ספר תרשימים מקוצר en

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 household’s 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%

20002001

20022003

20042005

20062007

20082009

20102011

20122013

20142015

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 25–64) 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%

Norway

KoreaJapan

Mexico

Iceland

Switzerla

nd

New zealand

Australia

United Kingdom

Germany

Luxembourg

Austria

Israel

United States

chile

Czech

Republic

Denmark

Canada

SwedenOECD

Netherlands

Hungary

Estonia

Finland

BelgiumPoland

Turkey

France

Slovenia

Ireland

Italy

Slovak R

epublic

Portugal

SpainGreece

20142007

20142007

Turkey

Mexico

Italy

Greece

Hungary

PolandKorea

Belgium Chile

Ireland

OECD

United States

Slovenia

Slovak R

epublic

Australia

Austria

France

LuxembourgIsr

ael

FinlandSpain

Portugal

Canada

Czech

Republic

United Kingdom

Japan

Netherlands

Denmark

Estonia

Germany

norway

New zealand

Switzerla

nd

Sweden

Iceland

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


31% 35%28%

62%

28%

112%

25%

97%

26%16%

0%

20%

40%

60%

80%

100%

120%

45-54 15-44

Age groupsJews

+55Jews & others(excl. Haredi)

Haredi

Religion

Jews &others(incl. Haredi)

Arabs

Sex

MenWomenTotal

* Haredim: by most recent educational institution

Source: Kohelet Economic Forum processing of CBS Income Surveys

Labor market expansion over the past decade was disproportionately driven by the increase in the participation of women, Arabs, Haredi (ultra-Orthodox) Jews, and those over age 55.The groups that entered the labor force in large numbers have relatively low levels of experience and skills.

As a result, the reported average wage increased less than it would have under a static labor-force composition.

Percent change in salaried employment among selected groups, 2002-2011


Arabs:+62%

Haredi Jews:+112% Elderly

population:+97% Women:

+35%

Labor market participation increased dramatically among certain groups between 2002 and 2011


98

100

102

104

106

108

110

112

114

116

118

98

100

102

104

106

108

110

112

114

116

118

19971998

19992000

20012002

20032004

20052006

20072008

20092010

20112012

20132014

20151997

19981999

20002001

20022003

20042005

20062007

20082009

20102011

20122013

20142015

* 1997 was chosen as the base year due to the similarity in GDP gap (the gap between actual GDP and full employment GDP) between the late 1990s and the past few years.

Source: Kohelet Economic Forum processing of CBS data (left figure) and BOI data (right figure)

Average real gross wages have increased a lot over the past few years, surpassing in 2015 the previous peak from the boom year of 2001. In the period between 1997 and 2015, both wages and the employment rate increased by roughly 15%.

Employment rate, ages 25-64 (index: 1997=100) Average real (gross) wages for salaried position (index: 1997=100)


Employment:+15%

Average real gross wages:+15%

There was a significant increase in real wages and in the employment rate between 1997 and 2015


-1.5% -3.4%

Income per standard person increased at a higher rate due to the decrease in the number of persons per households

Households' net income increased at a higher rate due to the increase in economic income and the decrease in income-tax ratesHouseholds’ income from

salaried work increased at a higher rate due to the increase in the number of wage-earners

Real wage increased by almost 5%

Income from salaried work per

employee

CPI Income from salaried work per employee,

2014 prices

Number of wage-earners

Household’s income from salaried work

Household’s gross money income from all sources

Household’s net money income from all sources

Persons per household

Standard persons per household

Real net income per standard

person

40.4%

34.2%

4.6%8.4%

13.3%16.7%

28.0%32.5%

* 1999 was selected as the base year because of the abnormal incomes of the boom year of 2000.

** The real wage per salaried worker increased less then the real wage per salaried position, which increased by 6% in this time period.

Source: Kohelet Economic Forum processing of CBS expenditure surveys

The average household’s standard of living increased significantly over the past 15 years. Multiple simultaneous developments contributed to this outcome.

Changes in the economic and socio-demographic characteristics of household headed by a salaried worker , 1999–2014*


* "Total income" refers to monetary and non-monetary (in-kind) income, such as imputed income for self-used housing.

Source: Kohelet Economic Forum processing of CBS and National Insurance Institute data

Inequality of economic income among households dropped markedly over the past decade, while inequality of net income and of consumption expenditures decreased more gradually. The difference in trends reflects the timing of benefit cuts and the speed of the labor market response.

