Author Archives: David

John Davison

John Davison is the Chief Investment Officer for Mt. Royal Management Company, a family office in Baltimore specializing in illiquid real estate and financial asset investments. He holds a Bachelor degree in Business Administration from Georgetown University.

Mr. Davison has been actively involved in Jewish causes and the Jewish community for over twenty years. Currently, he serves as President of the Baltimore Chapter of the American Friends of Technion University. He has been on the Board of Shoresh – a Jewish outreach organization based in Baltimore that targets the youth population in underserved communities – for over 20 years and is currently its Co-Chair.

Mr. Davison has also been an active member of the Associated Jewish Charities of Baltimore, serving on the investment committees as well as the campaign cabinet. He is a graduate of the UJA Young Leadership Cabinet. Mr. Davison is most interested in supporting Jewish education at every level and feels a strong connection to Israel. In addition, he is passionate about thoroughbred horse racing and the breeding industry.

Penny Blumenstein

Penny Blumenstein, Board Chair of the American Jewish Joint Distribution Committee (JDC) and immediate past President, is a renowned international philanthropic and Jewish leader. Blumenstein has more than a decade of leadership experience with JDC and is a Vice Chair of the Community Foundation of Southeastern Michigan.

She previously served as past President of the Jewish Federation of Metropolitan Detroit and past Chair of the Jewish Fund of Detroit and is currently a member of the board of the Detroit Symphony Orchestra and the Jewish Women’s Foundation of Detroit. Blumenstein is a recipient of multiple awards for her philanthropic work, including the George Romney Award for Lifetime Achievement in Volunteerism.

Jim Angell

Jim Angell is a board member of the Paul M. Angell Family Foundation and director of the Foundation’s environmental program. Mr. Angell’s work focuses primarily on supporting efforts to protect and conserve the world’s ocean habitats, coral reefs, and apex predators whose survival is imperiled by overfishing and global climate change.

 

Prior to joining the Foundation, Mr. Angell worked as an attorney for two decades for Earthjustice, a public interest environmental law firm. As an attorney in Earthjustice’s Bozeman, Montana office, and later as the managing attorney in the organization’s Denver, Colorado office, he litigated and directed numerous cases whose goals were to protect the landscapes and endangered species of the American west, and to preserve the clean air and water upon which the region’s residents depend. In addition to serving on the board of the Taub Center for Social Policy Studies in Israel, Mr. Angell sits on the board of Pacific Environment and the Advisory Council to Earthjustice. Mr. Angell has degrees from Columbia College (BA), the University of California at Los Angeles (MA), and the University of California at Berkeley (JD). He lives in Denver, Colorado with his two sons, of whom he is inordinately proud.

The Singer Series: State of the Nation Report 2009

Too often, public discourse and policy making are driven by preconceptions and gut feelings than facts. The purpose of this report is to provide an extensive factual, professional and impartial foundation to be used by the public and its leaders to understand where we were, where we are, where trends are leading us, what they mean, and how policy can change the reality even when it feels like force majeure.

Janet Rothenberg Pack z”l

Janet Rothenberg Pack is a professor emerita in the Department of Business Economics and Public Policy at The Wharton School of the University of Pennsylvania.  Her research focus has been on public economics, with an emphasis on urban and regional economics.  Pack is currently investigating “Agglomeration Economies and Economic Development” (a project stimulated by the World Bank’s “Knowledge Platform:  Urbanization Project).

 

She began her career as the Economist for the Redevelopment Agency of New Haven, Connecticut, which was undergoing major urban renewal at the time.  During these same years, she was a lecturer in the Department of City Planning at Yale University teaching courses on Urban Modeling.

 

From there she moved on to a position at the newly established School of Public and Urban Policy at the University of Pennsylvania (1970).  When the University transferred its public policy programs to the Wharton School, Pack was among the first members of the new Department of Public and Urban Policy (1978), currently the Department of Business Economics and Public Policy.  She chaired the department from 1992-97.  During that period she was also Editor of the Journal of Public Policy and Management, July, 1994 – 99.

 

Professor Pack has also spent many years (on leave from the University of Pennsylvania) at the Brookings Institution in Washington D.C.  Many productive research and other professional activities stem from that association. She is the author and editor of a number of books, including Urban Models: Diffusion and Policy Application; Sunbelt/Frostbelt:Public Policies and Market Forces in Metropolitan Development; and Growth and Convergence in Metropolitan America.In addition, from 2000 through 2009 she organized an annual conference on Urban Affairs (attended by about 40 major urban scholars).  Each conference resulted in a volume of Brookings Wharton Papers on Urban Affairs and the comments of the papers with an introduction by Pack and the co-editors of the volume, William Gale (1990-94) and Gary Burtless (1995-99).

 

Throughout her career, Professor Pack has been involved with academia in Israel, and has spent a number of summers at Israeli academic or research institutions including Hebrew University and the Jerusalem Institute for Israel Studies. She formerly served on the International Advisory Board of the Interdisciplinary Center in Herzliya.

Han Entzinger

Han Entzinger has been Professor of Migration and Integration Studies at Erasmus University Rotterdam since 2001. From 1986-2001 he held a similar chair at Utrecht University, and before that he worked inter alia for the Scientific Council for Government Policy (WRR), a think tank close to the Prime Minister of the Netherlands, and for the International Labour Office in Geneva.

 

He has published extensively on international migration, integration and multiculturalism and has consulted local and national governments and international organizations on these issues.  He is the former president of the Research Committee on Migration of the International Sociological Association and the former president of the Board of Directors of IMISCOE, the major European network of migration research institutes. Currently, he is the deputy chair of the Scientific Committee of the Fundamental Rights Agency of the European Union in Vienna.

James Heckman

Professor of Economics and Director of the Center for the Economics of Human Development at the University of Chicago

 

James J. Heckman is Henry Schultz Distinguished Service Professor of Economics in the Department of Economics at the University of Chicago. In 2000, Heckman shared the Nobel Prize in Economics for his work on the microeconometrics of diversity and heterogeneity and for establishing a causal basis for public policy evaluation. He has received numerous other awards for his work, including the John Bates Clark Medal in 1983, the Jacob Mincer Award for Lifetime Achievement in 2005, the 2005 and 2007 Dennis Aigner Award, the Ulysses Medal from the University College Dublin in 2006, the 2007 Theodore W. Schultz Award, the Gold Medal of the President of the Italian Republic in 2008, the Distinguished Contributions to Public Policy for Children Award in 2009, and the Frisch Medal in 2014. He is actively engaged in conducting and guiding empirical and theoretical research on skill development, inequality, and social mobility.

Peter S. Heller

Peter S. Heller is a visiting professor of Economics at Williams College, in Williamstown MA. He also teaches in the graduate program of governance at the University of Maastricht, Netherlands and as an occasional lecture at the IMF Institute. He worked at the International Monetary Fund (IMF) for almost thirty years, where he wrote extensively on issues of economic development and poverty reduction, macro fiscal policy, ageing populations, public expenditure policy, health care reforms in developing countries, pension and civil service reform, climate change, privatization, and globalization.

 

At the IMF, he was the Deputy Director of the Fiscal Affairs Department of the International Monetary Fund. He has had extensive experience in Asia, working on China, India, Indonesia, Japan, Korea, Malaysia, and Thailand, Africa (where he worked on Somalia, Kenya, Ethiopia), and Europe (where he worked on Bosnia). While working at the Fund, he was involved intensively with the WHO’s Commission on Macroeconomics and Health as well as the United Nations Millennium Development Plan. He also was a member of an advisory committee to the Director General of the World Health Organization on tobacco policies.

 

His book Who Will Pay? Coping with Ageing Societies, Climate Change, and other Long-Term Fiscal Challenges was published by the IMF in 2003. During his career, he was an Assistant Professor of Economics at the University of Michigan and after leaving the IMF, he taught several years at the School of Advanced International Studies of the Johns Hopkins University. Dr. Heller received his PhD in Economics from Harvard University and his BA from Trinity College (Hartford).

Adam Gamoran

Adam Gamoran is President of the William T. Grant Foundation, and John D. MacArthur Professor Emeritus of Sociology and Educational Policy Studies at the University of Wisconsin Madison.  At the Foundation, he leads initiatives to support research to improve the lives of young people ages 5 to 25, with emphasis on reducing inequality in youth outcomes and on understanding the use of research evidence in programs and policies that affect youth.

 

In a research career spanning three decades, Gamoran conducted a wide range of studies focusing on inequality in education and school reform.  He is the lead author of Transforming Teaching in Math and Science: How Schools and Districts Can Support Change (Teachers College Press, 2003) and editor of Standards-Based Reform and the Poverty Gap: Lessons for No Child Left Behind (Brookings Institution Press, 2007).  He also co-edited Methodological Advances in Cross-National Surveys of Educational Achievement (National Academy Press, 2002) and Stratification in Higher Education: A Comparative Study (Stanford University Press, 2007).  He chaired the Independent Advisory Panel of the National Assessment of Career and Technical Education for the U.S. Department of Education, served on the Board of International Comparative Studies of Education for the National Research Council (NRC), and currently chairs the NRC’s Board on Science Education.

 

He was twice appointed by President Barack Obama to serve on the National Board for Education Sciences, and he is an elected member of the National Academy of Education and the American Academy of Arts and Sciences.  In 2013 he was honored with the Spencer Foundation Award for research on educational policy from the Association for Public Policy and Management, and in 2014, he received the Distinguished Contributions to Research in Education Award from the American Educational Research Association.

Robert E. Litan

As an economist and attorney, Litan has had nearly four decades of experience in the worlds of the law, economic research and policy, and as an executive in both the private, public and government sectors. Through his extensive publications and many speeches and testimony, he has become a widely recognized national expert in regulation, antitrust, entrepreneurship, and finance, among other policy subjects.

