EMPLOYMENT : Israel Discovers Its Dependence on Palestinians : With occupied territories closed, industry is suffering without cheap labor.

In an old Zionist dream, all the people of Israel were to be Jewish. Not just the doctors, merchants and professors, but the farmers, soldiers, police and even, the joke went, the crooks.

With the government’s closure last week of the occupied West Bank and Gaza Strip--barring Palestinians from jobs in Israeli construction, agriculture and industry--Israel found that it has fallen dangerously short of that Zionist ideal and become dependent on cheap Arab labor.

Construction came almost to a standstill because nearly 60% of the builders were Palestinian; flower growers lost an estimated $10 million in pre-Easter export sales because most of their cutters and packers were Palestinian; farmers warned of mass bankruptcy without the Palestinian half of their work force.

Although no one objected to Prime Minister Yitzhak Rabin’s decision to close the occupied territories in response to an upsurge in fatal attacks on Israelis, the sudden withdrawal of Palestinians from key sectors of Israel’s economy plunged the country into a new, different crisis.

Hundreds of troops were rushed to hothouses to help flower growers; prisoners were promised early release if they would do farm work; soldiers were told they could get out of the army if they took up construction work, and planeloads of American volunteers were organized for stoop labor.

“We have become very dependent and very complacent,” Dan Gillerman, chairman of the Israel Chamber of Commerce, said, “and in doing so we have put our economy, certainly agriculture, seriously at risk.”

Many older Israelis took the crisis as a sign that the country had grown soft and flabby; not only had Israel departed from the Zionist ideal of Jews working in all occupations, they noted, but it had allowed employers to hire Arabs at a fraction of what they had to pay Jews.

“At one time, construction and agriculture were signs that the Jewish people were taking root and building in the Land of Israel,” Rabin, 71, commented. “These things can’t be handed over to foreigners, to the Palestinians. We cannot depend on Palestinians for our economic welfare.”

Abraham Shohat, the finance minister and a construction engineer by profession, declared it “an absolute scandal . . . beyond my imagination” that 1,000 workers could not be found among the country’s 150,000 unemployed to cut flowers. “Something is terribly, terribly wrong here,” Shohat said.

Gillerman called for a national effort to overcome the crisis. “We are at war, and during war you mobilize all your forces,” he said. “If we asked people to dig trenches, they would. So why not ask them to work in construction and agriculture? In the long run, this could be a blessing.”

Economists minimized the importance of the Palestinian laborers, noting they constituted no more than 6% of the total Israeli labor force and accounted for no more than 2% of the country’s gross domestic product, although in Gaza they brought in half the local income and on the West Bank about 30%.

No one was sure, however, how many Palestinians worked in Israel. The Labor Ministry said it had issued 68,000 permits but estimated that 40,000 more people were working illegally.

The military government on the West Bank said 71,000 residents were legally employed by Israelis, and troops at the main Gaza checkpoint said the daily flow ran from 30,000 to 110,000.

Ora Namir, minister of labor and social welfare, began recruiting among the unemployed, half of whom are immigrants from Russia and other former Soviet republics, to fill jobs held by Palestinians; Namir agreed to a daily subsidy of up to $15 to boost their wages and pay for their transport.

Namir also sent 40 inspectors into the field to enforce the hourly minimum wage of $2.54, roughly twice what Palestinians have been paid.

“Since 1967, we have become accustomed to cheap labor, which certain employers exploited, paying only 20 shekels ($7.60) or even 15 shekels ($5.70) a day,” Namir said.

“This is one reason why Israelis fled from the construction and agriculture sectors. The name of the game has been cheap labor, and it has to be stopped. We will make it possible for Israelis to compete for these jobs.”

But complaints were already multiplying that Israeli workers were less qualified as well as more expensive, and Israel’s agriculture minister said he would seek permission for 10,000 Palestinians to continue to work on Israeli farms.