Gini indices of inequality Gini indices of inequality by types of income, 2014

0.25

0.30

0.35

0.40

0.45

0.50

0.25

0.30

0.35

0.40

0.45

0.50

19971998

19992000

20012002

20032004

20052006

20072008

20092010

20112012

20132014

Inequality of economic income

Inequality of net income

Inequality of consumption expenditure

The level of inequality for total income is lower than the more commonly used measure based on money income, because money income does not include economic income derived from owner-occupied dwellings. In Israel, low-income populations including Arabs and Haredi Jews are characterized by considerable home-ownership rates.

Inequality of consumption expenditure

Inequality of net income

Inequality of economic

income

0.478

money total money total money total

0.438

0.3710.351

0.332

0.301

0.3890.371

0.3260.301

0.4780.541


* Effective tax rates - the actual tax collected relative to the tax base - substantially affect the activity of the economy. For this reason, economic policies should take them into account. In addition, an international comparison of statutory tax rates (rates set by law) does not present the whole picture, because countries differ in the structure of the tax system and the level of tax benefits.

** The analysis was done by the method shown in Mendoza et al. (1994). The years that are listed in every series are the years with data available for them, and the OECD average does not include Iceland, Luxembourg, Turkey, Mexico and Greece.


The effective tax* on labor is lower in Israel than in other developed countries.The effective tax rate on labor in Israel has decreased significantly in recent years, from 30% in 2000 to 23% in 2013, 10 percentage points lower than the OECD average.

The effective tax rate on consumption at the end of the 1990s was about 21% - higher than the OECD average. In 2000 it was reduced to 19%, a rate slightly lower than the OECD average.

In 2014 there was a slight increase in the effective rate of the two types of tax.

Norway

KoreaJapan

Mexico

Iceland

Switzerla

nd

New zealand

Australia

United Kingdom

Germany

Luxembourg

Austria

Israel

United States

chile

Czech

Republic

Denmark

Canada

SwedenOECD

Netherlands

Hungary

Estonia

Finland

BelgiumPoland

Turkey

France

Slovenia

Ireland

Italy

Slovak R

epublic

Portugal

SpainGreece

15%

17%

19%

21%

23%

25%

27%

29%

31%

33%

35%

19951996

19971998

19992000

20012002

20032004

20052006

20072008

20092010

20112012

20132014

OECD - labor

OECD - consumption

Israel - labor

Israel - consumption

Effective tax rates on labor and consumption **


Source: Bank Of Israel

The reduction in corporate tax rate was accompanied by an increase in government revenues from this tax.Between 1996 and 2003, after a prolonged period of reduction, the statutory corporate tax rate was 36%. Pursuant to the policies enacted in response to the economic crisis of 2001-2003, the Israeli government continued to reduce the corporate tax rate, bringing it down to 24% in 2011.

Following the conclusions of the Trajtenberg Committee , appointed by the government in 2011, the reduction of the corporate tax rate ceased. In 2014 it was increased to 26.5%, but in 2016 it was again reduced to 25%.

Although the corporate tax rate fell, government revenues from corporate taxes as a percentage of GDP saw an overall increase during the period in question.

Corporate tax in Israel

0%

1%

2%

3%

4%

5%

20%

25%

30%

35%

40%

45%

1990

1991

1992

1993

1994

1995

1996

1997

1998

1999

2000

2001

2002

2003

2004

2005

2006

2007

2008

2009

2010

2011

2012

2013

2014

2015

2016

StatutoryRates

Revenuesas % of GDP



The Israeli health system is relatively successful, despite low levels of inputs and expenditure.Israel’s health system is remarkably successful compared to the health systems of other advanced countries. This is apparent both in standard measures such as life expectancy and in more specific measures such as self-reported health status and survival rates from malignant diseases. Israel attains these results despite relatively low input and expenditure levels.

The gap between inputs and outcomes can be attributed to Israel’s relatively young population, the high quality of its medical manpower, and the efficiency of the health system’s clinical and managerial functions.

Israel’s rank in different health system indices, and the number of countries included in each index, 2013 or latest available year

41 44 4339

3432 31 33 33

28 27

34

19

17253341

4036

4036

44

34 33

22 22 22 22

1

9

17

25

33

41

Per capitaCTMRICTMRICTMRIBedsNursesDoctors

Consultations with MD

No. of examination per mil. Persons

No. of instruments per mil. 65+ yrs old

persons

No. of instruments per mil. Persons

Staff & beds per capitaExpenditure on health as a % of GDP

Expenditure on health as a % of GDP

PrivatePublic

55522

813

17

11

33

32

15 15

31

23

30 2832

28

21

11

20

Life Expectancy: men

At 65At 65At birth At birth At 65 Less=highBottom income quantile

Colorectal Cancer -

men

Colorectal Cancer - women

Cervical cancer

breast cancerTotal pop.

