So, what exactly is the state of the nation?


1. What exactly is the State of the Nation Report and how does this publication give a sense of the state of Israel’s economy and society?

Avi pictureThe State of the Nation Report 2018 contains ten new research studies that deal with various socioeconomic issues in Israel. Five of the studies serve as comprehensive overviews of the five fields the Taub Center studies – macroeconomics, labor markets, education, health, and welfare – while the remainder are on a variety of more specific topics. In addition, this year’s book presents synopses of important research papers released earlier in 2018. Together, these studies and synopses provide a picture of Israel’s society and economy.

2. How is Israel’s economy doing overall?

It’s a mixed bag. On the one hand, employment in Israel in 2018 is at an all-time high, unemployment is at a historic low, GDP growth is high, and wages have risen. However, Israel’s growth potential is declining because of demographic changes and trends in labor productivity, which is not growing at all. Prices in Israel have fallen in most categories, but this is not the case in the housing market where prices have increased (though one of the Report’s new studies shows the surprising result that the ability to purchase housing today is comparable to what it was in the mid-1990’s).

3. Where does Israel stand relative to the employment goals and priorities set by the government?

As shown in the chapter presenting trends in the labor market, most population groups in Israel participate in the labor market at very high rates. For example, the employment rate of non-Haredi Jewish women is the second-highest in the OECD. However, employment rates are still low among certain population groups, specifically Haredi men and Arab Israeli women. While employment of Arab Israeli women has increased in recent years and has neared the goal of 41% set by the government for 2020, employment of Haredi men has actually fallen below 50%, far from the goal of 63% set for 2020.

Another chapter of the Report looks at what percentage of working-age Israelis have the skills necessary to work in the high tech sector (a sector that has enjoyed support and incentives from policy makers since its inception), and how this breaks down across population groups. The study concludes that the ability to expand employment in this sector from within the adult population is limited, with the greatest potential coming from among non-Haredi Jews (who already make up the majority of high tech employees).

4. What are some of the biggest changes we are seeing in Israel’s education system in recent years?

Israel’s education system has seen some important changes in recent years. First of all, there has been an impressive increase in expenditure on education relative to other countries, although expenditure per student is still lower than the OECD average. In addition, there have been notable changes in the percentage of high school students studying in technological tracks (and, in particular, a rise in the share of those studying in the high technological track where academic achievements are high), as well as in the portion of students taking math and English at the highest levels.

5. What makes fertility in Israel so unusual?

Fertility rates in Israel are not only far higher than in any other developed country, but are also unusual in a number of other ways. For instance, Israel is the only country in which the fertility rate is not only high, but is also continuing to increase, despite an increase in the age at which the first child is born and the low incidence of out-of-marriage childbirth. In addition, while fertility rates have fallen sharply for the Arab population, they have been growing for the Jewish population, and, in particular, for the secular Jewish population. Furthermore, the usual pattern in which more highly educated women and men have fewer children does not hold true for Israel’s Jewish population.

6. What trends have developed in Israel’s health and welfare systems?

In Israel’s healthcare system, a major problem has developed from the fact that many doctors work both within the publicly funded health system (health funds and hospitals) and the private system, and doctors often refer patients who come through the public system to themselves in the private system. This distorts incentives, and, in addition, leads to inequality between those who can afford private insurance and those who cannot.

The Report’s overview chapter on the welfare system shows that expenditure on welfare has risen in Israel, with the plans concentrated, for the most part, around helping those who work rather than those who do not. Indeed, the growth in social expenditure appears to reflect components of the “social investment approach” to the welfare state in Israel, with its emphasis on improving human capital and increasing labor market participation.

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