in the context of the current negotiations, bearing in mind the lack of a labor infrastructure in the West Bank and Gaza.
The only viable solution is the creation of such an infrastructure in these territories, because employment trends and political conditions in Israel and the Arab countries indicate that Palestinian workers will be increasingly replaced by workers from other Arab countries, cheap Asian labor, or (in the case of Israel) by new immigrants.

The Gulf States

Both past migration patterns among Palestinians, and current political and economic conditions, point to the conclusion that the work force in the West Bank and Gaza cannot expect either the Gulf states or Jordan to solve their employment problems. The reasons for Palestinian migration have never been purely economic. Both the 1948 and the 1967 wars were causes of large-scale Palestinian emigration, whereas Israeli economic expansion in the early 1970s stemmed the tide. There was a demand for Palestinian labor, and many workers found employment in the Israeli economy. This, however, proved to be a temporary trend, and the Israeli economic slowdown of the mid-1970s, combined with opportunities in the Gulf states, resulted in a sharp increase in Palestinian emigration. At the same time, accumulated savings and external Arab financing precipitated an increase in construction in the West Bank and Gaza, and this countered the trend to emigration.
In the early 1980s migration to the Gulf states reached a peak, but the proportion of Palestinians was lower than it might have been, due to the preference of the Gulf states for what they regarded as "less volatile" workers from Arab countries with "moderate" regimes. This was true even of Iraq, which employed 1.5 million Egyptians, preferring them to Syrians, despite the diplomatic break between Iraq and Egypt resulting from the peace agreement with Israel.
Few Palestinians have been granted citizenship by the Gulf states, even those who have lived there since 1948. Kuwait and the United Arab Emirates took steps in the early 1980s to ensure that their Palestinian populations would not increase. One of the measures adopted was to require migrant workers who wanted to change jobs to leave the country first. These regulations were aimed mainly at residents of the West Bank and the Gaza Strip. Palestinian researchers were prevented from participating in Kuwaiti research projects, and Palestinian tourists were often turned back at the border. The Kuwaitis even went so far as to obtain a computer program from a Scandinavian country that checked the names of people entering the country against lists of Palestinian names to see whether the date and place of birth had been altered. This measure was aimed against Palestinians who might have obtained citizenship of another Arab country.
The situation became even worse after the Iraqi invasion of Kuwait and the Gulf War. The decrease in Gulf oil revenues, and the development of local labor forces, combined with Palestinian support for Iraq during the Gulf War, adversely affected employment prospects for Palestinians in the Gulf.

The Palestinian Labor Force

The population of the occupied territories at the end of 1991 was estimated at 1,682,000 (1,005,600 in the West Bank, and 676,100 in the Gaza Strip). This population continues to increase rapidly, due to high birth rates, reduced mortality rates, and changing migration patterns. The population is young, with some 47 percent of the total under the age of 14. The labor force averaged 312,000 in 1991 (200,000 in the West Bank and 112,000 in Gaza), an increase of 1.4 percent compared to 1990, which followed an increase of six percent in 1990 compared to earlier years. In 1991 there was an increase of 3.7 percent in the population over the age of 15 (to 834,000). The labor force, then, comprised 37.4 percent of the population in 1991, compared to 38.3 percent in 1990.
According to the Israeli Central Bureau of Statistics, the number of employed in the West Bank and Gaza decreased by three percent in 1991 to some 287,000. A larger reduction took place in the West Bank (seven percent, comprising 180,000 workers), while employment actually went up in the Gaza Strip (four percent, comprising 107,000 on a weekly basis). During this period the rate of unemployment in the territories reached 7.9 percent (compared with 3.7 percent in 1989 and 1990). Unemployment in the West Bank trebled from 3.6 percent in 1990 to 10.3 percent in 1991; but remained constant at 4.1 percent in the Gaza Strip.
Palestinian observers maintain that the official Israeli figures showing these relatively low levels of unemployment are wrong. They say that some 35 percent of the Palestinian population was unemployed in 1990.
The Intifada caused significant changes in the labor force employed in the occupied territories. West Bank workers who lost their jobs tended to leave the labor force or emigrate, whereas Gaza workers tended to seek alternative employment. The reason for this is that the Gaza inhabitants do not possess Jordanian passports, as many West Bankers do, and consequently it is more difficult for them to travel.

Conclusions

Although the Intifada and the Gulf War did not have a significant impact on the number of Palestinian workers employed in Israel, they did affect Palestinian employment patterns in the Gulf States, in Jordan, and in the territories themselves. The Israeli closure policy resulted in a considerable reduction of Palestinians employed in Israel, although this was modified in subsequent months. Nevertheless, unemployment in Israel, the substitution of Palestinian workers with new immigrants, and further immigration from the former Soviet Union will eventually reduce the need for Palestinian labor inside .Israel. Furthermore many Israelis would like to see the Palestinian labor force in Israel reduced, both to lessen hostility between Israelis and Palestinians, and to encourage Israeli technological progress that has been hampered by the continued availability of cheap Palestinian labor.
It seems that more than two decades of a single Israeli-Palestinian economy are coming to an end. Unemployment has increased, living standards have declined, and the United Nations Relief and Works Agency is distributing basic food supplies to most of the Palestinian population. In some places, unemployment could be as high as 50 percent. As the population is relatively young, increasing numbers of young persons will be joining the potential workforce in the next few years, making the situation even worse. This is likely to be further aggravated by the decrease in emigration, leading to a higher proportion of males in the population and increased birth rates. The situation is liable to become particularly serious in the refugee camps, which may become breeding grounds for extremism and violence.
Significant changes can only be achieved by the massive injection of foreign capital, and the preparation of a Marshall-type plan for the territories. There are a number of businessmen and entrepreneurs in Gaza and the West Bank, who are fully capable of making constructive use of foreign investment. At the same time, cooperation with Israel will increase cost-effectiveness and create an opening for reconciliation and a new and more healthy relationship between Israelis and Palestinians.
Israel took some steps, such as issuing more than 100 permits for new businesses in the West Bank and Gaza in 1991, compared to less than 10 per year in the 1980s. Moreover, the Israeli Government accepted the Sadan Committee's call for the cancellation of administrative restrictions on investment and an end to harassment of local businessmen on tax issues.
In the absence of an established local base of production, Gaza and West Bank Palestinians will continue to seek employment in Israel, Jordan, and the Gulf States. Of the three, Israel has proved best able to offer the Palestinians work in the short term. Even during the Intifada, tens of thousands of Palestinians continued to find jobs in Israel; but, in the medium and long term, other solutions have to be found. Only comprehensive regional cooperation will be able to create a local production base with significant employment opportunities in the West Bank and Gaza.
Bearing in mind that between 750,000 and one million Palestinians, at present in refugee camps in the neighboring Arab countries, may want to return to the territory of Palestinian self-government, stepped up development is essential. Massive foreign investment must be encouraged; restrictions on marketing West Bank and Gaza produce in Israel, Jordan, Egypt and Europe must be removed. A framework of peace and regional cooperation is required to create employment opportunities for the Palestinians, to the benefit of all the states and societies in the region.