 

Litan is Counsel to Korein Tillery, a law firm based in St. Louis and Chicago specializing in large case litigation, and Chief Economist at Main Street Genome, a DC-based startup providing financial analytics to small businesses. He formerly directed economic research at the Brookings Institution, the Kauffman Foundation and Bloomberg Government.

 

Litan also serves on several advisory boards: the Smith Richardson Foundation; the Committee for Economic Development; the American Antitrust Institute; and the Taub Center for Social Policy Studies in Israel. He is also a special consultant to Economists, Inc. in Washington, D.C. He has also been a member of the international advisory board of the Principal Financial Group and has also held several high-level appointed positions, as an economist and attorney, in the U.S. federal government.

 

During his research career, Litan has authored or co-authored 27 books and edited another 14, and authored or co-authored more than 200 articles in professional and popular publications. His most recent book, published by Wiley Press in the fall of 2014, is The Trillion Dollar Economists.

 

Litan earned his B.S. in Economics (summa cum laude) at the Wharton School of Finance at the University of Pennsylvania; his J.D. at Yale Law School; and his M. Phil. and Ph.D. at Yale University.

Daniel Kahneman

Daniel Kahneman is Professor Emeritus of Psychology and Public Affairs at Princeton, a member of the Center for Rationality at the Hebrew University of Jerusalem, and a partner in The TGG consulting company. He is best known for his work with Amos Tversky on human judgment and decision making, for which he was awarded the Nobel Prize in Economics in 2002.

Kahneman has also studied a number of other topics including attention, the memory of experiences, well-being, counterfactual thinking, and behavioral economics.  His honors include the Presidential Medal of Freedom (2013), the Distinguished Lifetime Career Contribution of the American  Psychological Association, the Grawemeyer Prize in Psychology (with Amos Tversky), and the Thomas Schelling Award for contributions to policy, among others.  He holds honorary degree from many Universities.

Eric Hanushek

Eric Hanushek is the Paul and Jean Hanna Senior Fellow at the Hoover Institution of Stanford University. He has been a leader in the development of economic analysis of educational issues. He has authored numerous, highly cited studies on the effects of class size reduction, high stakes accountability, value-added assessments of teacher quality, and other education related topics. His pioneering analysis measuring teacher quality through the growth in student achievement forms the basis for current research into the value-added of teachers and schools. Most recently, Hanushek shows that the quality of education is closely related to national economic growth.

His most recent book, Endangering Prosperity: A Global View of the American School, considers the performance of U.S. schools from an international perspective and identifies the costs of not improving student outcomes. His prior book, Schoolhouses, Courthouses, and Statehouses: Solving the Funding-Achievement Puzzle in America’s Public Schools, describes how improved school finance policies can be used to meet our achievement goals. Earlier books include Courting Failure, the Handbook on the Economics of Education (four volumes), The Economics of Schooling and School Quality, Improving America’s Schools, Making Schools Work, Educational Performance of the Poor, Education and Race, Modern Political Economy, Improving Information for Social Policy Decisions, and Statistical Methods for Social Scientists. His numerous scholarly articles on a wide range of education topics are very widely cited both in professional journals and in policy discussions.

He is chairman of the Executive Committee for the Texas Schools Project at the University of Texas at Dallas, a research associate of the National Bureau of Economic Research, and a member of the Koret Task Force on K-12 Education. He recently served as a commissioner on the Equity and Excellence Commission of the U.S. Department of Education. He was chair of the Board of Directors of the National Board for Education Sciences during 2008-2010. He is currently the area coordinator for Economics of Education of the CESifo Research Network.

He previously held academic appointments at the University of Rochester, Yale University, and the U.S. Air Force Academy. Government service includes being Deputy Director of the Congressional Budget Office, Senior Staff Economist at the Council of Economic Advisers, and Senior Economist at the Cost of Living Council. He has been appointed to a variety of policy commissions including the Governor’s Committee on Education Excellence in California and the Governor’s Commission for a College Ready Texas. He is a member of the National Academy of Education and the International Academy of Education along with being a fellow of the Society of Labor Economists and the American Education Research Association. He was awarded the Fordham Prize for Distinguished Scholarship in 2004.

He is a Distinguished Graduate of the United States Air Force Academy and completed his Ph.D. in economics at the Massachusetts Institute of Technology. He served in the U.S. Air Force from 1965-1974.

Stuart Eizenstat

Ambassador Stuart Eizenstat heads Covington’s international practice.  His work at Covington focuses on resolving international trade problems and business disputes with the US and foreign governments, and international business transactions and regulations on behalf of US companies and others around the world.

 

During a decade and a half of public service in three US administrations, Ambassador Eizenstat has held a number of key senior positions, including chief White House domestic policy adviser to President Jimmy Carter (1977-1981); U.S. Ambassador to the European Union, Under Secretary of Commerce for International Trade, Under Secretary of State for Economic, Business and Agricultural Affairs, and Deputy Secretary of the Treasury in the Clinton Administration (1993-2001).

 

During the Clinton Administration, he had a prominent role in the development of key international initiatives, including the negotiations of the Transatlantic Agenda with the European Union (establishing what remains of the framework for the US relationship with the EU); the development of the Transatlantic Business Dialogue (TABD) among European and US CEOs; the negotiation of agreements with the European Union regarding the Helms-Burton Act and the Iran-Libya Sanctions Act; the negotiation of the Japan Port Agreement with the Japanese government; and the negotiation of the Kyoto Protocol on global warming, where he led the US delegation.

 

Much of the interest in providing belated justice for victims of the Holocaust and other victims of Nazi tyranny during World War II was the result of his leadership of the Clinton Administration as Special Representative of the President and Secretary of State on Holocaust-Era Issues.  He successfully negotiated major agreements with the Swiss, Germans, Austrian and French, and other European countries, covering restitution of property, payment for slave and forced laborers, recovery of looted art, bank accounts, and payment of insurance policies.  His book on these events, Imperfect Justice: Looted Assets, Slave Labor, and the Unfinished Business of World War II, has been favorably received in publications like the New York Times, Los Angeles Times, Washington Post, Business Week, and Publisher’s Weekly.  It has been translated into German, French, Czech and Hebrew.

 

Ambassador Eizenstat has received seven honorary doctorate degrees from universities and academic institutions.  He has been awarded high civilian awards from the governments of France (Legion of Honor), Germany, Austria, and Belgium, as well as from Secretary of State Warren Christopher, Secretary of State Madeleine Albright, and Secretary of the Treasury Lawrence Summers.  In 2007, he was named “The Leading Lawyer in International Trade” in Washington, DC by Legal Times.  His articles appear in The New York Times, Financial Times, International Herald Tribune, Washington Post, Los Angeles Times, Foreign Policy magazine, and Foreign Affairs magazine, on a variety of international and domestic topics.  Ambassador Eizenstat grew up and was educated in the public schools of Atlanta.  He is a Phi Beta Kappa, cum laude graduate of the University of North Carolina at Chapel Hill and of Harvard Law School. He is married to Frances Eizenstat and has two sons and five grandchildren.

Aaron Ciechanover

Aaron Ciechanover was born in Israel in 1947.  He is a distinguished Professor in the Technion in Haifa, Israel.  He received his M.Sc. (1971) and M.D. (1973) from the Hebrew University in Jerusalem, and his D.Sc. from the Technion (1982), where as a graduate student with Dr. Avram Hershko and in collaboration with Dr. Irwin Rose from Philadelphia, they discovered the central reaction in the ubiquitin-proteasome system –   covalent tagging of protein substrates with ubiquitin which target them for degradation.

They also demonstrated the role of the system in removing short-lived, abnormal proteins. Ciechanover received the 2000 Albert Lasker Award, the 2003 Israel Prize, and the 2004 Nobel Prize (Chemistry; shared with Drs. Hershko and Rose).  He is a member of the Israeli National Academy of Sciences and Humanities, the National Academy of Sciences of the USA (NAS) and its Institute of medicine (IOM)(Foreign Associate), the Pontifical Academy of Sciences of the Vatican, and the Chinese Academy of Sciences (CAS; Foreign Fellow).

Henry Aaron

Henry J. Aaron (PhD) is currently Bruce and Virginia MacLaury Senior Fellow in the Economic Studies Program at the Brookings Institution. From 1990 through 1996 he was the Director of the Economic Studies Program.

 

Aaron taught at the University of Maryland from 1967 through 1989, except for 1977 and 1978 when he served as Assistant Secretary for Planning and Evaluation at the Department of Health, Education, and Welfare. He chaired the 1979 Advisory Council on Social Security. During the academic year 1996-97, he was a Guggenheim Fellow at the Center for Advanced Studies in the Behavioral Sciences at Stanford University. He is a graduate of UCLA and holds a PhD in economics from Harvard University.

 

He is also a member of the District of Columbia Health Benefits Exchange and is chair of the Social Security Advisory Board.  He is a member of the Institute of Medicine, the American Academy of Arts and Sciences, the advisory committee of the Stanford Institute for Economic Policy Research, and the visiting committee of the Harvard Medical and Dental Schools. He was a member of the board of directors of Abt Associates and is a member of the board of directors of the Center on Budget and Policy Priorities.  He was a founding member, vice-president, and chair of the board of the National Academy of Social Insurance. He has been vice-president and member of the executive committee of the American Economic Association and was president of the Association of Public Policy and Management. He has been a member of the boards of directors of the College Retirement Equity Fund and Georgetown University.

