Analysis: Few Arabs and haredim in the workforce isn't Israel's only issue
The problems that threaten to drag down Israel's economy have to do with the country's entire workforce.
By AVI TEMKIN/GLOBESUpdated: JULY 4, 2018 10:13
(TNS)- The latest OECD report on the Israeli economy, published earlier this year, finds unequivocally that Israel's economic growth is far from being inclusive - that is to say, not all the population benefits from it equally. The report warns that unless this situation is corrected soon, within a few decades the income of Israelis will lag the OECD average by some 30%. That will be the price of the discrimination, of leaving entire groups behind, and of faulty long-term planning.The stress laid by the OECD, but not just by them, on inclusive growth is one of the chief results of the financial and economic crisis that broke out in 2008 and led to a fundamental change in the perception of the meaning of growth by the main economic organizations. The International Monetary Fund, the World Bank and the OECD are not satisfied with economic growth, but point out that growth needs to be inclusive, such that all of society benefits from it, rather than it leading to wider economic gaps.WarningThe OECD report, released in March, does heap praise on Israel's growth and employment performance, but it also expresses concern and criticism about social gaps, the poor state of infrastructures, the standard of education in Israel, and the low level of social services provided to Israeli citizens. The organization warned that the standard of living in Israel would be harmed unless there was swift change in economic and social structures.The OECD's warning raises two questions: What are the processes leading us to a situation in which we fall behind other countries in the long term? And can these processes be changed through policy changes and reforms?How do you determine whether growth is inclusive? The OECD has three criteria. The first is the extent to which growth contributes to reduction of poverty and greater equality in income distribution, and, beyond that, how much it contributes to social solidarity in each country. The second is to what extent growth benefits all geographic areas in a country and narrows gaps between different areas. The third and last is the extent to which growth is balanced with regard to the various sectors of the economy, between the part that operates in the domestic market and the part that is overseas-oriented, between different industries, and between industry, trade, and finance.Anyone familiar with the data on the Israeli economy and Israeli society knows how far we are from fulfilling even one of these criteria. Growth in Israel has not contributed to reducing poverty and inequality, and it could be argued that it has even increased them. Israel's outlying regions remain behind, both in terms of per capita income and in terms of quality of services. The labor market is characterized by extreme polarity when it comes to technology, productivity and wages, while the education system perpetuates this situation and creates huge gaps in the acquisition of skills.If Israelis want a concrete example of what an ideal country looks like according to these criteria, they can examine the World Economic Forum Inclusive Development Index, according to which Norway has the most inclusive economic growth, thanks to the structure of its labor market, its high quality education system, its sovereign wealth fund, and so on.Social shiftsAny report on the Israeli economy in recent years, including the annual report by the Bank of Israel, immediately identifies the groups being left behind in Israeli society: Arabs and haredim (ultra-Orthodox Jews). The incidence of poverty in these two groups is very high: 45% among haredim, and 49% among Arabs. These rates turn Israel into the country with the highest incidence of poverty among the OECD countries. The OECD's economists have no difficulty in identifying the source of the problem: a very low level of skills taught to children in these groups, and the lack of any genuine programs for improving their capabilities.