Life Expectancy: women infant mortality

Share of population reporting their health is

good or excellent

Five-year survival rates – among ages 15+ (age standardized)

Inputs

Outputs


Despite low levels of inputs and expenditure, the Israeli health system is relatively successful


* Haredi Jews: by most recent educational institution

** Bellow each group, its share out of the total number of rooms for living

Source: Kohelet Economic Forum processing of CBS expenditure Surveys

The adjusted average number of rooms per household increased over time, reducing crowding in Israeli housing.The trend in the number of rooms per household was measured by a regression analysis, which adjusts for changes that are due solely to a change in the size and composition of households.

During this time period there has been a decrease in housing density: the number of rooms per household increased, on average, by 0.43% annually. Among Haredi and Arab households, however, crowding increased.

Average annual change in number of rooms per household, by group, 2006-2013, adjusted for household size and composition.

0.43%

1.04%

0.61%

0.12%0.18%

0.27%

0.73%

Christian

(2.5%)**

Muslim

(9.5%)

Druze

(1%)

Haredi

(5.7%)

Non-HarediJews

(79.4%)

Other

(1.8%)

Total


OBSTACLES

* Average of all OECD countries except the Czech Republic, Estonia, Poland, Slovakia, Slovenia, New Zealand and Hungary

** Labels show average annual change in the relevant sub-period.

Source: Kohelet Economic Forum processing of Penn World Table 8.1, labor market data from the World Bank and the national accounting data according to the OECD

The productivity gap between Israel and other developed countries has not narrowed in the years since 1960, and has grown since the 1980s.Countries with different productivity levels but similar institutions typically display “conditional convergence,” or a gradual closing of the productivity gap. This happens because when the capital level is relatively low, investment is more effective and it is easier to mimic existing technology than to invent it. For over twenty years, however, the gap in productivity between Israel and other developed countries, and in particular between Israel and the United States, has grown.*

Productivity per worker in thousands of dollars at fixed 2005 prices, purchasing power standardized (PPP), 1960 – 2014**

20

Prod

uctiv

ity p

er w

orke

r (lo

garit

hmic

scal

e)Pr

oduc

tivity

per

wor

ker (

loga

rithm

ic sc

ale)

28

40

56

80

112

160

1960 1965 1970 1975 1980 1985 1990 1995 2000 2005 2010 2014

Year

1960-1986 1986-2014

USA

OECD*

Israel

1.67%

1.25%

0.91%

2.51%

2.64%

1.59%

25Israel's Path to Economic and Social Prosperity Obstacles

Source: The OECD Barriers to Entrepreneurship index

Barriers to entry and exit in the Israeli marketplace are among the highest in the OECD.Barriers to entry and exit prevent the proper allocation of economic resources by making it difficult for successful firms to grow and for failing firms to clear the way for new ones. Israel has among the highest barriers to entry and exit of any OECD country on seven out of eleven indicators.

Barriers to entry and exit, 2013

-100%

150%

-50%

100%

0%

50%

Israel

AustraliaAustralia

SloveniaPortugal

SlovakRepublic

SlovakRepublic

NorwayCanada

Poland

Complexity of

regulatory procedures

Barriers to entrepreneurship

Administrative

burdens on startups

Barriers in services sectors

Regulatory protection of incum

bents

Legal barriers to entry

Barriers in netw

ork sectors

Licence and perm

its system

Comm

unication and sim

plification of rules and procedures

Administrative

burdens for corporations

Administrative burdens

for sole proprietor firms

dev.

in %

from

ave

rage

UnitedKingdom

UnitedKingdom

26 Israel's Path to Economic and Social Prosperity Obstacles

* Average score in math, reading and science at the 2006 PISA test lower than 400 (one standard deviation below the average ex-aminee in the entire organization)


The fraction of youngsters lacking basic skills in Israel is especially high. Cognitive skills have been shown to play an important role in productivity. The international PISA exams test the reading ability, mathematical problem-solving skills, and scientific thinking of 15-year-old students. In 2006, the average score of Israeli students was 445, compared with an OECD average of 500, and the variance of Israeli results was high.