 

Aaron’s publications include: Closing the Deficit: How Much Can Later Retirement Help? (with Gary Burtless); Taxing Capital Income: Do We? Should We? Can We? (coedited with Leonard Burman and Eugene Steuerle); Can We Say No: The Challenge of Health Care Rationing (with Melissa Cox); Coping With Methuselah: The Impact of Molecular Biology on Medicine and Society (coedited with William Schwartz); Agenda for the Nation (coedited with James Lindsay and Pietro Nivola); Crisis in Tax Administration (coedited with Joel Slemrod); The Plight of Academic Medical Centers, Countdown to Reform: The Great Social Security Debate (with Robert Reischauer); and Setting National Priorities: The Year 2000 and Beyond, which he coedited. Other books include The Painful Prescription: Rationing Hospital Care (coauthored with William Schwartz); Can America Afford to Grow Old? (coauthored with Barry Bosworth and William Gale); Serious and Unstable Condition: Financing America’s Health Care; Economic Effects of Fundamental Tax Reform (coedited with William Gale); and Behavioral Aspects of Retirement Economics (editor).

The Singer Series: State of the Nation Report 2010

Too often, public discourse and policy making are driven by preconceptions and gut feelings rather than facts. The purpose of this report is to provide an extensive factual, professional and impartial foundation to be used by the public and by policy leaders to understand where we were, where we are, where trends are leading us, what they mean, and how policy can change the reality even when it feels like force majeure.

The Middle Class in Israel

The controversy over the question whether “Riki Cohen from Hadera” – to whom Finance Minister Yair Lapid referred on his Facebook page – belongs to the middle class has made it necessary to redefine the boundaries of the three classes in Israeli society. Many saw the social protest movement of summer 2011 as attesting to the unification of the middle class in Israel, but the question remains: What is the middle class, and how ought it to be defined? Is the keyword here “class,” i.e., individuals who share a similar social status, or is the reference to those in the middle of the income distribution, namely the only attribute that unites the individuals belonging to it is income level? The difficulty in identifying and precisely defining the middle class may explain the fact that this article does not focus on any particular definition, but examines the development of the middle class in Israel over the past decade, with reference to a variety of aspects and employing a selection of measuring tools.

A Picture of the Nation 2014

History

In 1982, Prime Minister Menachem Begin appointed Dr. Israel Katz (who had completed his term as Minister of Labor and Social Affairs) to head up a new group with the title of the Prime Minister’s Team for Planning Social Services. This entity was to provide the government with policy options, information, and research that were previously unavailable. Within two years, the “Team” evolved into the independent Center for Social Policy Studies under the leadership of Israel Katz as Executive Director, with Professor Yaakov Kop as Director of Research.

To maintain the Center’s independent status, it was decided not to accept any government funding.  Instead, funding for the Center came from the Joint Distribution Committee (JDC) and a group of committed JDC leaders, with JDC assuming sole financial responsibility for the Center in 1987. This was a milestone for the Center in establishing its independent status and assuring its continuation.

In 1991 Israel Katz retired his position as Director of the Center and Yaakov Kop became the Director. Under the chairmanship of Henry Taub, Kop developed the structure of the Area Teams and the Interdisciplinary Team. This structure is still in place at the Center today. The Teams – referred to today as Policy Programs – are made up of recognized experts from both the field and academia recruited on an ad hoc basis. This added to the Center’s comprehensive, interdisciplinary approach the element of area specialization.

In 2003, another milestone was reached when the JDC decided to embark on an Endowment Campaign to ensure the long-term funding of the Center. The Endowment Fund was created with donations from the Henry and Marilyn Taub Foundation, the Herbert M. and Nell Singer foundation, Jane and John Colman, the Kolker-Saxon-Hallock Family Foundation, the Milton A. and Roslyn Z. Wolf Foundation, and the JDC. At that time, the name of the Center was formally changed to the Taub Center for Social Policy Studies in Israel in recognition of the continuous support and dedication of the Center’s long-time Chairman of the Board of Directors, Henry Taub. In 2007, the Center moved in to its own building in the Rehavia neighborhood of Jerusalem – in close proximity to the President and the Prime Minister’s residences.

In November 2008, Professor Yaakov Kop retired and was replaced as Executive Director by Tel-Aviv University professor Dan Ben-David (PhD, Economics, University of Chicago, areas of specialization: economic growth, globalization, and the Israeli economy). In October 2009, Hebrew University professor Ayal Kimhi (PhD, Economics, University of Chicago, areas of specialization: labor economics and income inequality) joined the Center as Deputy Director.  The change in leadership at the Center has been accompanied by new directions for research as well as a revamping of some of the basic program elements.

Mission & Vision

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Greg Rosshandler

Mr. Greg Rosshandler is Managing Director of Peachtree Capital Pty Ltd, a Melbourne based investment group that controls a broad portfolio of property and listed equities. Prior to forming Peachtree in 2006, Mr. Rosshandler founded Finewrap Australia Pty Ltd in 1966, which operated a packaging manufacturing business until it was sold in 2006.

 

At the time of its sale the Finewrap Group had 5 manufacturing plants with around 475 employees.

 

Mr. Rosshandler is passionate about preservation of the State of Israel and a significant contributor to Israeli charities and institutions.

Low productivity: A systemic problem across Israel’s economy

At the end of the day, one of the main goals of policy makers is to improve living standards (commonly measured by GDP per capita).  Increasing economic growth in the steady state is a result of steadily improving productivity.  One important measure of productivity is the average amount of GDP produced per hour worked, or what is generally referred to as labor productivity, which is also an important determinant of wages.  Taub Center Executive Director Prof. Dan Ben-David explored the issue of labor productivity in a study published in the most recent State of the Nation Report 2013.

The study finds that not only is labor productivity in Israel among the lowest in the developed world, but that a substantial labor productivity gap between the G7 countries and Israel has been progressively growing for over four decades.  Furthermore, while average hours worked per person have decreased steadily among the G7 countries over the last thirty years, the corresponding figure for Israel has fluctuated over time but remains at a similar level today as in the early 1980s.

An important contribution of Ben-David’s study is a holistic look at productivity across five business sectors that comprise a large portion of Israel’s economy.  Prior to this work, it was thought that the productivity gap may be due to a bloated government bureaucracy or to individual sectors where Israel performs poorly.  However, as the five panels of the figure indicate, labor productivity in Israel in four of the five business sectors is below all, or nearly all, eleven other developed OECD countries with relevant data since 1995.

In the manufacturing sector, which includes both high tech and more traditional industry, Israel has improved from last place in 1995, to second to last place, ahead of Italy in 2008.  Across countries, productivity is the highest in the financial intermediation, real estate, renting and business activities sector, relative to the four other sectors examined.  In this sector, Israel has moved from second to last place in 1995, to a tie with Denmark for last place in 2008.  In the sector encompassing wholesale and retail trade, repairs, hotels and restaurants, and transport, Israel has the lowest productivity throughout the entire period examined, and is falling further behind other developed countries.  The construction sector, which is dominated in Israel by a large number of unskilled foreign workers, is characterized by particularly low levels of labor productivity.  Throughout the period examined, Israel remained far behind the other eleven countries examined in this sector.  The one sector where Israel performs relatively better is agriculture, long a source of pride and innovation in the country, though Israel’s productivity in this sector has not been exceptional – remaining consistently among the middle of the eleven OECD countries examined.

Israel’s productivity is lower than the OECD average across the board, and the gap is particularly noticeable in the wholesale and retail trade, repairs, hotels and restaurants, and transport sector as well as in the construction sector, which both have productivity almost 40 percent lower than the OECD average.

Productivity Part A

Productivity Part B
Given that lower productivity is a ubiquitous phenomenon across the Israeli economy, there are clearly underlying country-wide factors that lead to such a result.  As shown in the State of the Nation Report 2013, this is due to a range of underlying factors, including lack of sufficient human capital due to poor basic education in general and for ultra-Orthodox and Arab Israeli students in particular.  Low investment in physical capital over the years and a cumbersome government bureaucracy make it more difficult to conduct business efficiently in the country.  Productivity is intimately tied with higher standards of living.  Thus, addressing the barriers to increased productivity is key towards improving the everyday life of Israelis.

Left behind: Declining higher education levels among the Haredim

The education of the Haredi (ultra-Orthodox) and their participation in Israel’s workforce is a subject of hot debate in Israeli society today.  But the discussions on this topic are not always based on accurate facts.  As such, in the State of the Nation Report 2013 Taub Center researcher Eitan Regev explored trends in education and employment among the Haredim using a unique, more precise method of identifying this population.

A number of key findings emerged.  First, as is the case for the non-Haredi population, higher education was very important to success in the labor market for Haredim, both in terms of employment and wages.  Employment rates of Haredi men aged 25-64 with an academic degree stood at 71 percent, double that of their counterparts without an academic degree.  A similar gap, though smaller, was shown for Haredi women.  The wages of Haredi men aged 25-64 in full-time employment were 80 percent higher for those holding an academic degree than f.or those without.

Given the importance of an academic degree to the economic integration of Haredi families, Regev explores the rates of higher education in this population.  In general, higher education rates among Haredim are much lower than that of other population groups.  As shown in the first figure, only 7.5 percent of Haredi men aged 25-44 had an academic degree in 2008, as compared to 11.8 percent of Muslim and Druze men, 23.6 percent of Christian Arab Israeli men, and 31.2 percent of non-Haredi Jewish men.  Large gaps in academic attainment also apply to Haredi women in this age bracket.  Interestingly, in today’s Israel, women aged 25-44 are more likely than men of that age to hold an academic degree within each population subgroup.

There is a striking contrast in trends between Haredim and the other groups with regards to higher education.  Among women in the Muslim and Druze, Christian Arab Israeli and non-Haredi Jewish population groups, there has been an increasing tendency to acquire an academic degree over time.  Among these groups, women aged 25-44 are more likely than their older counterparts aged 45-64 to hold academic degrees.  In sharp contrast, the share of academic degree holders among younger Haredi women (12.8 percent) is a third less than among older Haredi women (17.6 percent).

