Israel faces existential socioeconomic issues that endanger the country’s ability to defend itself, according to a Shoresh Institution policy brief released on Wednesday.
“One nation-shaking crisis – emanating from the security and/or economic spheres – could spark a process from which there will be no turning back,” according to the report.
The brief, written by Shoresh Institute President Prof. Dan Ben-David and Vice President Prof. Ayal Kimhi at the request of the Prime Minister’s National Economic Council, aims to analyze the country’s main socioeconomic challenges in the coming years – and paints a bleak picture.
Low productivity and high inequality and poverty rates are the main socioeconomic challenges facing Israel.
Additionally, the report lists a number of areas – education, adult training, transportation infrastructure, housing, healthcare and budget transparency – as policy areas requiring “core treatment.”
Israel has fallen behind the world’s leading economies, the researchers write.
In looking at the total factor productivity, which is considered the primary engine underlying the economic growth of nations, Israel has since the 1970s experienced a slowdown in growth, according to the report.
Furthermore, in terms of labor productivity, or GDP per work-hour, Israel is also falling behind, and lags the majority of OECD countries. This means there is a steadily widening gap between what an employed person living in Israel can attain and what that person could attain in other developed countries.
“It’s hard to see how these trajectories [that of Israel vis-a-vis other developed nations] can continue to pull apart from one another for several more decades without causing the exodus of educated and skilled people from Israel to reach a magnitude that may become irreversible,” the report states.
With regards to inequality and poverty rates, here too Israel is at the bottom of OECD countries.
According to the authors, lowering inequality and poverty rates requires a focus on the country’s core problems – inadequate education and physical capital infrastructure, such as transportation.
The brief says that a “substantial increase in welfare payments” would provide a temporary fix, but a more viable and long-lasting solution would be to provide more citizens with “better tools and conditions” to improve their income and standing.
The quality of education in Israel is low, which in turn leads to lower personal wages and economic growth, the researchers write.
“The quality of a year of schooling in Israel is below the quality of a year of schooling in nearly all developed countries,” the brief states, citing the low performances of Israeli students across basic subjects on international exams.
The report concludes that the education system is in need of a “major structural reform,” and that “given the long-term consequences one cannot overstate the importance of such a reform.”
According to the findings, the problem in not overcrowded classrooms or a lack of teachers, but rather with what is being taught and the quality of the teachers. As such, the authors recommend changing the way teachers are trained, compensated and employed as well as developing a uniform and higher-quality core curriculum for all of Israel’s educational streams.
As a direct result of poor education, the report finds, many adults were not provided with adequate skills to enter the labor market, resulting in a “working poor” phenomenon. Adults should be provided with opportunities to upgrade their education and skill levels, the authors argue.
With regards to transportation, the report finds a need to “significantly” upgrade infrastructure.
“Israel’s congested roads reduce productivity, increase inequality and raise the country’s poverty rates,” the report states.
While the importance of improving transportation infrastructure has been understood and addressed in recent years, Israel is still not developing fast enough in this area and gaps with developed nations continue to grow, the brief continues.
It also cites the rising cost of housing and recommends transforming current peripheries into future suburbs as one possible solution.
The report also paints a negative picture with regards to healthcare, showing that Israel is at the bottom of the OECD in terms of hospital beds and nurses per person, and of the mortality rate from infectious and parasitic diseases.
The main problem with the healthcare system is not the amount of money allocated, but rather the way in which it is managed and used, the report states.
Despite the bleak outlook and major challenges, “Israel has not yet passed the point of no return,” the researchers write.
“Israel has reached a critical juncture.
Decisions that it makes today will literally determine the existence of the country in a few decades,” the report states. “In light of the rapid pace of current demographic changes, there is just a small window of opportunity remaining for making decisions that are already very difficult to reach today.”
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