The education system’s lack of success in imparting cognitive skills is especially noticeable in the Arab sector, where scores were much lower and the improvement between 2006 and 2012 was smaller. Furthermore, students in Haredi institutions, who amounted to about 16% of high school students in 2006, were not examined. Given the Haredi curriculum, we conjecture that these students’ performance on the PISA or a similar test would be significantly lower than the average Israeli student. As a result, the state of basic skills among Israeli youth is even more worrisome than the test scores imply.

395

497458

0

100

200

300

400

500

600

0%

5%

10%

15%

20%

25%

30%

35%

40%

2006 OECDIsrael2012

382

2006 2012

15.9%

34.9%

Hebrew SpeakersArabic Speakers

The rate of students with low scores*PISA test results, years 2006 and 2012


95%90%

90%50%

90%77%

88%83%

88%65%

78%26%

3 5 7 9 11 13 15Thousands shekelsper month 17 19 21

Bubble size = employment rate

Bellow BA BA and above

MEN

WOM

EN

non-Haredi Jews

Haredi Jews

Arabs

non-Haredi Jews

Haredi Jews

Arabs

Source: Kohelet Economic Forum processing of CBS Expenditure Survey data

Haredi men and Arab women are characterized by low employment rates and low wages regardless of their level of education.Among men with college education aged 30-49, there is a considerable gap between the gross monthly wages of non-Haredi Jews, Haredi Jews and Arabs, although the employment rates of these groups are relatively high. The salaries of Haredi Jews with high levels of education are lower than those of non-Haredi Jews with fewer years of schooling.

Arab women who lack a college education have a particularly low earnings level, as do Haredi Jewish women relative to both similar-age Haredi men and non-Haredi Jewish women.

Income from work per employee and employment rate by education groups (ages 30–49), 2014


* This figure is obtained by multiplying the employment rate and the level of gross income from work per worker aged 30-49 in each group

Source: Kohelet Economic Forum processing of CBS Expenditure Survey data

The gaps in per capita income between population groups are very large due to differences in both employment rates and income per employee.Labor income per capita is affected by both the employment rate and earnings level.

Haredi Jewish men with a college education are characterized by relatively low per capita income, equal to half the average per capita income of non-Haredi men.

Gross work income per capita (ages 30–49) by education group, in shekels per month, 2014*

ArabHarediNon-HarediJewish

ArabHarediNon-HarediJewish

10,091

5,698

7,669

3,408

5,959

1,058

18,123

9,9878,754

3,484

BA and aboveBellow BA

11,564

5,727

0

4,000

8,000

12,000

16,000

20,000

Women Men


Source: Kohelet Economic Forum processing of CBS data (population forecast, 2009 – 2059, medium scenario)

The proportion of non-Haredi Jews in the population is projected to shrink considerably in the coming decades, especially in the working-age cohort.

Israel’s population by age and sector group

28.3%

11.7%

10.3%

14.2%

5.5%

10.2%

14.7%

3.4%

42.6%

9.7%

15.6%

7.3%

12.8%

5.3%

5.6%

Arabs 0-14Arabs 0-14

Arabs 15-64Arabs 15-64

Arabs 65+Arabs 65+

Haredi Jews0-14

Haredi Jews0-14

Haredi Jews 15-64

Haredi Jews 65+

Haredi Jews 15-64

Haredi Jews 65+non-Haredi Jews 0-14

non-Haredi Jews 0-14

non-Haredi Jews 15-64non-Haredi Jews

15-64

non-Haredi Jews 65+

non-Haredi Jews 65+


• The reference scenario assumption is that the total population, and in particular the total population aged 15 and over, increases in accordance with the official projection, but the behavioral differences among sectors is unchanged. All data from the CBS 2014 expen-ditures survey, except rates of population growth by population-group and sex, taken from population forecast from 2009 to 2059, published by the Central Bureau of Statistics in 2012 (medium scenario).

Source: Kohelet Economic Forum prossesing of CBS Expenditure Survey data

If levels of employment and wages in the Haredi and Arab population were similar to those of the rest of the population, average income per capita would be 15% higher compared to the situation today. If current gaps persist, per capita income will be 15% less than it would be under the assumption of static demographic composition.