The situation among Haredi men is even starker.  In contrast to the conventional wisdom, the share of Haredi men with academic degrees is declining, not rising.  Even though more Haredi men are deciding to attain an academic degree, this is more than offset by the many more Haredim deciding not to do so.  As a result, while 15.1 percent of Haredi men aged 45-64 have an academic degree, only half of that, or 7.5 percent of younger Haredi men, have an academic degree.

Haredi education Fig 1

The share of academic degree holders among prime working-age Haredi men remained very low throughout the decade between 2002 and 2010, as indicated in the second figure.  Similarly, throughout the decade, a low rate of bagrut certificate recipients (i.e., high school matriculation) was also evident.  The largest group by far, and the only one showing a significant increase, from 31 to 47 percent of men in this age group, was that of Haredi men with no more than a primary school education. These trends are a result of more Haredi boys entering the yeshiva system after eighth grade, at which point they cease to receive any basic education in core curriculum subjects and focus solely on religious study.

Haredi education Fig 2 new

The phenomenon of declining shares of academic degree holders in the Haredi population was documented for the first time in the Regev study and has major implications for Israel’s economy.  When the younger generation of Haredi men increasingly has shorter lengths of formal studies and is less likely to hold academic degrees than the older generation, then its ability to find jobs in a progressively competitive and global market falls accordingly.  It is no coincidence that while over 80 percent of prime working age Haredi men were employed in the late 1970s, less than 50 percent are employed today – with a multi-decade employment decline mirroring that of completely uneducated non-Haredi men.  With the Haredi population growing more rapidly than the rest of the population, an increasing share of Israelis are not receiving the education and tools to participate in the economy.  This has some major negative ramifications for future national standards of living and poverty rates in Israel.

 

Is There a Doctor (or Nurse) in the House?

Some actions have been taken in recent years to reverse these trends and it remains to be seen if these will be sufficient. Even the great advancements in technology have not changed one fundamental fact about healthcare – providing medical services requires significant manpower.  The field is composed of a broad workforce spanning nurses, specialists, medical technicians, pharmacists, and much more. The effectiveness of a healthcare system depends greatly on having a sufficient and available workforce to meet demand where and when it occurs.  Shortages can cause significant pain for patients and inefficiency in operations.  However, upgrading the supply of healthcare professionals, particularly physicians, requires years of foresight and planning due to long length of training.

Prof. Dov Chernichovsky, Chair of the Taub Center’s Health Policy Program and an economist at Ben-Gurion University, and Taub Center researcher Eitan Regev published a new paper in the Center’s State of the Nation Report 2013 discussing trends with regards to the supply of physicians and nurses in Israel as well as the investment being made today to educate professionals who will work in these fields in the future.

Over the last couple of decades, Israel has benefitted from a high physician-to-population ratio in comparison to other developed countries, namely due to the great immigration wave of doctors from the former Soviet Union.  Starting in the late 1990s, the share of physicians relative to the population began dropping in Israel, while the share in the OECD has been rising.  Despite the decline, Israel still remains slightly ahead of the OECD with 3.0 physicians per 1,000 standardized persons (i.e., after adjusting for the size of different population age groups) compared to 2.8 in the OECD.

These figures, however, do not provide insight into the distribution of physicians among specialties or across the public and private healthcare systems.  As discussed in the Taub Center’s recent policy brief “Hot Issues in Israel’s Healthcare System,” by Liora Bowers, the Israeli Medical Association has identified anesthesiology and geriatrics as having current shortages, and has warned of potential future shortages in general surgery, internal medicine and pediatrics, among others.  Similarly, the State Comptroller’s 2009 report indicated that Israel had 30 percent fewer anesthesiologists than the recommended standard, which it cited as partly responsible for long waiting times on elective surgeries.  Furthermore, there is concern that physician specialists are increasingly drawn towards work in the private, rather than public, healthcare system.

Chernichovsky and Regev examined the causes for the declining share of physicians in Israel.  As shown in the first figure, Israel is educating far fewer physicians than other developed countries.  OECD countries produced 11 medical school graduates per 100,000 people in 2010, compared to only 4 in Israel.

Healthcare Fig 1

While these figures may be worrisome, there are some other relevant factors to consider.  First, Israel currently has significantly more students starting medical school today than it has had in previous years.  Part of this increase comes from the opening of Israel’s fifth medical school in 2011, which welcomed 125 students (students holding bachelor’s degrees or those who completed three years of study at European medical schools) via two shortened tracks of study.  There are also other initiatives underway to increase the number of students and streamline the medical education process.  These include the initiation in recent years of several four-year medical school programs targeted at students already holding an undergraduate degree and relevant biology coursework, as well as a reduction by six months in the length of medical school education.

Because entry to medical school in Israel is extremely competitive and capacity is limited, hundreds of Israelis graduate from medical schools abroad, in places such as Hungary, Romania and Italy, many of whom return to Israel after completing their studies.  Israelis studying abroad are subject to a different licensing exam to practice medicine in Israel than their counterparts who studied locally.  Graduates of medical schools in the U.S., Canada and the U.K. are exempt from this exam, and there has been some discussion on broadening the list of countries whose graduates are exempt.  In early 2013, the Knesset voted to exempt Israeli graduates of foreign medical schools from the Israeli licensing exam, if they have passed the equivalent United States licensing exams.  The various initiatives described above are expected to have a noticeably positive impact on physician supply in the coming 6-8 years.

Chernichovsky and Regev highlight that Israel’s healthcare workforce challenges are even greater in nursing than they are for physicians.  As indicated in the second figure, while the U.S. and other developed countries have seen an increase in their nurse-to-population ratio over the last decade, Israel’s numbers have slightly declined over this period.  At 4.9 nurses per 1,000 people, Israel had less than half of the supply of nurses than the OECD in 2011, which stood at 10.3.

Healthcare Fig 2

The third figure shows that the low supply is exacerbated by an extremely low – and declining – number of nursing graduates in the country.  Israel produced only 11.2 nursing graduates per 100,000 people in 2011, compared with 42.8 in the OECD. Over the past decade, Israel has seen a 43 percent reduction in the rate of nursing graduates.  As a result, the average age of the nursing workforce has risen, with half of Israeli nurses now over the age of 45.  The two primary factors underlying the declining rates of new graduates are relatively low wages that do not provide sufficient incentive for entering the field, and a heavy workload due to the nursing shortages.  The issues of high work load and low number of graduates are mutually reinforcing and have led to a deteriorating situation in recent years.  A nurses strike in 2012 led to a new agreement resulting in significant wage increases.  The coming years will reveal if the compensation increase was sufficient to spur a renewed interest and higher enrollment in nursing studies.

Healthcare Fig 3

Overall, the findings presented in the Taub Center study paint a mixed picture of the situation of the healthcare workforce in Israel.  On the one hand, Israel has experienced a declining supply of physicians and nurses in recent years, while other developed countries have seen a growth in supply.  Furthermore, the number of medical school and nursing graduates in Israel is one-half and one-quarter that of other OECD countries, respectively.  The fact that Israel’s population is relatively young, and therefore requires fewer health services, mitigates some of the impact of the low supply of healthcare professionals.  In addition, there have been concrete steps taken to alleviate the physician shortages, ranging from increased medical school capacity to the relaxation of licensing regulations for medical students learning abroad.  The situation in nursing is worse and it remains to be seen whether the new wage agreement signed in 2012 will incentivize entry into the field and help reverse the particularly concerning decline in nursing graduates.  Continuing to address these workforce challenges is crucial to ensuring that the Israeli healthcare system can provide high quality, effective and accessible care to its citizens.

The Singer Series: State of the Nation Report 2013

This year’s report focuses on several of Israel’s primary socioeconomic issues, each from a number of different perspectives.  Inequality and poverty in Israel are examined not just in terms of income but as they impact and are reflected in health and education.  The country’s elderly are looked at in terms of employment and incomes (Kimhi and Shraberman) and their levels of poverty (Ben-David and Bleikh).  The Haredi (ultra-Orthodox Jews) sector is the focus for an examination of their education levels, employment, and wages (Regev), while material hardship and coping mechanisms in this group are compared to other population groups (Stier and Lewin). Other topics covered in this volume include: health (Chernichovsky and Regev) and mental health reform (Aviram); pupils and teachers (Blass), the link between school discipline and educational achievement (Blank and Shavit), and higher education in Israel (Ben-David); women in the labor force (Stier and Herzberg); educational opportunities and employment (Bar-Haim, Blank, and Shavit); productivity (Ben-David); and a macro view of issues in the Israeli economy (Yashiv). As in past volumes, the chapters in this year’s report are written by some of Israel’s premier researchers in the social sciences.

David Autor

David Autor is Professor of Economics at MIT, Faculty Research Associate of the National Bureau of Economic Research, Research Affiliate of the Abdul Jameel Latif Poverty Action Lab, Co-director of the MIT School Effectiveness and Inequality Initiative, Associate Director of the NBER Disability Research Center, and Editor in Chief of the Journal of Economic Perspectives.

He studies labor market impacts of technological change and globalization, earnings inequality, disability insurance and labor supply, and temporary help and other intermediated work arrangements. Autor has received the NSF Career award, the Alfred P. Sloan Foundation Fellowship, the Sherwin Rosen Prize for outstanding contributions in the field of Labor Economics, and MIT’s James A. and Ruth Levitan Award for excellence in teaching. He is also an elected Fellow of the American Academy of Arts and Sciences. Autor earned a B.A. in Psychology from Tufts University and a Ph.D. in Public Policy from Harvard’s Kennedy School of Government in 1999. Prior to graduate study, he spent three years directing computer skills education for economically disadvantaged children and adults in San Francisco and South Africa.

