Looking back on Israel’s society and economy in 2019

As 2019 winds to a close, what do you know about the state of Israel’s economy and society? In this short video, President of the Taub Center Prof. Avi Weiss explains a number of the key trends we see from our latest research – some of which are quite surprising.

On the one hand, there have been some very encouraging developments in the Israeli economy, like an increase in the standard of living. There has been significant growth in household income and consumption in recent years across the board – among those with the lowest, middle, and highest incomes. In fact, income has risen more for the lower income populations than for the higher income ones, leading to a decrease in inequality in the country. However, there are very real concerns regarding the sustainability of these trends, even over the next few years. If, indeed, these concerns are justified, new growth engines will need to be uncovered to continue moving Israel forward. Another positive development is that prices have decreased in most categories; however, it is still very expensive to live in Israel.

The government’s welfare efforts have been mostly aimed at encouraging labor force participation and far less toward helping those who are not in the labor force. Thus, families dependent on income support find themselves further below the poverty line than in the past and find it difficult to extract themselves from poverty. For example, a married Israeli couple with two children will need to work nearly 68 work hours a week to rise above the poverty line, compared to just 41 work hours in the OECD.

In the education system, there have been a number of positive developments. In general, gaps in expenditure per student have been closing and student scores have improved on the Meitzav and bagrut exams. In all subject areas, Meitzav scores have risen since 2008 and, in most subjects, the level of test score dispersion has fallen; that is, the differences between student scores have gotten smaller. In addition, the share of students taking higher level math and the share receiving technological-vocational education have risen. The percentage of students completing the bagrut (matriculation) exams has also increased substantially since the turn of the century in all education streams. At the same time, the recently published international PISA exam results show a decline in Israeli student scores and an increase in gaps compared to the 2015 PISA exam. The decline is particularly pronounced among Arab Israeli students, a matter that requires further examination.

In the area of employment there have also been many improvements and employment has been rising for almost all population groups at least since the turn of the century. Employment rates among Arab Israeli women have almost doubled during this period and nearly reached the goal set by the government for 2020. Nonetheless, employment rates among Haredi men have plateaued and remain far from reaching the government’s 2020 goal. Employment in the high tech industry is higher in Israel than in any other OECD country, but is greatly dominated by men (an international phenomenon) and non-Haredi Jews. Workers in Israel’s high tech scene tend to be the most highly skilled, and there are large skill gaps between them and workers in other industries. To strengthen the high tech industry, Israel needs to invest in improving the skills of children currently in the education system and prepare them for the future labor market.

Equality in Israel’s healthcare system is affected by the system’s public-private mix, which distorts incentives for doctors who can work simultaneously in both the public and private spheres. The public-private mix can lead to the inefficient use of resources and unnecessary treatments as well as to inequalities in accessing care, and long waiting times.

These challenges in Israel’s health system need to be addressed promptly as the system faces the rising medical needs of a rapidly aging population alongside a lagging growth in resources.

Get the full picture and learn more about Israel’s society and economy in 2019 from A Picture of the Nation 2019.

This research was generously supported by the Koret Foundation.