Change in labor income of all employed under the assumption of full upward convergence of employment and income, compared to existing state of 2014

Change in labor income of all employed, compared to the situation of static demographic composition and employment rate, based on projected population growth*

-16%

-12%

-8%

-4%

0%

4%

-4%

0%

4%

8%

12%

16%15.2%

5.9%5.7%

-2.8%

2014: convergence of employment

2014: convergence of employment & wages

-4.9%

-8.9%

-14.5%-14.5%

population size & composition according to

projection, and employment rates

of 2014

population size & composition according to

projection, and employment convergence

Per employee Per capita



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. One effect of the increase in life expectancy is an increase in number of years of retirement that households must finance.

Households can therefore maintain their standard of living by increasing pension or other forms of saving, or by deferring retirement.

Gap between the effective retirement age and the life expectancy at age 65, assuming no change in the retirement age

12

14

16

18

20

22

24

26

28

30

32

34

36

38

1990 1995 2000 2005 2010 2015 2020 2025 2030 2035 2040 2045 2050 2055

forecast

Men

Women


The duration of retirement is expected to increase by a factor of 1.5


3838

38 3231

3835 36

14 14 14

17

131925313743

17

13192531374349

18

9 102

12 132630

2630

26 2720

35

17

2925

1818

22 92 3 4

Expenditure on education as a % of GDP

Share of pop. by level of education

Secondary and above

(25-34)

Higher Education

(25-34)

Higher Education

(55-64) Scientific Nobel prizes

Per capita

Average Grade

Grade of the 90th

percentile

Average Grade

Grade of the 90th

percentile

Average Grade

Grade of the 90th

percentile

Average Grade

Grade of the 90th

percentile

PISA: Reading PISA: Mathematics PISA: Science PISA: Problem Solving

Upper secondary

Lower secondary

PrimaryUpper secondary

Lower secondary

PrimarySecondaryPrimaryHigher Education

SecondaryPrimary

Students per classroom* Students per teacher* Teachers’ salary compared to workers

with similar qualification (25-64)

28283434

34343434

50444444

Inputs

Outputs

* In these categories, a higher rank is attributed to a lower ratio.


Israel's education expenditures are close to the median for developed countries, but its educational performance is quite low by international standards.Teacher salaries in Israel stand above the OECD median, yet Israel rates quite low in terms of its educational outcomes.

Scores for Israeli students on the 2012 international PISA exams put Israel at the bottom ranking in all categories. Israel did, however, lead in improvement of PISA scores between 2009 and 2012.

Israel’s rating in educational measures compared to countries for which data exists, 2012 or the latest year available


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


* Simple average of the 25 OECD countries for which data is available.

** The forecast for Israel for 2015-2018 assumes annual growth of 3% in the average wage of full-time employees.

*** Link: www.oecd.org/israel/Employment-Outlook-Israel-EN.pdf


Israel's statutory minimum wage, compared to the average wage, is higher than the corresponding ratio in the OECD, and is set to grow even more in the coming years.The statutory minimum wage in Israel was 4,300 shekels per month in 2014 and is set to rise in phases to 5,300 shekels per month by December 2017. As a result, the ratio of the minimum wage to the average wage is expected to rise from 41.2% in 2014 to 45.1% in 2018. **

According to the OECD, Israel’s relatively high minimum wage threatens to make it more difficult for low-skilled and inexperienced workers to find jobs. ***

Minimum wage compared to the average wage of full-time employees, Israel and the OECD average *

35%

37%

39%

41%

43%

45%

47%

2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018

Israel

OECD*

45.1%

41.2%

39.5%


* 21 OECD countries. Data for 2013 or last year available.

Source: Kohelet Economic Forum processing of LIS data

One third of employees in Israel work more than 45 hours per week, a very high rate compared with other developed countries.Long working hours influence quality of life in two ways: first, long working hours mean limited leisure time, which is in itself a measure of life quality; and second, long working hours are associated with a low level of labor productivity.

Rate of employed working over 45 hours per week*

0%

10%

20%

30%

40%

50%

60%

18%

32%

Israel

Mexico

Iceland

Brazil

Greece

Australia

Czech Republic

United Kingdom

Belgium

United States

Spain

Italy

Austria

Hungary

Slovak Republic

Luxembourg

Ireland

Estonia

Finland

Switzerland

Netherlands

Germany

Average*


* OLS estimation of the unemployment rate in the settlement included as explanatory variables settlement size (logarithm) and dummy variables for sector and region. In calculating the forecast, we assumed settlement size equal to the average of the sample (195 settle-ments).