 

Autor is the co-captain of the MIT Economics hockey team, which is reputed to be one of the most highly cited teams in the MIT intramural league.

Hot Issues in Israel’s Healthcare System

The Israeli healthcare system has long produced good comparative healthcare outcomes on a range of indicators – low infant mortality, high life expectancy, effective chronic disease management, and good primary care quality. These results are consistent with the country’s longstanding history of developing and supporting community and primary care with a strong public health orientation. Due to various concerns about public hospital care in Israel, Minister of Health Yael German commissioned a 13-member “Committee to Strengthen the Public Health System” in June 2013 to recommend policy and operational changes to the healthcare system.

This brief provides a short context on healthcare system issues relevant to the German Committee discussions.

Pensions, Poverty, and the Elderly in Israel

Welfare and social security policies eliminate almost 90% of elderly poverty in the vast majority of countries examined, but have much less of an impact in Israel.  This brief examines this surprising dichotomy: why do Israel’s elderly have the second lowest poverty rates in terms of market income, but the highest poverty rates in terms of disposable income relative to the 21 OECD countries?

Israel’s Economy: A Macro Perspective

Data for 2012 and early 2013 point to a reasonable level of growth in GDP, a stable unemployment rate, and a continued increase in investment; all the while inflation remains low.  Israeli macroeconomic activity continued to be in the shadow of the global slowdown.  The government deficit grew, in particular due to a decline in tax revenues.

An analysis of fiscal policy over time indicates that while Israel is not, at present, deviating from its behavior of the past 20 years, it could potentially find itself treading a dangerous fiscal path.  At the same time, it is difficult to see how the Israeli government will attain the one-percent-of-GDP deficit target that has long been on the agenda of policy makers.  This chapter calls attention to several problematic aspects of the government  budget management and presents ideas for reform.

This paper appears in the Center’s annual publication – State of the Nation Report – Society, Economy and Policy 2013.

Educational Opportunity, Employment, and Income: 1995-2008

 The following questions are addressed:  Did the expansion of the Israeli education system during this period contribute to more equal educational opportunity among socioeconomic groups? And did the returns to education, in terms of income and occupational prestige, increase or decrease? The study is based on aggregate census data for two periods, 1983-1995 and 1995-2008.  The sample included native-born young Israelis, both Jewish and Arab Israeli.  The data show that despite considerable educational expansion, educational inequality among different socioeconomic groups increased significantly.  Moreover, occupational prestige at all education levels except the very lowest decreased on average, especially at the highest levels of education.  The latter change is explained by the fact that the demand for professional, academic, technical, and managerial workers grew only modestly leaving many newer graduates out of the field.  A more encouraging finding is that the average income for young Israelis grew during the period.  Much of this growth was due to the expansion of higher education, which increased the proportion of high-earning, highly educated individuals in the overall population.  Nevertheless, the higher educated earn less today (relative to those without an education) than they did in 1995, that is, the economic returns to education have declined.

This paper appears in the Center’s annual publication State of the Nation Report: Society, Economy and Policy 2013.

Employment and Income Trends Among Older Israelis

This chapter looks at the changes that occurred in the employment patterns and economic status of Israel’s older adults between 2001 and 2011.  The research indicates that the employment rates of people aged 55-64 rose over the course of this decade, particularly among new immigrants.  The employment rates of people aged 65-74 rose as well.  Per capita income for households headed by older adults increased significantly over the decade, due primarily to a rise in income from work, capital, and pensions.  The findings indicate that the rising percentage of older Israelis in the population does not necessarily herald an increase in economic distress within this age group or a heavier burden on the social services.  However, more flexibility is needed regarding terms of retirement, to enable those who wish and are able to continue working past the official retirement age.  Moreover, an improved safety net should be provided for those who are not able to provide for themselves after retirement.

This paper appears in the Center’s annual publication State of the Nation Report – Society, Economy and Policy 2013.

Poverty and Inequality Over Time: In Israel and in the OECD

Contrary to conventional wisdom, Israeli rates of poverty and inequality in disposable incomes are very high – compared with developed countries – even after excluding Haredim and Arab Israelis from the sample (though not particularly high in terms of market incomes).  Israel’s elderly population is the smallest in the West, and poverty among the elderly before welfare and taxes is among the lowest while after the social welfare net is spread, poverty rates in Israel are the highest in the developed world.  Poverty among children after welfare and taxes is also the highest in the developed world.  The share of national income received by the top 1 percentile is not particularly high in Israel, but the gap between individuals at the 90th income percentile and individuals with median incomes is the highest in the West – with the gap between individuals with median incomes and those at the 10th percentile even higher in Israel.  A systemic plan to deal with the underlying problems and their symptoms is outlined here.

This paper appears in the Center’s annual publication – State of the Nation Report – Society, Economy and Policy 2013.

Material Hardship in Israel

The study, based on the Central Bureau of Statistics Social Survey data, reveals that a large number of Israelis experience economic difficulties in buying food, paying for basic needs, and obtaining medical care and prescribed drugs.  As was expected, those who suffer from poverty also suffer material hardship, although economic difficulties are not limited to the poor.  It was found that different groups of the poor are distinguished by the number of concessions they are forced to make.  Poor Arab Israelis consistently experience more severe material hardship than Haredim, since many of them also grew up in poverty and they have fewer support networks relative to Haredim.  These findings have important implications for social policies, especially due to the long-term consequences of economic hardship on health and the inter-generational transmission of poverty and they draw attention to the need to lessen material hardships among the poor.

This paper appears in the Center’s annual publication State of the Nation Report – Society, Economy and Policy 2013.

Education and Employment in the Haredi Sector

 A new and more precise method of identifying the Haredi population was developed, enabling a deeper analysis as well as a more comprehensive picture of employment and education patterns.  The findings point to a significant positive effect of formal education on the employment rates and wage levels of Haredi men and women.  Paradoxically, however, in recent decades there has been a gradual decline in formal education rates in this sector.  An in-depth examination of the Haredi labor market reveals several irregularities concerning the supply and demand for manpower.  Among Haredi men and women, there is both a considerable over-supply of manpower in the field of education and a lack of the tools and training that are necessary for integration in other fields.  These trends coincided with a sharp rise in the rate of Haredi men studying in yeshivas, and in their average length of study.  All of this indicates a gradual transition from the labor market to the world of Torah study.  Entrenchment of these patterns makes the return to the labor market a significant challenge.

This paper appears in the Center’s annual publication State of the Nation Report – Society, Economy and Policy 2013.

Trends in Israel’s Healthcare System

However, the healthcare system continues to play a role in widening income gaps; it also continues to exhibit a loss of efficiency evident in the rise in healthcare costs that exceeded the rise in the consumer price index.  These trends are related to an ongoing policy of substituting public funding with private funding of the system, and to promotion of private service-provision arrangements via supplemental insurance.  Continued decline in the share of public funding of the health system is liable to further impair the public system’s ability to address increases in need of a wealthier and fast-aging population – rather than reinforcing the system especially during a period of economic crisis and worsening income disparities, which are known health risk factors.  In light of this, the chapter also discusses possible supplemental insurance arrangements that might improve the situation.

This paper appears in the Center’s annual publication State of the Nation Report – Society, Economy and Policy 2013.

Merging Small Municipalities

Israel has scores of small municipalities with populations of under 6,000 residents. Such localities have difficulty supplying a full spectrum of municipal services at a reasonable cost. Frequently, these towns adjoin other towns with similar populations. In these conditions, municipal amalgamation can bring both improved service and lower cost.

The advantages of merging municipalities have long been recognized, but actual progress has been limited. A new study from the Taub Center for Social Policy Studies in Israel by economist Dr. Yaniv Reingewertz of George Washington University, breaks new ground in advancing this important policy goal. The study provides a quantitative estimate of the expected savings, identifies those towns for which the conditions for merger are ripe and promising, and maps out a detailed plan to carry out this transition.

The Taub Center study explains that economies of scale are generally achieved when municipalities reach 7,000 to 10,000 residents. At this scale, the fixed costs (such as salaries for essential officials) are distributed among more residents resulting in lower costs per resident. Figures presented by Dr. Reingewertz show that the outlay per resident in municipalities that were merged in 2003 was lower than in similar municipalities that were not merged (see figure).

E Municipalities Fig 1

THE EXPECTED SAVINGS FROM MUNICIPAL AMALGAMATION

Dr. Reingewertz’s study found that merging small municipalities can be expected to save an average of NIS 5 million a year for each merger. The savings result from more efficient provision of public services and can be expected to reduce dependence on grants from the Ministry of the Interior. Dr. Reingewertz calculates that the program he proposes could bring about savings totaling at least NIS 131 million per year.

About 35 percent of municipalities’ outlays are financed by the central government. This means that savings for local government are also savings for the national budget. In an era of significant budget cuts, the savings from municipal amalgamation could offset some of the planned government cuts in welfare, education, and health budgets.

WHO SHOULD MERGE

Alongside the advantages of amalgamation, there is also a downside.  Reingewertz explains that mergers are liable to negatively impact the fit between the desires of the citizen and the activities of the town. This problem can be especially problematic when the merged towns have significantly different cultural or economic characteristics, since the new merged municipality has to then deal with widely varying types of services.

Furthermore, realization of amalgamation advantages requires administrative changes necessitating careful consideration, such as merging departments and firing workers. Such changes are not easy to carry out and they are liable to be delayed in the short run or even fail to happen in the long run.

To minimize these potential problems, the Taub Center study identifies 25 towns meeting the criteria for optimal success in municipal mergers: they have fewer than 6,000 residents; the towns adjoin each other; and, they have similar cultural and social makeup.

