A Picture of the Nation 2023

The Taub Center is releasing A Picture of the Nation 2023, a collection of important data in the areas of economics, labor, welfare, health, education, demography, and the environment. The data indicate an improvement in some areas, like rapid growth in GDP, low rates of unemployment, growing investment in benefits for senior citizens, high life expectancy, and a rise in teacher’s wages alongside a decline in the number of students per teacher. In contrast to these positive gains, productivity per work hour in Israel is low, prices are high, poverty rates are high, and there is considerable inequality in the areas of health and education.

The booklet was written by Prof. Avi Weiss, President of the Taub Center and a professor of economics at Bar-Ilan University.

Macroeconomic Trends

• GDP per capita in the first quarter of 2023 is almost identical to what would have been expected if the economy grew from the last quarter of 2019 at the average multi-year growth rate. In contrast, private consumption was lower by about NIS 1,000 per capita than it would have been had it grown at its average annual rate of 2.1% per year.
• Productivity per work hour in Israel is substantially lower than in similar countries (those with similar population size and economic structure to Israel’s) although it has increased over time — from about $30 per hour in the 1990s to about $50 per hour in 2021. Low labor productivity in Israel is due to the quality of human capital and government regulations, as well as to low levels of private capital per employee and public capital per capita — two components that remain unchanged in the past 40 years. Bringing Israel’s level of infrastructure up to the level seen in similar developed countries can contribute to narrowing labor productivity disparities.
• The consumer price index began to rise at the beginning of 2021 in parallel with a slowdown in economic activity due to the impact of COVID and the Russia-Ukraine war in 2022. The rise is a modest one relative to the US and the Euro Area, particularly for food and energy prices. Like many other high-income countries, Israel is also dealing with inflation. In Israel, though, the inflation is also influenced by the weakening of the shekel due to the increased uncertainly created by the internal political situation. The Bank of Israel has raised interest rates in an attempt to curb inflation – and the market has reacted accordingly. According to the Bank of Israel, inflation is expected to return to the upper bound of its target, and fall to 2.9% within a year.
• In the last decade, prices in Israel have increased little, although the strength of the Israeli shekel over the past few years has resulted in prices in Israel being 50% higher than in Europe and 26% higher than in the US in 2021. Since Israel is a small economy and not part of a larger economic union, there are a limited number of manufacturers and competition is limited. Alongside low worker productivity and regulatory obstacles to trade that limit import and competition even further, the cost of living in Israel remains high.
  
   Labor Markets

• The unemployment rate in 2022 was between 3% and 4%, similar to the rate in 2019. The share of workers who were laid off since March 2020 who have not returned to the labor force and who are not seeking employment has been consistently declining, and, at the end of 2022, was about 0.4%.
• The employment rate for Haredi men has increased since the last quarter of 2022, but it appears it will not reach the goal set by the Employment Committee for 2030 (65%). Data do not include workers with unreported income, which may constitute a considerable portion of this population group.
• In a breakdown by districts, employment rates in Jerusalem, the North, and the South are lower than in the Center and the Tel Aviv districts, among other reasons due to the large portion of Haredim and Arabs in these districts and the fewer number of quality employment opportunities in the North and the South.
• Jobs in the high tech sector constitute about 11% of the jobs in the economy and contribute between 15% and 16% to GDP. Despite the large amount of publicity regarding lay-offs in this sector, since 2012, the number of positions in high tech production remains stable and the number in the service sector has risen — from about 170,000 to 270,000 jobs. Average wages in the sector are about NIS 28,000 per month, nearly three times the average wage in the rest of the labor market.
• Between 1999 and 2019, real wages per hour rose for Arab men and women by 51%, among non-Haredi men, they rose by 35%, and among non-Haredi women, by about 40%. Wages for Haredi women rose by 23% versus a 16% rise among Haredi men. Despite the similar percent rise in wages for men and women, the gender gap in wages actually widened since women generally earn less than men. The gap in hourly wages between Jewish women and Arab women narrowed, although in terms of monthly wages, it widened, similar to the gap between non-Haredi men and Arab men and Haredi men.
• The gender wage gap widened in all population groups except among the Haredim. The greatest gap is actually among those populations that work most — non-Haredi Jews. There the gap is about 37% in gross monthly wages and about NIS 21 in hourly wages — to the disadvantage of women. The gap is mainly attributable to the different number of work hours and occupation sector of men and women.
  

Demography

• Life expectancy is high in Israel and places Israel in 11^th place among the OECD countries. However, there are gender and sector gaps. Women live on average 84.6 years versus men who live until age 80.5. Life expectancy among Arab men is lower — 76.3 years – while Jewish women have the highest life expectancy — 85.1 years. Life expectancy for Arab women is 81.2 and for Jewish men is 81.3. In terms of Healthy Life Expectancy (HALE), Israel ranks even higher — sixth place worldwide.
• Israel is characterized by a low rate of infant mortality — 2.5 deaths per 1,000 live births (2020), versus an OECD average of 4.1. Among Jews, the rate is 2.3 versus 5.4 deaths per 1,000 births among Arabs. In the Bedouin population, where consanguine marriages are quite common and there is a high rate of birth defects and other risk factors, the infant mortality rate is 9 deaths per 1,000 births.
• A decline in fertility has been seen in all population groups, although in older Haredi cities, like Bnei Brak, fertility levels have remained stable (5.5 children per woman), while in smaller Haredi towns, it has declined from 6.9 to 6.3 children per woman. This is a substantial drop of 0.6 children in 6 years. During the COVID period, the downward trend partially reversed, and, in 2021, the fertility levels returned to their 2018–2019 levels.
• Younger age groups are distancing themselves from the marriage norm, and the share of women who remain unmarried until the age of 40 has risen in Israel from 4% in 1980 to almost 12% in 2016.
• In 2022, immigration to Israel saw 74,500 arrivals, 59% of them from Russia and 20% from Ukraine. Immigrants in 2022 were, on the whole, older than in previous years. It is reasonable to assume that a portion of them will leave Israel in the short- to medium-term.
  

