Dan Ben-David’s findings show an unsustainable burden is being placed on the fewer and fewer Israelis who can contribute effectively. Reform is urgent, and it must begin with education.

My friend and veteran Jerusalem Post columnist Saul Singer, co-author of the fascinating and hugely encouraging book on Israeli innovation, Start-up Nation: The Story of Israel's Economic Miracle, likes to retell one of the stories from his book when he’s giving lectures. It’s the tale of a trailblazing Israeli Internet credit card fraud-busting company that’s being checked out by the head of PayPal, the leading company for making payments safely and securely online.

The highly skeptical PayPal boss is certain the Israelis can do nothing that his own in-house fraud-busters can’t do faster and more efficiently. He’s even more dubious when he hears the seemingly banal formula at the heart of the Israelis’ business. But his doubts prove misplaced, the sabra entrepreneurs really are onto something, and PayPal winds up buying their company for over $100 million.

It’s a terrific story, from a terrific book – a book which shows some of Israel’s best faces to the world, and helps us Israelis feel a little better about ourselves and where we’re heading.

But on the basis of an immensely troubling conversation I had this week with Prof. Dan Ben-David, it seems hard to believe that these kinds of successes – ground-breaking, barrier-clearing innovations of the kind that have given Israel more listings on NASDAQ than any country bar the US and China, more patents per billion dollars GDP than the G-7 countries and three times as many Nobel Prizes per capita in the sciences this past decade as any other country on earth – are going to be sustainable on a large enough scale to keep Israel growing fast economically and combating unemployment, poverty and massive educational inequalities in the years ahead.

A professor of economics at Tel Aviv University
and the executive director of the independent
Taub Center for Social Policy Studies in Jerusalem, Ben-David was born in Kfar Saba, raised in the US, came back here for the army and university, and then studied for his PhD and taught in the US before returning home. He pours his heart and soul into his work at the Taub Center – to the point of turning down a Knesset seat last year when Ehud Olmert was leaving and his was the next name on the Kadima list.

Looking over my notes, I realized that he used phrases such as “We’re going to hell,” “We’re in real trouble here,” and “We’re finished if we don’t act now” seven or eight times in our conversation. He also said his personal conviction that “we’ve not passed the point of no return” is not shared by many of his expert academic colleagues – which means that this voice of near-doom is actually considered, by others who are familiar with his data, to be something of an optimist.

Looking over my notes, too, I found some of the statistics I had written to be so chilling, so seemingly implausible, that I had to contact Ben-David again to make sure I had got the numbers right. Unfortunately, I had.


PROF. BEN-DAVID began by talking me through a series of statistical tables from his newly published Taub Center “State of the Nation Report: Society, Economy and Policy.”

He gave me worrying figures on labor productivity – Israel had caught up with the G-7’s rising rate by the 1970s, but has been slipping steadily behind over the past 30 years or so. And then he described the related fall-off in GDP – the data that essentially governs our living standards: “We were soaring until 1972, catching up to the US in standard of living and on track to outstrip the US in the 1980s or 1990s,” he noted.

“But since then we’ve moved to a lower path. Now of course we’ve faced wars and inflation and a massive influx of immigrants, but these have only caused fluctuations around the path, not changed the path itself. The big issue here is one of priorities, and our priorities have been wrong. Critically, we’ve created a situation in which a large and growing part of the Israeli population simply doesn’t have the tools to work in the modern economy. So, despite our extraordinary capacity for innovation, poverty is dragging Israel down,” he said.

Coincidentally, the Bank of Israel this week released figures proving Ben-David’s point. These showed dramatically rising poverty rates in households with at least one wage-earner; even a steady bread-winner, in many fields, can’t keep his or her family’s head above the financial waters.

In the future, Ben-David fears, an economically
failing Israel will both lose the capacity to attract immigrants from the West, and will lose its best and brightest youngsters. But if that sounded bad enough, he then showed me scarcely credible figures underlining the brain drain that’s already been occurring here.

For every 100 British academic scholars hard at work in Britain, the figures showed, 2.1 British scholars had moved to the US. For France, the number was 2.9. For Italy, 4.2. For Canada, where cross-border movement is a two-way street, the number is 12.2. And for Israel? For every 100 Israeli academic scholars hard at work in Israel, a staggering 24.9 have moved to the US.

Ben-David took pains to stress that he had no
desire to get into a debate about the relative merits of a focus on welfare as opposed to capitalism, and what might constitute the healthy balance between them. “That debate is a waste of time. In truth, welfare can provide the opportunity for capitalism: Give people the tools and conditions to work in a modern economy, and if you do it smartly, you create growth.”

As things stand, he moved on to show me, Israel has been grappling with an ever-growing welfare burden over the past 30 years. In 1979, 26 percent of Israeli families lived below the poverty line before tax and welfare adjustments. By 2008, that figure was 32.3% – a vast increase compared to the OECD countries that are his barometer, leaving Israel second only to the US in terms of the numbers reliant on the overburdened state system. “The welfare payment burden is soaring,” said Ben-David. “We can’t sustain it for another 30 years.”

Turning to employment, Ben-David again unveiled a picture still grimmer than conventional wisdom holds. Focusing on men aged 35-54, “those in the age group who have no excuse for not working,” he showed nonemployment in the OECD averaging 11.9%, with Spain the worst afflicted at 14.5%. In Israel, the rate is 18.9%.

The most troubled sectors, as is widely known,
are the Arab and ultra-Orthodox sectors: some 27% of Israeli Arab males and a staggering 65.1% of haredim in that age group aren’t working.