Eng Municipalities Table 1

DOING IT RIGHT

In 2003, Israel undertook a project of town mergers, but three of the twelve mergers were reversed in 2009-2010 due to the opposition of residents and local officials. Dr. Reingewertz states that in order to ensure the success of the amalgamations proposed by the study, it is necessary to carry them out in cooperation with the merging municipalities.  According to Reingewertz: “It is necessary to involve the political and administrative officials and ensure that there is cooperation between the local and central governments. It is desirable to give some adjustment grants to the merged towns in order to provide a solution to one-time costs resulting from the amalgamation, and to alter the structure of the parity grants so that the aid given towns that refuse to merge will be reduced. This step will incentivize them to consider the alternative of merger.”

front-cover-municipalities-127x179

Municipal Amalgamation in Israel: Lessons and Proposals for the Future

According to an estimate based on the results of the municipal amalgamations reform carried out in Israel in 2003 (Reingewertz, 2012), thanks to the economies of scale in providing public services, these unifications are expected to generate savings of approximately NIS 131 million per annum. 

The policy paper also discusses the drawbacks stemming from merging municipalities and proposes ways to minimize them.  It then specifies the preconditions and criteria for amalgamation, e.g., the desirability of unifying small municipalities that are contiguous and that share similar cultural attributes.  In that context, it is important to ensure the participation of the municipalities being merged in the decision making process, and to allow them to choose their partners to the process.

Jailing Debtors

In contrast, the harm to consumers is great and there is evidence that imprisoning debtors and the various negative sanctions against them depress demand for credit.  In the opinion of Dr. Meir, complete abolition of the policy of imprisonment for normal debts is likely to improve the functioning of the credit market for consumers in Israel.

 

Privatization of Social Services in Israel

Prof. Reuben Gronau, a Policy Fellow in the Taub Center’s Economic Policy Program and an economist at the Hebrew University, has produced a new study of this phenomenon published in the Taub Center’s State of the Nation Report 2011-2012.  On the conceptual level, Gronau explains why public administration in this sector is justified.  Competition alone leads to efficient provision when customers are well equipped to identify and choose the best providers.  But consumers of social services are often unable to assess the quality of the services they receive, and are unable to select a service provider of their choice.  These consumers tend to be vulnerable, to lack their own resources, and to be infrequent purchasers of a service whose quality is difficult to evaluate.  The government is in a good position to provide the necessary oversight.

Additionally, social services provide an overall social benefit which extends far beyond the services’ direct and immediate benefit to individual consumers.  For example, a service that promotes healthy, educated and well-functioning individuals has positive ramifications for those living around them, as well.  Gronau adds that the public funding of social services reflects the public’s preference for equality.

As for Israeli privatization in practice, the study finds that the current public discussion is grounded on a weak basis research foundation stating that the intensity of the dispute over “privatization” of social services is disproportionate to the extent of information.  There are not even economy-wide figures that can provide an indication of the extent of the phenomenon.

During the past decade, there has not been any significant change in government transfers to local authorities, non-profits and the business sector, or in the relative contribution of public bodies involved in the provision of services.  Likewise, the numbers do not suggest a trend of replacing internal activities with the purchase of services – something that would indicate a transition from public operation to outsourcing.  Finally, employment data do not indicate a decline in the number of social service employees as a share of the total number of jobs in the Israeli economy; on the contrary, their share has increased.

However, Gronau does find some worrisome indications regarding the quality of privately provided social services.  Two developments are particularly telling.

First, wages of private sector employees in the social services sector are substantially lower than those of public sector workers.  The first figure shows wages for workers from different sectors for the three main areas of social services: health and welfare, education, and community services. The red bar shows wages for public sector workers; the other bars show wages for workers in the same field from public non-profits, private companies, private non-profits and other providers. In each case, it is evident that public sector salaries are much higher – approximately 50 percent higher than the median alternative provider.  While salaries are not a direct measure of quality, Gronau thinks that in the service sector there are sound reasons to believe that higher salaries translate into higher quality of service.  Higher salaries should enable the public sector to draw better qualified workers in the first place, and to provide them with more motivation and higher morale once they are at work.

private1E-fig-3

A second development is that the fraction of social services financed directly by households has risen dramatically.  The second graph shows the growth in household-financed social services between 1997 and 2009.  Gronau finds that total expenditure on social services in Israel has actually grown more slowly than the economy as a whole over the past fifteen years, but the part funded by households has grown far more quickly than overall economic growth.  This corroborates findings of other Taub Center studies showing that there is an ongoing tendency in Israel for placing an increasing share of the cost of social services directly on the user, thus reducing the extent of social insurance enjoyed by Israelis.  The declining scope of public provision compels an increasing number of people to seek private sector alternatives.  It is also possible that increased private outlays testify to a declining quality of services, particularly health services, provided by the government.  If so, indigent clients – who lack a private option – are obtaining lower quality services.

private2

The study attributes critical importance to the overall approach to privatization.  Improved efficiency can express itself in either a smaller expenditure for the same level of service, or an improved level of service for the same expenditure.  The prevailing mindset in Israel has been the former, but particularly in light of the already reduced government funding, the latter approach is the one that Gronau recommends.  In particular, he suggests that consumer contributions to the funding of services can have a positive impact.  Such increased consumer funding would enhance consumers’ bargaining power regarding service quality and offer providers competitive incentives.  However, in order to avoid reductions in quality, greater consumer contributions need to be accompanied by commensurate increases in government funding.  Gronau believes that improving the quality of government-provided social services would curb the emergence of private organizations (such as private hospitals and colleges) which, in his opinion, threaten the public system.

Gronau concludes that privatization of social services can be beneficial, but that capitalizing on these benefits requires serious quality control on the part of the government, quality control at a level that is currently lacking.

 

 

Gridlock on the Roads and in Israel’s Priorities

Whether the focus is productivity, income inequality, housing, or a host of other serious challenges facing Israel, one common underlying theme is the very problematic condition of Israel’s basic physical and human capital infrastructures.  In the Taub Center’s new State of the Nation Report 2011-2012, Taub Center Executive Director, Prof. Dan Ben-David, highlights some of the particular problems of Israel’s transportation infrastructure.

Economic growth is vitally dependent on the transportation system to move workers and goods throughout the country.  Yet Israel’s current infrastructure is clearly inadequate to meet the needs of future growth.

The first graph provides a glimpse of the seriousness of the situation, showing the striking contrast between heavy congestion on the roads and the paucity of vehicles per capita.  The bar on the left shows that Israel’s roads are already far more congested than those in other Western countries – over two and a half times the OECD average, while only one OECD country, South Korea, has more crowded roads.  It follows that even given the current number of vehicles in Israel, development of the country’s road infrastructure will require massive investment to bring it to developed world levels.  The bar on the right shows that Israel also has an unusually low number of vehicles per capita.  As living standards rise in Israel, it can be expected that the demand for automobiles will increase as well, making the existing infrastructure even more inadequate in the coming years.

E fig 5

In fact, the situation is even worse than that portrayed in the figure, due to the relative lack of rail infrastructure in Israel.  Since rail transport is much more developed in most of the other OECD countries, there are more alternatives to cars and trucks in those countries.  The scarcity of rail alternatives in Israel means that as economic development approaches OECD levels, it is not unreasonable to assume that Israelis will rely even more heavily on their automobiles than is common in other Western countries with rail alternatives.  Recent history supports this supposition.  Ben-David shows that from 1990 to 2008, the increase in the number of vehicles in Israel is far greater than in other comparable countries – and Israel is still playing catch-up.

Since some OECD countries are quite large, with huge expanses of land requiring extensive road and rail coverage, it is hard to compare them to Israel.  The second figure compares Israel to a more relevant benchmark group of Western European countries:  the small developed countries of the OECD. This graph shows that each of these countries has at least twice as much road coverage as a fraction of total area; three and a half times as many kilometers traveled by rail per person; and, at least four times as much use of freight railway.

E fig 6

 

In recent years, Israeli governments have finally begun a concerted effort to rectify this problem.  However, as Ben-David shows in the State of the Nation Report 2011-2012, even with the much larger infusion of resources into the country’s transportation infrastructure – a very large part of it from private sources – the national expenditure (i.e., public and private together) is still not at levels that are sufficient to close the existing gaps.  On average, Israeli investment in roads has fallen below the OECD average in recent years while the investment in rail has been only slightly higher than that in the OECD.  Since most of the road and rail infrastructure in the OECD has already been built, this means that most of their expenditure goes toward maintenance rather than first-time construction.  Therefore, the recent level of Israeli investment in these important transportation infrastructures is insufficient to close the gaps that currently exist.

Given the vital importance of transportation for economic development, the current inadequate state and insufficient investment in Israel’s transportation infrastructure is shaping up to be a major bottleneck for Israel’s continued economic growth.

Israel’s Population: Deceptively Young

Due to Israel’s high birth rate and relatively young immigrants prior to the 1990s, its population is characterized by a rather low share, about 10 percent of the general population, of elderly persons (defined as those aged 65 and over).  However, the proportion of older seniors within this group (those aged 75 and over) is relatively high, due to Israel’s comparatively high life expectancy.  Moreover, Israel’s rate of aging in the population is high compared with that of all other developed countries – and it has recently taken off with increasing health standards and rising longevity.

