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  • Kohelet Economic Forum November 2016 | Tishrei 5777

    2016

    Israel's Pathto Economic and Social Prosperity

    Editors: Michael Sarel & Itamar Yakir

    A s t o r y i n 2 5 c h a r t s

  • Israel's Path to Economic and Social ProsperityA story in 25 charts

    All rights reserved by Kohelet Policy ForumDesign and illustrations by Aaron Friedmann, Dov Abramson Studio

    Printed in Israel 2016-5777ISBN: 978-965-7674-34-5

  • Compact Edition | November 2016 | Tishrei 5777

    Israel's Path to Economic and

    Social ProsperityA story in 25 charts

    Editors:Michael Sarel & Itamar Yakir

    Published by Kohelet Economic ForumSponsored by the Tikvah Fund

  • Participants in the preparation of the book:

    Dr. Michael Sarel Head of Kohelet Economic Forum

    Former Chief Economist at the Ministry of Finance and Director of State Revenue Administration, Research and International Affairs. Headed the economic and research department of Harel Insurance and Finance Group. Worked at the International Monetary Fund, the Bank of Israel and the Finance Ministry. Earned his PhD in Economics at Harvard University and his BSc in Computer Science and Economics at the Hebrew University in Jerusalem.

    Dr. Asher Meir Director of Economic Research at Kohelet Policy Forum

    Dr. Meir has worked in academia, in the public sector, in a number of research organizations and in the private sector. These include the US Council of Economic Advisers, the NBER, World Bank and Taub Center. He obtained a PhD in Economics from MIT and a BA in applied mathematics from Harvard University.

    Itamar Yakir Research economist at Kohelet Economic Forum

    Holds an MA in Public Policy, and a BA in PPE (Philosophy, Political Science and Economics) and the Amirim honors program, both from the Hebrew university in Jerusalem. As a fellow of the Milken institute he interned at the ministry of welfare, planning division. Previously, he has served for two years as an economic consultant to governmental agencies.

    Itzik Pinhas Research economist at Kohelet Economic Forum

    Research student in the MA program in economics at the Department of Economics at the Ben-Gurion University of the Negev. Completed his BA in economics and philosophy at Ben-Gurion University of the Negev. Has worked as economist in the Israeli Employment Service and in the Israel Tax Authority.

    Amir Feder (Former) Research economist at Kohelet Economic Forum

    PhD candidate in Economics, Northwestern University. Holds a BA in Economics and history from Tel-Aviv University and an MA from the joint research program at the Hebrew University and Tel-Aviv University.

    Research Assistants:

    Yarden Maimon, BA student in the PPE program (Philosophy, Political Science and Economics) and the MBA direct track, at the Hebrew University. Daniel Wood, BA student in the PPE program, at the Hebrew University. Shmuel Applbaum, BA student in the PPE program, at the Hebrew University.

    The editors and authors of the book wish to thank Ori Katz, Omer Moav, Lev Drucker, Mark Feldman and Meir Rubin for their useful remarks.

  • SUCCESSES

    Over the past decade the Israeli labor market has improved dramatically: unemployment decreased and the participation rate grew. In both measures, Israel now ranks among the leading group of developed countries.

    Although many of the workers who joined the labor market during the 2000s were unskilled, the average real wage has increased over the past years by 15%.

    The main trends in labor and income have led to an improvement in the average households standard of living and to a decline in Inequality, especially in terms of economic income.

    The effective tax on labor is lower in Israel than in other developed countries.

    The reduction in the corporate tax rate was accompanied by an increase in government revenues from this tax.

    Although gaps in educational achievement between different

    population sectors are still significant, students in Arab localities increased their passage rate of matriculation exams, and especially in Druze localities.

    The Israeli health system is relatively successful, despite low levels of inputs and expenditure.

    4 Israel's Path to Economic and Social Prosperity

  • OBSTACLES

    The productivity gap between Israel and other developed countries has grown since the 1980s. This is a product of the high barriers that characterize the Israeli marketplace; and the large fraction of Israeli youngsters lacking basic skills, among other factors.

    Haredi men and Arab women are characterized by low employment rates and wages regardless of education level, resulting in significant gaps in per capita income between the main population groups of Israeli society.

    The proportion of non-Haredi Jews in the population is projected to shrink considerably in the coming decades, and correspondingly the share of the Haredi population will increase. As a result, if current levels of employment and wages in the Haredi and Arab population remain the same, per capita income would be lower by 15% compared to the projection assuming static population composition.

    Without further changes in the retirement age, the duration of

    retirement is expected to increase by a factor of 1.5 for men and even more for women.

    Israel's education expenditures are close to the median of developed countries, but performance is quite low by international standards.

    5Israel's Path to Economic and Social Prosperity

  • SUCCESSES

  • 79.9%

    ParticipationUnemployment

    2%

    4%

    6%

    8%

    10%

    12%

    72%

    74%

    76%

    78%

    80%

    82%

    2000

    2001

    2002

    2003

    2004

    2005

    2006

    2007

    2008

    2009

    2010

    2011

    2012

    2013

    2014

    2015

    11.7%

    75.4%

    4.6%

    Source: Bank Of Israel

    Over the past decade, the Israeli labor market has seen a decrease in unemployment and an increase in the rate of participation.The labor market recovered quickly from the world economic crisis in 2008 and has improved consistently over the past decade, as reflected by trends in the rates of participation and unemployment.

    Changes in welfare policy helped to reduce reliance on transfer payments and encourage greater labor-force participation, especially among low-skilled employees. This led to a broad increase in the welfare of the Israeli population, including a decrease in poverty and inequality.

    Participation and unemployment rates (ages 2564) Quarterly chained data, seasonally adjusted

    9Israel's Path to Economic and Social Prosperity Successes

  • Source: OECD.Stat

    The unemployment rate in Israel is low and the participation rate is high relative to other developed countries.

    Participation rate (ages 25 64), Israel and the OECD countries

    0%

    10%

    20%

    30%

    50%

    60%

    70%

    80%

    90%

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    Spain

    Greece

    20142007

    20142007

    Turkey

    Mexic

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    Hung

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    Polan

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    m Ch

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    79.5%

    7.3%5%

    Unemployment rate (ages 25 64), Israel and the OECD countries

    10 Israel's Path to Economic and Social Prosperity Successes

  • * The quality matriculation exam meets the minimum requirements of the universities

    Source: Kohelet Economic Forum processing of OECD data

    Students in Arab localities increased their passage rate of matriculation exams between 2002 and 2014, but still lag behind students in Jewish localities. Druze towns surpassed even the Jewish towns in their overall rate of passage.

    Pass rate for matriculation exam among 201 local authorities

    67.6%

    72.9%

    61.1%

    55.2%

    47.6%49.9%

    20%

    30%

    40%40%

    50%

    60%

    70%

    80%

    56.3%

    51.6%

    45.5% 46.2%

    24.2%

    29.7%

    20%

    30%

    40%

    50%

    60%

    70%

    80%

    Arab localitiesincluding Druze (81)

    Druze localities (14) Jewish localities (120) Arab localitiesincluding Druze (81)

    Druze localities (14) Jewish localities (120)

    2002 20142002 2014

    Quality Matriculation*Ordinary Matriculation

    11Israel's Path to