Health

• The share of public expenditure per capita on healthcare is low relative to the OECD and was about 60% in 2019 — a figure that places Israel in 26^th place out of the 38 OECD countries. Although Israel’s population is relatively young, this ranking doesn’t change much even after adjusting for the population age distribution. This is because Israel has a large number of children, and health expenditure at young ages (particularly until age 1) are relatively high.
• The healthcare basket of services, which is a major component of the public healthcare expenditure, has eroded over the years: in 2020, the gap between the actual budget and that required to retain the level of care set when the law was legislated in 1995 was between 56% and 70%. This erosion has spurred the development of a private healthcare services market and exacerbated the inequalities in healthcare services.
• National expenditure on healthcare declined in 2021 to 8.1% of GDP, versus 9.7% in the OECD, and per capita expenditure increased by 6.9%. About a third of national expenditure comes from private spending for healthcare services.
• The number of physicians per capita in the Tel Aviv district is the highest, about 2.3 times that in the North where the number is the lowest. The number of nurses per capita in the Haifa district is twice their number in the South. The number of long-term care hospital beds in Israel has declined in the past decade — from almost 4 beds per 1,000 population aged 65 and over in 2010 to 2.9 in 2021. Waiting times for physician consultations are also quite long — more than 30 days for a dermatologist, and between 15 and 20 days for physicians in other specialties.
  

Environment and Health

• In Israel, the share of deaths from exposure to air pollution is high in comparison to other OECD countries. High blood pressure and diabetes are also substantial risk facts in Israel, both of which are related to environmental factors.
• The rapid growth in population and the economy have led to a rapid rise in built-up areas — from 1.8% in 1992 to 5.2% in 2019. In contrast, the ratio of built areas per capita fell by 35%, meaning that Israel has improved in concentrating a larger number of people in a smaller vertical space, and this occurred while the standard of living increased.
• Air pollutant PM2.5 is the most dangerous to health — it increases the risk of heart diseases, diabetes, and various types of cancer. In 2019, exposure to ambient particulate matter was the cause of 5% of premature mortality in Israel, and was 39% higher than the average exposure rate in the OECD. If steps aren’t taken to limit the impact of this exposure, Israel will soon exceed the OECD average of premature deaths from diseases related to such exposure.
  

Welfare

• More than one-fifth of families in Israel live below the poverty line. Of these, 55% are non-Haredi Jews, and the portion of Haredi and Arab families out of all families living below the poverty line is almost double their portion in the population. In a breakdown of families by children’s ages, it was found that the situation of families with children under age 4 is even worse. A quarter of these families live below the poverty line, and of them, nearly 80% are from the Arab or Haredi populations.
• Inequality in gross income in Israel is among the lowest in the OECD, but in terms of disposable income, Israeli inequality ranks among the highest. This discrepancy is due to the relatively low levels of taxes in Israel. The rise in the minimum wage and in employment rates in the Arab and Haredi societies are helping to narrow this inequality, which has persisted for over a decade.
• In 2022, overall expenditure on unemployment benefits reached about NIS 3.2 billion, versus NIS 4 billion in 2019. At the same time, the amount of long-term care benefits for elderly citizens rose substantially in 2021 and is now one-tenth of overall NII spending. Income security for low-income seniors also rose and in 2022 (including the universal old-age benefit for seniors) reached NIS 3,799 for a single individual, and NIS 6,002 for a couple.
• There is a serious shortage of social workers in Israel. One-tenth of the jobs in local authority welfare offices remain unfilled, and according to estimates, there are some 1,500 unfilled positions. Many leave the profession due to the low pay.
  

Education

• The education budget has grown in the past twenty years at 1.6 times the rate of the growth in the number of students, and, in 2023, was 18% of the national budget.
• The number of students per full-time teaching position and per class has declined for most education levels and in most education streams, and in the Haredi system, it has risen due to the large number of students. The population that benefits the most from budget additions has been the Arab population. Budget additions have allowed a narrowing of gaps between Hebrew and Arab education.
• Only 20% of teachers who teach language arts (Hebrew) in State primary schools, and 10% in the State-religious system, have appropriate training in the subject, versus 60% in the Arab education system. The match between teacher training and what they teach is higher in middle schools, mainly in Arab education. The reason that the situation is better in the Arab education system is apparently that the share of younger teachers is higher in this system and they bring a more up-to-date skill set.
• In the past twenty years the average wage for teachers has risen by about 90%. The improvement has been higher for women than for men. The wages in Arab and Haredi education rose more than in the Hebrew State and State-religious systems. Wages for more senior teachers rose more than for those at the start of their careers, and those without an academic education gained more than their colleagues with an academic degree.

The Taub Center for Social Policy Studies in Israel is an independent, non-partisan socioeconomic research institute. The Center provides decision makers and the public with research and findings on some of the most critical issues facing Israel in the areas of education, health, welfare, labor markets and economic policy in order to impact the decision-making process in Israel and to advance the well-being of all Israelis.