The first figure depicts the underlying demographic change.  Over the past twenty years – between 1990 and 2010 – the ratio of elderly persons to working age adults between the ages of 25 to 64 has been relatively steady, with approximately 160 elderly persons per 1,000 working age adults.  In the next twenty years – from 2010 to 2030 – this ratio is expected to steadily increase each year, reaching 230 elderly people in Israel for every thousand people of working age in 2030, an increase of over 40 percent in just two decades, probably the sharpest among developed economies.

health1_E-fig-1.2

This demographic picture indicates a substantial increase in future long-term care needs.  Older seniors tend to have multiple and complex health problems.  These problems often manifest themselves in functional decline and in a loss of independence in daily living, resulting in a growing need for hospitalization, facility-based care or constant caregiving in the home.  A forthcoming Taub Center policy paper by Dov Chernichovsky, Avigdor Kaplan, and Yohanan Stessman, partially summarized in the latest Taub Center State of the Nation Report 2011-2012, describes some of the challenges Israel faces in providing adequate funding for long-term nursing care.

The second figure gives an idea of what this heightened aging of the population could mean for future expenditures.  The horizontal axis shows the percentage of elderly over the age of 80 in the population in a variety of OECD countries; the vertical axis shows expenditure on long-term care as a fraction of GDP.  Israel’s currently low share of elderly in the population makes it one of the left-most points on the graph.  But on the vertical axis, Israel is near the OECD average, spending 1.4 percent of its GDP on long-term care.  However, when taking into account the relatively low share of those aged 80 and over in the population, Israel actually spends a comparatively high proportion of its GDP on this form of care.  While this can be an indication of high quality, it may also signify inefficiencies in funding.

health2_E-fig-2.2

How is this care funded?  Long-term care in Israel is characterized by a relatively large share of private funding.  Chernichovsky, Kaplan, and Stessman found that about 50 percent of care in Israel is privately funded, including both out-of-pocket expenses and private insurance.  Of the countries examined, only Switzerland has a higher share of private funding.  The OECD comparable average is only 16 percent, meaning that Israel’s private funding share for long-term care is three times higher than the OECD average.  And, a substantial portion of this spending is out-of-pocket and not insurance premiums.

One uniquely Israeli finding was that a remarkable 42 percent of private expenditure for continuing care is spent on the employment of foreign workers as personal caregivers to roughly 57,500 elderly people receiving assistance.  Partially as a result, Israel’s percentage of those cared for in the community and at home is especially high, at 86.5 percent of all Israeli long-term nursing care patients, compared with an OECD average of 50.7 percent.

The authors question the sustainability of current privately based funding of long-term care in Israel in the face of anticipated developments: an aging of the elderly population with rising needs on the one hand, and a likely decline in private funding capabilities, on the other.  In response to these same concerns, two government ministries – the Ministry of Finance and the Ministry of Health – have proposed different approaches for future funding of long-term nursing care in Israel.

The Ministry of Finance has championed turning the long-term care insurance managed by Israeli health care plans (health funds) that is based on age related but not individual risk-based subsidies into premiums based on individual risk.  As a result, weak groups currently subsidized by the stronger groups would have to pay higher premiums.  This approach runs counter to international trends.  International experience, including that of the United States, clearly indicates that the private insurance market cannot contribute substantially to resolving the issue of long-term care funding; as a result, the developed countries have given up on any private-market based solution to the problem.

By contrast, the Ministry of Health’s approach aspires to expand the universal healthcare coverage to include long-term care insurance for those currently lacking it with payment on an equitable basis.  This approach in financing the care conforms to international trends and to principles of equity and efficiency, but the idea of integrating this in the universal healthcare coverage runs contrary to the rather common approach in other developed countries (except Belgium and Switzerland) of not integrating long-term care with healthcare.

Among the solutions proposed in the study:

  • A pre-defined basket of long-term care services could be provided in the form of an allowance – in cash and in-kind, depending on the circumstances – funded by pooling all public resources that currently exist for long-term care from the various ministries and agencies, plus new mandatory insurance.
  • Some of the private, health fund-based insurance could be converted to this mandatory insurance, with the state making up the difference for less affluent sectors, on a means test basis.
  • Transparent criteria for eligibility and for various levels of aid could be created and administered.
  • All such arrangements would be managed by a government authority in charge of managing and administering the public long-term care budget.
  • Private insurance to supplement the public arrangement would remain intact.

Israel’s unusually low ratio of elderly to working age population eases the burden of financing good long-term care for its elderly population.  But anticipated demographic and economic changes will require the government to be more proactive in creating the conditions for continued high-level care for Israel’s aged.

 

Alan H. Gill

Alan H. Gill, Executive Vice President Emeritus of the American Jewish Joint Distribution Committee (JDC), is one of the Jewish world’s transformative professional leaders. With four decades experience in Jewish community development, Gill has played a central role in expanding JDC’s global humanitarian operation in more than 70 countries and Israel. He was previously CEO of the Jewish Federation of Columbus, founded the Ohio State University’s graduate training program for Jewish Communal Service, and has taught social work at Ohio State College.

Labor Market Trends: Employment Rate and Wage Disparities

Over the past few decades, the decline in male employment was concentrated amongst the less educated, while the rise in female employment has been attributed almost entirely to the rise in the level of education of the younger generations.  These trends are especially pronounced in the Arab sector.  The growing importance of education in the Israeli labor market is expressed also in the fact that the wage gap between more and less educated workers has not narrowed in the past decade despite the large growth in the share of educated workers.  An examination of the changes in wages by occupational group indicates a relative growth in demand for educated workers in specific occupations, something that has brought about a rise in wage gaps in those particular occupations.  The conclusion is that employment gaps and wage gaps in Israel are, to a large degree, correlated with education.  The skills that workers with no more than 12 years of schooling have do not allow them to integrate in a satisfactory way into the modern labor market.

This paper appears in the Center’s annual publication State of the Nation Report – Society, Economy and Policy 2011-2012.

Changes in Labor Force Survey Data and Their Meaning

The change brought about some significant differences in the data.  In particular, amongst Arab Israelis there was a dramatic jump in the unemployment rate; it was approximately two times greater in men and three times in women.  Following this, the estimates of the unemployment rate in the overall population also rose.  Labor force participation rates amongst all populations examined – men and women, Jews and Arabs – were higher than reported by the old survey method.  It thus seems that there is a more serious problem of unemployment in the Arab sector than what was reflected by the old survey and it is important to give greater emphasis to steps to deal with this unemployment.  At the same time, the picture of the labor force participation rates in Israel, an issue that is central to labor market problems, is somewhat better than it had been believed to be.

This paper appears in the Center’s annual publication State of the Nation Report – Society, Economy and Policy 2011-2012.

The Economic Background of the Social Protest of Summer 2011

 The centrality of this group in the protests may be explained by trends in their socioeconomic position. Analysis of the period between 1995 and 2010 shows that in the five years prior to the summer of 2011, the income of the typical working family headed by a young Israeli-born Jew, relative to all Israeli households, declined to unprecedented levels.  The main cause was wage erosion among young adults.  This decline also occurred among those with higher education, and their chances of attaining an income in the highest quintile fell substantially, especially among women.  Among young Arabs and ultra-Orthodox Jews, both individual wages and household income – already very low in earlier years – declined even further.  Of all the population groups, only Russian-speaking immigrants improved their relative income position.  Overall in the period studied, there was a decline in the value of those advantages that previously assisted young families in Israel to attain a middle-class standard of living: higher education, two working partners, residence in the Tel-Aviv area, and being an Israeli-born Jew.  At the same time, the rising cost of housing has made income erosion a bigger problem.  The proportion of young adults living in their parents’ homes increased, and the share of young home-owning families fell.

This paper appears in the Center’s annual publication State of the Nation Report – Society, Economy and Policy 2011-2012.

The Privatization of Social Services in Israel: Considerations and Concerns

 This chapter examines whether the statistical data supports this concern. The picture of the scope of social services that have been transferred is unclear: in the past decade there has been no significant change in the transfers from the government to the local authorities, the non-profits and the business sector, or in the relative contribution of public bodies involved in the provision of services. The numbers do not point to a trend of replacing internal activities with purchasing of services – something that would indicate a sharp transition from self-operation to outsourcing. Finally, employment data do not indicate a decline in the number of social service employees as a share of the total number of jobs in the Israeli economy (on the contrary, their share has increased). On the other hand, household contribution to the funding of services (especially health services) has increased, affecting equality. Israel’s government must make improvement in service quality an overarching objective of its policy. Consumers of social services are often unable to assess the quality of the services they receive, and are unable to select a service provider of their choice. Thus, the key to privatization of social services is the existence of appropriate quality control. Where this is not possible, services ought to remain government-run. Too often privatization fails to improve the quality of services and also distorts resource allocations.

This paper appears in the Center’s annual publication State of the Nation Report – Society, Economy and Policy 2011-2012.

Israel’s Healthcare System

Manpower increases were recently authorized for the system, and access to healthcare in Israel’s periphery is expanding.  Some of these measures represent promises to the public which, hopefully, the government will be able to keep.  These changes do not, however, have the power to bring about structural change in terms of financing, organizing or managing the system.  The recent wage agreements may conceivably increase the share of public funding in Israel’s national health expenditure; but such a development would merely reflect a lack of long-term government policy.  The public system is eroding and administered from crisis to crisis.  An analysis of household healthcare expenditure indicates that those who need and are able to leave the public system do so.  Decades of achievement in the realm of equity and efficiency are eroding, and public health may ultimately suffer.  Within the overall context of worthwhile initiatives and long-term policy with far-reaching consequences for Israel’s social services system, an assessment should be made of the reform proposed for long-term care insurance in Israel – a sphere that by default, rather than by a process of careful consideration, is regarded as a healthcare system issue.

This paper appears in the Center’s annual publication State of the Nation Report – Society, Economy and Policy 2011-2012.

The Singer Series: State of the Nation Report 2011- 2012

Too often, public discourse and policy making are driven by preconceptions and gut feelings rather than facts. The purpose of this report is to provide an extensive factual, professional and impartial foundation to be used by the public and by policy leaders to understand where we were, where we are, where trends are leading us, what they mean, and how policy can change the reality even when it feels like force majeure.

