Taub report: Economic slowdown, high poverty and inequality in Israel in 2017

"A State of the Nation 2017," produced by the Taub Center, offers a snapshot of the socioeconomic condition of Israel in 2017.

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December 27, 2017 06:16
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Israel is likely to see slow economic growth due primarily to an increase in population groups with high unemployment rates and low skill sets, according to a new report released Wednesday by the Taub Center for Social Policy Studies in Israel.

The study, "A State of the Nation 2017," is based primarily on Taub Center research compiled and edited by Professor Avi Weiss, executive director of the Taub Center and professor of Economics at Bar-Ilan University, and offers a snapshot of the socioeconomic condition of Israel in 2017.

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According to the report, the past year was characterized by an increase in employment and real wages (and a decrease in the unemployment rate – at an historic low) which in turn has led to an increase in consumption as well as an increase in the standard of living.

Despite this, large parts of the labor market are still characterized by low productivity and low wages and price levels in Israel remain among the highest in the OECD.

The report offered a bleak macroeconomic long term outlook, stating that the country is expected to face demographic challenges that will “likely slow the rate of economic growth, including a decline in the share of the working-age population, alongside an increase in the share of population groups whose employment rates are relatively low and whose skills are not compatible with the modern labor market.”

As such, the report dedicated two chapters to the patterns of ultra-Orthodox integration into the labor market as well as education and employment among young Arab Israelis – two population groups with relatively low labor rates.

With regards to the ultra-Orthodox, researcher Dr. Eitan Regev found that in recent years there has been a significant rise in the employment rates of young Haredi women and men across all Haredi streams.

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As such, between 2008 and 2013, the employment rates of ultra-Orthodox women and men ages 23-30 rose by 9 percentage points, reaching 73% among women and 36% among men, the largest increase across all sectors.

Furthermore, the findings indicated that ultra-Orthodox living in homogeneous Haredi cities (such as Betar Illit and Modi’in Illit), both in the periphery and in the center of the country, have significantly lower employment rates than Haredim living in mixed cities.

The employment rate among Haredi students is similar to the rate among Haredim who already hold an academic degree.

In 2013, approximately 76% of Haredi men with academic degrees (ages 25-35) and 67% of male Haredi students worked, compared with only 37% of Haredi men in the same age group who never pursued higher education.

According to Regev, this indicates that the employment level of Haredi men is more influenced by the decision to start working (and learning) than by actually earning a degree.

With regards to Arab Israelis, researcher Hadas Fuchs found that the major factor contributing to educational gaps between Jews and Arab Israelis is the lower socioeconomic status of the Arab Israeli population.

When controlling for socioeconomic backgrounds, the matriculation rates among all sub-groups of Arab Israeli women are higher than (or equal to) those among Jewish women, while among men there are still gaps favoring Jewish men - and these gaps have increased over the past decade.

A high percentage of Arab Israelis qualifying for a matriculation certificate studied in a scientific-engineering track, the report stated.

The differences between Jewish and Arab Israelis are particularly prominent among women: 39% of Jewish women who qualified for a matriculation certificate in 2013 studied in scientific-engineering tracks, compared to 71% of Bedouin women and 84% of Christian women.

Arab Israeli women (especially Muslims and Bedouins) still pursue occupations in the education field at very high rates – a field that facilitates working within their localities.

This trend may lead to employment difficulties: 59% of those who applied to teach in the Arab school system did not receive placements in the 2013-2014 school year, the data revealed.

“If there is not a significant drop in the share of female students studying for a teaching certificate, this percentage is likely to increase as the percentage of female Arab Israeli graduates increases,” Fuchs explained.

On a positive note, Fuchs found that there has been an increase in the share of Arab Israeli men pursuing engineering and computer science degrees – “which may open the door to new fields of employment,” she posited.

With regards to poverty and inequality, another major area addressed in the report, researchers Prof. John Gal and Shavit Madhala stated that the level of expenditure allocated to address these issues remains low relative to other welfare states.

Social expenditure on welfare, health and education amounted to NIS 205 billion in 2016 – 57% of total government expenditure.

In 2017, expenditure on implementing the recommendations of the Committee for the War Against Poverty, headed by Eli Alalouf, is expected to amount to 30% of the recommended expenditure, similar to 2016, and compared to 6% in 2015.

Yet, the researchers noted this figure did not take into account the implementation of the Savings Plan for Every Child program which appeared in the committee's recommendations.

When factoring in the cost of this program, total spending on implementation in 2017 increases to some 90% of the total recommended expenditure.

Furthermore, the struggle for disability benefits has led the government to change policy in this area and allocate some NIS 4.2 billion to raising disability allotments through 2021.

With regards to education, the report found that the greatest challenge facing the education system was reducing the "severe inequality among students from different backgrounds."

The report found that expenditure per pupil increased throughout the education system over the past several years, though mainly for the stronger socioeconomic classes.

Less than 30% of the additional resources in the system were allocated to students in the two lowest quintiles, the report found.

Furthermore, the study found that the number of teaching hours per pupil in the Arab Israeli education in all quintiles remained much lower than the number of hours per pupil in the Jewish sector.

Another major issue facing the education system, according to the report involved social ostracism and bullying among pupils.

According to the findings, some six percent of all pupils reported being ostracized in 2015. In over 60% of classes there is at least one child who suffers from ostracism.

Between 2007 and 2015 there was a significant decline in the share of pupils experiencing ostracism: from 18% to 11% in Arab education and from 5% to 3.4% in Jewish education, indicating large gaps between the educational streams.

The findings indicated that there were also gaps within the Arab education system: 15% of pupils in the Bedouin education system reported ostracism, 10% in the Arab system, and 7% in the Druze system.

Pupils with lower socioeconomic backgrounds suffer from ostracism at higher rates than pupils from higher socioeconomic backgrounds (as reflected in parents’ levels of education), the report found.

Among pupils whose parents had 11 or fewer years of schooling, 16% of Arab Israeli pupils and 6% of Jewish pupils reported ostracism.  In contrast, 11% among Arab Israelis and 4% among Jews whose parents had 16 or more years of schooling.

The report also provided an overview of philanthropy in Israel - the first study of Israeli philanthropy based on data from all donors who requested tax credits for charitable donations to recognized non-profit organizations in Israel.

The findings indicated that the total donations between 1999 and 2011 nearly quadrupled in real terms - from NIS 153 million to NIS 606 million a year, based on data reported to the Israel Tax Authority during this time period.

The report also found that philanthropists who immigrated to Israel donate more money than Israeli-born philanthropists, and are also more generous.

New immigrants are more generous than veteran immigrants and donate larger sums on average, whereas immigrant philanthropists who have lived in Israel for 21 years or more tend to have similar contribution patterns to Israel-born donors.

A possible explanation for this, the report stated, is that immigrants bring with them a different giving culture, but this gradually converges over time to the level that is customary in the local culture.

Furthermore, there is a significant underrepresentation of Arab Israelis in officially reported philanthropy in Israel – despite the fact that they make up about 20% of the total population in Israel, only 1% of reported philanthropists are Arab Israelis, the data indicated.

The study further found that the most generous localities in Israel include some of the more wealthy municipalities such as Kfar Shmaryahu and Savyon, as well as localities of low socioeconomic ranking such as Modi’in Illit, Hatzor HaGlilit and Tiberias.

Interestingly, Jerusalem and Tel Aviv were not among the top ten municipalities with the most generous residents.

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