Israel's economy is demonstrating a surprising resilience, largely driven by its high-tech sector which continues to secure international business despite ongoing conflict. However, this economic strength is not broadly shared, as a significant majority of Israelis are experiencing financial strain and reduced earnings.
The high-tech industry, which employs approximately one in nine Israeli workers, generates a disproportionately large share of its revenue from customers abroad. This sector's international focus allows it to maintain business even amid domestic turmoil, as foreign clients continue their engagements regardless of regional security concerns.
In contrast, the remaining eight out of nine Israeli workers, who are employed in sectors reliant on local consumers such as retail, agriculture, and small businesses, are bearing the brunt of the war's economic impact. These businesses depend on a stable domestic customer base, which is directly affected by heightened security situations that deter public activity and reduce spending.
More than two years after the conflict began in October 2023, approximately half of Israel's self-employed individuals report earning less than they did prior to the war, according to a survey by the Israel Democracy Institute. This indicates a widespread struggle among small business owners and independent contractors to maintain their income levels.
One example illustrates the personal cost of military service on small business owners. A reservist who operated a kite surfing business left his enterprise to serve over 400 days on active duty. During his absence, the business incurred debt, forcing him to take out a bank loan to stay afloat. He has since transitioned to working in construction, highlighting the sacrifices made by individuals who contribute to national security while facing personal financial hardship. Israel faces the challenge of addressing the domestic economic consequences of the war before its conclusion.