Annual State of the Nation Report: Israel Doing Well But Social Gaps Pose a Problem

“Riches and honor are Yours to dispense; You have dominion over all; with You are strength and might, and it is in Your power to make anyone great and strong.” I Chronicles 29:12 (The Israel Bible™)

The Taub Center’s annual report, State of the Nation, was published this week, providing a largely positive picture of various socioeconomic trends in Israel in 2017, while still showing some major gaps between sectors of the economy and the Israeli population.

Compiling 10 new research studies on employment, macroeconomics, education, health, and welfare, the report showed that there are positive trends in employment, wages, the high-tech sector, and higher education. However, similar to the past few decades, Israel’s overall productivity is not growing and there are still major gaps, although narrowing, between the Arab Israeli and Ultra-Orthodox populations as compared to the non-Ultra Orthodox Jewish Israeli population.

Professor Avi Weiss, the Executive Director of the Taub Center and professor of economics at Bar-Ilan University, edited the report. He found that “from a macroeconomic perspective you see some very good signs and some signs that are concerning.”

He told Breaking Israel News, “You see an increase in the labor market, very little unemployment and high rates of participation, and wages are increasing significantly. But what you also see is that there are two very different sectors in Israel– the high tech sector, which is doing incredibly well, and the rest of the economy, which is not doing nearly as well.”

The high tech sector, which represents 9% of Israeli employment, is a “huge” percentage of the economy in international comparison and the productivity is growing “very much,” but it is “not enough” to change the overall productivity of the country.

Israel’s productivity remains at about 60% of that of the United States, and that gap does not seem to be changing over the past few decades, said Weiss.

“That is something that is of somewhat concern and surprising to some extent because you think that the Start-Up Nation would build the entire economy and that unfortunately has not really happened,” Weiss told Breaking Israel News.

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The report showed that while there was progress in Ultra-Orthodox participation in the labor market and higher education, gaps are still large between the non-Ultra Orthodox and Ultra-Orthodox Jewish Israeli populations. Because of resistance from leadership in integration into the labor market, change is slowing down in that sector.  

The State of the Nation Report also studied the gaps between the Israeli Jewish population and the Arab Israeli population, in the context of Israel’s 2015 Resolution 922, a five-year economic plan to enhance the economic and social integration of Arab citizens of Israel.

While Weiss reported “significant improvements” and “more significant increases” in the economic integration and higher education of the Arab-Israeli population as compared to the Jewish population, there are still significant gaps in welfare related to socioeconomic status and differing incomes.

Weiss reported, “There is are no sign of real discrimination, and the government does not treat the different sectors differently because one is Jewish and one is Arab, but we do see very large gaps because they are so different in a socioeconomic indicator.”

In comparison to other Arab countries, Weiss added that in every marker, Arab Israelis are doing much better, especially socioeconomically and in health issues.  

“It’s not even close,” he told Breaking Israel News. “Still, we tend to compare ourselves to where we’d like to go, which is towards the more developed countries,” rather than using less-developed Arab countries as a place marker.

But unlike the Ultra-Orthodox population, Weiss noted, “there is a great desire among young Israeli-Arabs, their leadership, and especially young women to study high tech, to learn computers, to learn sciences, and advance in that.”

Looking towards 2018, Weiss hoped that Israel will “continue to find sources of growth from investment in human capital,” suggesting that the largest growth potential could come from the Arab-Israeli population, and particularly women, who are largely undereducated but “want the higher education and to be incorporated into the [labor] market.”

To those ends, Weiss suggested opening up the employment sector in the high tech industries and security firms, which tend to shy away from employing Arab-Israelis who “can give a lot,” and are thus “wasting great potential.”

He concluded, “There are different types of social organizations who are trying to make that type of change and trying to go to employers and show them that the ones who will benefit the most from opening up their ranks would actually be them, the employers. It’s something that is going to take time, but I expect it to happen.”