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(photo credit: Ariel Jerozolimski)
As the teachers' strike moves into its fourth week, Bank of Israel Governor Stanley Fischer said Tuesday improving the education system needs to be a top priority to reduce poverty and encourage investment for the Israeli economy to grow at an annual rate of 5 percent over the next 25 years,
"If we manage on average to grow in the next 25 years at a rate of 5 percent a year, in 2032 we will attain a level of GDP of NIS 2,235 billion [in 2007 prices], compared to a GDP of NIS 660b. in 2007. To compare, if we were to grow by only 3% a year, GDP would reach only NIS 1,380," Fischer said at the Sderot Conference for Society, according to prepared remarks released to the press ahead of the speech. "That's an enormous difference of more than 60%. It is important that we understand that if we can achieve persistent high growth, then we will have the necessary resources to address existing problems in critical areas, such as social welfare."
Looking ahead, Fischer said that in order to achieve sustainable growth levels the government needed to focus on education to reduce poverty in the long run, investment and welfare.
"Israeli society cannot succeed if there are wide social gaps, and if a large part of the population has to subsist on a very low standard of living," he said.
Fischer warned that if the subject of education did not continue to hold a high enough place in the government's priorities, the country could find itself in a continually deteriorating situation.
"In some ways," he said, "this erosion has already begun."
Moreover, Fischer slammed the Israeli education system as being ineffective, noting a decline in pupil achievement over the years compared to other countries, despite higher spending per child in compulsory and tertiary education as a share of GDP in comparison to OECD standards.
Fischer also raised concern over the long lists of Israelis leaving for faculties of leading universities of the US and other countries and urged the government to implement the recommendations put forward by the Shochat Committee, including wage differentials in order to reward the best academic staffers.
Technological education was another field mentioned by Fischer that had been neglected in recent years and needed "cultivating and promoting."
On the problem of welfare, Fischer referred to the issue of employment, urging the government to find the right system of incentives given the fact that the majority of the poor were found among the ultra-orthodox population and Arabs, who were not joining the working population.
"If we do not manage to deal with this issue, more and more of the Israeli population are likely to find themselves outside of the labor market and, as a result, poor," said Fischer. "It is important that this sensitive and complex topic be addressed, and that appropriate solutions are found based, inter alia, on the right system of incentives."
From a global perspective, Fischer lamented that Israel needed to do more to attract investment by improving certain standards of doing business in Israel by removing bureaucratic obstacles and barriers to growth.
"In the Doing Business Report, published by the World Bank, which ranks 178 countries, Israel ranks very low: for example, on legal procedures relating to the enforcement of contracts (102nd place); on the procedures, time, and costs to build a warehouse (109th place); and on registering property (152nd place)," said Fischer. "These findings will not surprise any Israeli."
Meanwhile, the month-long secondary school strike has already cost the Israeli economy over NIS 3.5 billion, a new research report finds.
According to the Jerusalem Institute for Market Studies, an independent economic policy think tank, the school strike will result in lifetime losses in income and declining capabilities in academic subjects such as reading and math for thousands of Israeli students.
According to research conducted by the Jerusalem Institute for Market Studies, for each day lost in formal learning, the lifetime earnings of the students diminishes and the hidden costs of the strike keep growing.
"When students learn, they increase their human capital. This investment translates into higher lifetime earnings. Delaying investment in students' education, whether for a year or even just a few months, lowers future earnings," the report said.
It noted that widely accepted econometric studies have shown that an interruption in formal education of one year decreases average lifetime earnings by at least 4%. Assuming the same rate of decrease, it said, a month-long interruption in schooling due to the strike will reduce lifetime earnings of Israeli students by 0.4%. Assume that, on average, high school students of today will work 45 years and earn an average annual income of NIS 88,000 a year, which was Israel's average wage in 2006, the lost earnings due to the strike will amount to more than NIS 15,000 for each student, according to the study.
Ehud Zion Waldoks contributed to this report.