THE Army checkpoint between the Gaza Strip and pre-1967 Israel remains quiet, the traffic lanes usually choked with busloads of Palestinian workers entering Israel virtually empty.
About 1,200 workers were allowed across Sunday, the only ones since Israel sealed off the occupied territories March 29 following a sharp escalation in Palestinian attacks on Jewish civilians.
But even when the traffic flows again, the 110,000 Palestinians employed in Israel - 30 percent of the Palestinian work force - face an uncertain future.
Escalating political tensions have brought a radical rethinking of the economic relationship between Israel and the Palestinians. In the last month, 15 Israelis have been stabbed or shot to death, some by disgruntled Arab employees who spend long hours commuting daily to and from Israeli jobs, earning below-minimum wages with no benefits or job protection.
The violence has changed long-held Israeli assumptions about the indispensibility of Palestinian labor to Israel's economy. The Rabin government announced Sunday that it would establish a formal committee to find ways to reduce the number of Palestinians working in Israel.
To compensate for jobs lost, Israeli authorities are now encouraging the development of Palestinian industry and agriculture in the West Bank and Gaza Strip for the first time since 1967. Replacing Palestinians
New Russian and Ethiopian Jewish immigrants are gradually replacing the Palestinians as Israel weans itself from cheap Palestinian labor.
"My goal is to reduce in stages, as fast as possible, the number of Palestinians working in Israel," Israeli Prime Minister Yitzhak Rabin declared upon closing the borders. "It is this intermingling which allows them to endanger our security."
Construction, the Israeli sector employing the most Palestinians, has hired about 30,000 new Israeli workers in the past two years. The Israeli Contractors Association plans to replace another 30,000 Palestinians within six months, says chairman Amos Bar-Am. "The situation is intolerable. The Palestinians are a security threat to the new Israeli workers," he says. "Even if the government does open the gates of the territories, we'll do everything possible to prevent Palestinians from working at construct ion sites."
Some say the decoupling may be healthy for Israel, which treats Palestinians as a second-class workforce, and for Palestinians, who seek economic and political independence. The policy change gives Palestinians an opportunity to begin building a self-sufficient infrastructure.
But the present Palestinian reality is economic dislocation and unemployment. While only 2 percent of Israel's $60 billion gross national product is dependent on Palestinian labor, about 30 percent of the $3 billion GNP of the territories is garnered from salaries earned in Israel.
Dependence on Israel is most pronounced in Gaza, where 800,000 Palestinians live in 139 square miles of sand-swept Mediterranean coastline. The jobless rate in Gaza is already nearly 30 percent. Unemployment fuels activism
Nader, a 22-year-old Gaza City resident, is one of the thousands of young people now barred from working in Israel. He used to earn $20 dollars a day as a skilled electrician. But after his arrest during a protest in 1990, he now earns $4 a day carting vegetables in the Gaza city market.
"One of the reasons the Islamic movement is on the rise is because of the loss of hope," Nader says. "If, for example, Israel prevents a young man from going to work, he wants revenge [and] may join the fundamentalists."
New Israeli and Palestinian economic initiatives generate about 2,500 new jobs annually in Gaza, but 5,000 young Gazans enter the work force every year. Israeli officials say an investment of $100 million annually is needed to provide jobs for all the new workers; Israel's development budget for Gaza last year was half that.
"The investments needed here are beyond our means. We need enormous investments from outside, and we are now seeking aid from the European Community, Japan, and anyone else who is willing to help out," says Gen. Dov Gazit, a top Israeli civil administration official in Gaza.
Israel's rush to build the Palestinian economy was long-delayed. For decades Israeli leaders blocked virtually all industrial or agricultural ventures that could be viewed as competitive with Israeli monopolies. The architects of that policy include Mr. Rabin himself, who as defense minister in the late 1980s vetoed Palestinian projects ranging from cement factories to UN-financed chicken hatcheries.
The restrictions began to loosen after the Gulf war. Nearly 200 new Gaza industrial workshops have opened in the past two years and industrial employment has risen nearly 60 percent. Three industrial parks are under construction. Thousands of Palestinian families have been relocated from crowded camps to new housing units with the help of Israeli government grants.
Wealthy Palestinians from abroad are being wooed to Gaza with an offer of permanent residency permits if they invest at least $100,000 in a local concern. Thirty Palestinians from abroad have already pumped $25 million into Gaza.
But Palestinian entrepreneurs say the Israeli bureaucracy, the all-embracing security apparatus, and aggressive tax policies remain major obstacles to investment.
"Whether it's a matter of getting the permits to export goods to Israel or abroad, or just going to your factory during a curfew, everything is connected to the political and security situation," says Gaza journalist Mohammed Waheidi.