Source:Kohelet Economic Forum processing of Israeli Employment Service data (for both charts)

Unemployment rates are higher in the periphery than in the center of the country and much higher in the Arab sector than among Jews.An econometric study* examining the relationship between unemployment and characteristics of various localities shows that in all districts of the country there is a large gap between Arab towns and villages and other localities.

For example, the predicted unemployment rate in an Arab village located in the southern region is 16%, 6 percentage points higher than that of a Jewish locality in the southern region and 14 percentage points higher that of a Jewish locality in the central region.

Expected unemployment rate in locality by region and sector

Localities in Israel by unemployment rate, 2015

Point size proportional to number of employed in locality (at 2012)

1.9%

3.6% 3.5%

5.0%

9.5%

8.1%

9.8% 9.7%

11.3%

15.7%

0%

2%

4%

6%

8%

10%

12%

14%

16%

18%

SouthNorthJerusalemHaifaTel-Aviv& center

Jewish localities

Arab localitiesHaifa

Tel-Aviv

Jerusalem

Beer Sheva

High

medium

low


0.4

0.5

0.6

0.7

0.8

0.9

1.0

1.1

1.2

2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013

0%

10%

20%

30%

40%

50%

60%

20%

15%

23%

14%

26%

26%

29%

23%

29%

29%

33%

26%

36%

31%

49%

44%

52%

47%

Jerusalem

Wage in all localities (simple average)

Beit ShemeshEladSafedBnei Brak

Beitar IllitModi’in Illit

PetahTikvah

Rehovot

Safed

Jerusalem

Beit Shem

esh

Bnei Brak

Elad

Beitar Illit

Modi’in Illit

heterogeneouslocalities

localities with largeHaredi population

haredi localities

20142002

The average salary in Haredi localities remains very low compared to the Israeli average. In localities with large Haredi population, the relative wages eroded in recent years.

Employee wage in Haredi towns compared to country-wide averageThe rate of employed as part of the total population in authority (all ages), 2002 and 2014

Source: Kohelet Economic Forum processing of CBS local authorities data


* Israel's territory does not include the Judea and Samaria and the Gaza Strip but has the Golan Heights and East Jerusalem; The popula-tion includes residents of Israel living in Judea and Samaria.

Source: population – OECD data; territory – CIA Factbook data

Israel's population density is very high relative to other developed countries. Israel is projected to become by far the most crowded country in the OECD by 2050.Israel’s high population density is likely to impair citizens’ quality of life. The fact that a significant proportion of Israeli territory comprises desert land exacerbates the problem.

Israel’s population density necessitates continued improvement in the planning and functioning of its transportation and energy infrastructures, and in the management of its natural and environmental resources.

Population density, residents per km² (OECD countries)

0

100

200

300

400

500

600

700

Australia

Iceland

Canada

norway

Finland

New zealand

Swedenchile

Estonia

United States

MexicoIre

landGreece

SpainTurke

y

FranceAustr

ia

Slovenia

Hungary

Slovak Republic

Portugal

Poland

Denmark

Czech Republic

Luxembourg

Switzerla

ndIta

ly

Germany

United Kingdom

Japan

BelgiumIsr

ael

Netherlands

Korea

205020151960


Israel's population density is relatively very high


The Kohelet Economic ForumThe Kohelet Economic Forum promotes policy to support growth, competition and freedom, through economic and social policy research and the publication of policy proposals. The forum was founded in Jerusalem in September 2014 with the support of the Kohelet Policy Forum and the Tikvah Fund.

The Kohelet Policy ForumThe Kohelet Policy Forum is a non-partisan think tank that strives to secure the future of Israel as the nation-state of the Jewish people, to strengthen Israeli democracy, expand individual liberty and deepen free market principles in Israel.

The Tikvah FundThe Tikvah Fund is a philanthropic foundation and ideas institution committed to supporting the intellectual, religious, and political leaders of the Jewish people and the Jewish State. Tikvah runs and invests in a wide range of initiatives in Israel, the United States, and around the world, including educational programs, publications, and fellowships.

Kohelet Economic ForumThe Kohelet Economic Forum promotes policy to support growth, competition and freedom, through economic and social policy research and the publication of policy proposals. The forum was founded in Jerusalem in September 2014 with the

support of the Kohelet Policy Forum and the Tikvah Fund.

Kohelet Policy Forum (RA)Am V'Olamo 8, Jerusalem 9546306

Phone: 972-2-6312720 | Fax: 972-2-6312724

[email protected] | www.kohelet.org.il

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Economy & Finance