And here’s where Ben-David’s economically and socially terrifying peek into the future really begins to resonate. Because if you look at who the Israelis of tomorrow are going to be, you realize that, as things stand, we are becoming a country of more and more nonworkers. In 1960, 15% of kids going into primary school came from the Arab and haredi sectors – the sectors so blighted by not working. By the 1980s, Arabs and haredim were up to 26% of new primary school kids. In 2000, that figure hit 40% and, as of 2008, it had shot up still further, to 48%. By 2040, according to current projections, Ben-David said soberly, “78% of primary school enrollment will be haredi and Arab. If we don’t grapple with these sectors, we’re goners.”



SO HOW, I asked Ben-David, should Israel be tackling the worsening phenomenon of growing sectors of the Israeli populace failing to enter the labor market, burdening the welfare system, exacerbating inequalities, holding back growth and fundamentally threatening the country’s well-being?

Among his key remedies: radical educational reform. But before he spelled out the specifics, he showed me another welter of statistics to hammer the point home still further – statistics that showed the obvious, that Israelis who don’t finish high school lose out in terms of finding work and lose out in terms of the salaries they earn when they can find work, whereas employment and incomes rise strikingly with more education.

The employment rates of Israelis aged 29-54 with a university degree contrast utterly with all the negative statistics. Among Arab women in that age range who don’t finish high school, fewer than 10% have work, but among Arab women with a degree, the figure is 70%. And it’s around 90% for Arab men and for non-haredi Jewish men and women.

Put simply: Employment is a function of education. Get a degree, get a job. Improve education here, and you raise growth, tackle poverty, raise incomes.

This country, of course, used to give its youngsters an education.

“In the 1960s, we were first in everything,” Ben-David noted, referring to various international comparative tests in math, science and reading. “Now, we’re at the bottom, and we also have the highest education gaps in the OECD – the greatest inequalities, that is, within our education system.

“So we’re cleaning up on Nobel prizes, but what of the next generation?” he asked, echoing precisely the concerned message delivered by our latest Nobel laureate, chemistry professor Ada Yonath.

“Parents who can and who want to,” Ben-David continued, “enable their kids with private education. And we have some excellent schools. But we’re running on less and less of our cylinders. In far too much of the country, by the end of primary school, by the end of junior high, we’ve lost them. They won’t get a bagrut [matriculation], let alone get into university.”

Ben-David’s reform proposals extend to encompass the demand that Israel stop allowing the labor market to be flooded with uneducated foreign workers, that laws on the minimum wage be properly enforced, that transportation infrastructure enable fast and cheap movement from outlying areas to major cities, and that adults be given vocational training for the modern economy and the incentives to take it.

But at the heart of his urgent plea for change is education reform – an imperative for a common core curriculum, higher targets, longer school days, and enrichment in poorer neighborhoods. He urges a reevaluation of what we teach, who teaches it, and how. He noted that some of his own university students, asked to review a book, “don’t want to read it, and don’t have the skills to write about it.”

He added that it has been widespread for years to provide extra schooling for youngsters who lack the basic tools to thrive as undergraduates. Now, he said, universities are having to provide extra schooling for graduates moving into post-graduate education.

He laments the neglect of education in the Arab sector, and the rejection of vital education in the haredi sector. “We need to reclaim our sovereignty,” he insisted. “This is not about trying to make ultra-Orthodox people secular. This is about providing the tools for employment. We’re heading ever deeper into a situation where more and more people don’t have the skills to perform effective work, and fewer and fewer people are left supporting them. It’s not sustainable. We must wake up.”

Saul Singer, who says he and co-author Dan Senor agree with Ben-David overall and cite him extensively in “Start-up Nation,” stresses that one of the keys to education reform is putting in place measures to improve teachers and school principals. He also argues that technology and innovation can be applied to education as well, and says Israeli companies are already active in the field. “Israel can fix its own education problem,” says Singer, “while becoming a model for the world.”

Indeed, Singer argues that Israel must treat the rest of the troubled Israeli economy the way hi-tech is treated, with low taxes, low regulation, high competition and high access to credit, the very opposite of the current environment. “Is it any wonder that hi-tech flourishes,” Singer asks, “while the rest of the economy is underperforming, thereby increasing social gaps?”

GIVING A rare hint of optimism, Ben-David described Israel as “the anomaly of the West. We have everything we need to be top. We’ve got the people here to change this. But we’re crashing downhill and we don’t have the luxury of failure: Our Jewish state comes along about once every 2,000 years.”

Ben-David said he’d known broadly about the problems for several years. He presented figures to Ehud Barak a decade ago, and the then-prime minister allocated a day for the cabinet to discuss the situation. But it’s only with the compilation of this report that he has realized how rapid is the decline. “We have only a few years to get our act together.”

So now he’s crying “Gevalt” to whoever will listen, including newspaper editors and politicians. He showed Education Minister Gideon Sa’ar his findings not long ago, and Sa’ar, struck by the jobless totals and demographic trends in the ultra-Orthodox sector, sent him to meet with his deputy minister, United Torah Judaism’s Rabbi Meir Porush. “Porush responded that if only the haredim were exempted from IDF service, more would join the labor force – which is not born out by the data – and he disagreed on the haredi sector’s educational needs. His response was unacceptable. It won’t work.”

Again, Ben-David showed a glimpse of optimism, unleashing one final statistical salvo. Look at our fertility rates, he enthused. The average woman aged 15-49 in the OECD countries has 1.7 kids, he noted, with New Zealand topping the league at 2.2. The average Israeli woman in that age-range has three kids.

“That is our hope,” said Ben-David. In the OECD, “they’re not producing enough kids. We are. If we can give them the best education in the world, we’d totally overtake all these countries. We’d be in a league of our own.”

If.

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