The Start-Up Nation’s Threat from Within

Three main vantage points are brought together in this chapter: (1) Israel’s relatively good economic performance in recent years – at least, in comparison with other Western countries that have still not emerged from the recession; (2) motivations for the wave of social protests that erupted in Israel in the summer of 2011, and; (3) the big picture, which is the primary one, incorporating the first two vantage points with additional issues, and framing them within long-run and international contexts.  This third vantage point focuses on the very problematic trajectories that Israel has been on for decades and the state of some of the country’s primary infrastructures – human capital and transportation – that underlie these trajectories.  Space limitations do not make it possible to provide a full exposition of all three vantage points here.  However, the conventional socioeconomic discussion in Israel often makes it difficult to see the forest for the trees.  Hence, the emphasis here is on a perspective from a vantage point far above, so that it will be possible to see, to understand, and to internalize the magnitude and the implications of the entire picture.

This paper appears in the Center’s annual publication – State of the Nation Report – Society, Economy and Policy 2011-2012.

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The Impact of the Expected Tax Rate Changes on the Middle Class

In light of the current budget situation, the Israeli government decided to raise the VAT by 1 percent as of September 2012, and to impose higher income tax rates and National Insurance payments on higher-earning Israelis starting in 2013.  In doing so, the government has gone even further than the Trajtenberg Committee, whose tax recommendations it only partly adopted in late 2011.  Although the recent decisions affect all strata of the population, Israel’s middle class will feel their impact the least.  Nevertheless, it is reasonable to expect additional tax increases and/or budget cuts that will reverse this conclusion.

This paper appears in the Center’s annual publication State of the Nation Report – Society, Economy and Policy 2011-2012.

Arab Israeli Unemployment Much Higher than Previously Thought

In January 2012, Israel’s Central Bureau of Statistics (CBS) began conducting its Labor Force Survey under new guidelines.  The changes included counting the entire labor force rather than only the civilian labor force, a more thorough and accurate interview process and broader geographical coverage.  The result is a sample more representative of the Israeli workforce as a whole.  Prof. Eran Yashiv, Chair of the Taub Center Economic Policy Program and a professor of economics and public policy at Tel-Aviv University, compared the data compiled for the new survey to the matching figures from the preceding year based on the old survey.  While periodic changes in survey methodology are normal and invariably show some minor discrepancies from previous results, Yashiv’s analysis shows that in this case, the new methodology generated surprising and strikingly different results.

Among the Jewish population – for both men and women alike – the new survey did not result in a markedly different reported unemployment rate.  In the Arab population, however, there was a dramatic hike in the unemployment figures: approximately doubling the previous rate among men, and tripling it among women.  This rise also implies an increase in the national unemployment rate.

The rate of labor force participation in Israel across all groups of society – men and women, Jews and Arabs – is somewhat higher than previous figures had indicated.  As the new CBS survey is considered more accurate and reliable than the previous survey, it appears that the true unemployment figures in the Arab population are indeed much higher than previously thought.  A corollary is that the share of Arabs among all unemployed Israelis is considerably higher as well – at around 30 percent, about double the earlier estimates.

There was some good news regarding participation rates.  Based on the new survey, it seems the actual labor force participation rate in Israel is roughly 4 percentage points higher than previous surveys have shown.  However, Yashiv points out that even this upwardly revised rate is still among the lowest of all OECD countries.  The comparison of the old and new surveys also shows that there was no real difference in the labor force participation rates among Arabs and Jews.

Taub researcher Prof. Yashiv feels that the findings suggest a few implications for current government policy.  Firstly, they show that the issue of Arab unemployment is much more serious than had been thought which means that there is more importance in the steps taken to tackle this problem.  Secondly, Israel’s labor force participation rate – a topic around which there has been considerable heated discussion– is a little higher than previously assumed although the improvement seen is not high enough to render useless the necessary public policy initiatives meant to address this problem.

 

 

Running on Empty

In the beginning of September, Israel’s government-regulated gasoline prices spiked up to 8.25 shekels a liter (roughly $8.00 per gallon of gasoline).  The government blamed spiraling crude oil prices.  A new study by Prof. Dan Ben-David, Executive Director of the Taub Center, which appears in the Taub Center’s upcoming State of the Nation Report 2011-2012, finds this claim misleading at best.

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Israeli Single Mothers – Smaller in Number and Poorer in Income

Single mothers are among the most vulnerable members of society. These mothers have a significantly greater burden of household duties than others, with no one to share in the tasks of housework and childcare; they also have considerably fewer economic resources since the amount of economic support they receive from the father is often quite minimal. In “Welfare and Employment among Single Mothers,” the former Chair of the Taub Center’s Social Welfare Policy Program, Professor Haya Stier, a Tel-Aviv University sociologist, examines how such mothers in Israel fare compared to single mothers in other developed countries.

One aspect of the study is demographic. Stier reveals that while the number of single mothers in Israel is rising, their share of the total population is still low on an international basis. The first figure shows that 8.9 percent of mothers in Israel are single, lower than the rate in three-quarters of the countries studied and less than half the rate of England, Sweden, Ireland, and the US. Another finding regards the composition of single mothers in Israel. Stier finds that only 14 percent of Israeli single mothers have never married; only two countries in the sample had a lower rate.

Eng single mothers fig 1

The study then turns to the economic circumstances of the mothers and to government policy. In the 1990s, Israeli policy was considerably more supportive of single mothers than it is today; the 1992 Single Parent Families Law granted special eligibility conditions for income support to single mothers. This legislation substantially improved the economic status of families headed by single mothers. It was also accompanied by a certain decline in single mothers’ labor market participation rates, but this decrease mainly characterized women whose chances of success in the labor market were already low.

In the early 2000s, benefits were considerably reduced, while programs encouraging greater women’s participation in the labor force were implemented. Labor force participation of Israeli single mothers rose and is currently high; in 2004-2005 it was 67 percent, greatly exceeding the 59 percent rate for mothers with partners.

A narrow focus on employment, though, may ignore the constraints faced by single mothers seeking employment, including for example, the presence of young children in the home, childcare costs, a lack of quality, subsidized childcare options, limited labor market mobility, and the like. Research findings indicate that although the early-2000s policy changes did help raise single mothers’ labor force participation rates, they nevertheless failed to improve their household incomes in a significant manner.

Accordingly, Prof. Stier shows in the second figure that Israeli households headed by single mothers have a poverty rate of 35 percent, about twice the rate for households where the mother lives with a partner. The Taub Center study concludes that Israeli single-parent families are relatively poor, compared both with Israeli two-partner families and with single-parent families in other Western countries. One reason is a comparatively low level of public support: single mothers in Israel obtain about 25 percent of their income from transfer payments, a rate lower than that for most countries studied by Stier. Israel was found to be among the lower ranking countries (e.g., US, Canada and Ireland) in terms of the level of support that it offers to single mothers, and in terms of the resources that it devotes to raising these mothers out of poverty.

Eng single mothers fig 2

Stier notes that Israeli policy has been oriented towards increasing employment of single mothers, yet due to the meager level of government benefits, increased employment has not been reflected in a commensurate increase in income and standard of living. She recommends that a comprehensive policy should be implemented. Such a policy would include ensuring the availability of quality childcare so as to empower single mothers to genuinely improve their standard of living through paid work, as well as guaranteeing an adequate level of income for all single mothers.

The State of Public Preschool Education in Israel

While the importance of early childhood education for long-term success is widely known and commonly accepted, Israel’s investment in education for its youngest children is provided in a piecemeal manner, with wide disparities in preschool enrollment and tuition costs. Despite the amended Compulsory Education Law (1984) which brought the statutory age of compulsory education down to 3, the law has been implemented only since 1999, and solely in localities with lower socioeconomic rankings, affecting only about one-third of Israeli children. As a result, the cost of preschool education for 3-6 year-olds varies widely depending on the education framework in which they are enrolled. Prices range from almost no monthly fee in the public system to NIS 3,000 or higher in the private system.

Historically, resistance to full implementation of the law has been based on a number of factors: concerns about lack of funding for construction; concern that universal preschool education would come at the expense of other budgetary areas in need of expansion; belief that funds should be allocated to subsidies for low-income individuals rather than to universal education; and concerns about a lack of physical and organizational infrastructure in the Arab sector, which was to be the main beneficiary of the amendment.

A recent Taub Center study written by Taub Center researchers Nachum Blass and Haim Bleikh with Hila Zaban from Ben-Gurion University, and edited by Deputy Director, Prof. Ayal Kimhi, merges educational and economic expertise in a comprehensive overview of Israel’s pre-primary education system, including the budgetary implications regarding implementation of the law.

Preschool in the Arab Israeli sector

The Arab Israeli sector was to be one of the first beneficiaries of the 1984 preschool amendment, yet deficient infrastructure in the Arab sector was cited by policy makers as a potentially serious obstacle to the law’s implementation.

According to Taub Center researcher Nachum Blass, the implementation of the Compulsory Education Law led to a 54 percent enrollment increase in the Arab sector between 2000 and 2005, yet only a two percent enrollment increase over the next five years. Despite this substantial increase, preschool enrollment rates remain lower in the Arab sector than in the Jewish sector.

The first figure compares the preschool enrollment rate of Arab children with that of Jewish children. In 2000, 49 percent of Arab children and 85 percent of Jewish children attended public preschools. In 2010, by comparison, about 71 percent of 3-5 year-old Arab children and 84 percent of 3-5 year-old Jewish children attended public preschools. Attendance in private preschools was negligible in the Arab sector and grew in the Jewish sector.

Eng Preschool fig 1A

Preschool in the Jewish sector

Within the Jewish sector, the number of 3-5 year-olds attending preschool increased approximately 27 percent between 2000 and 2010. During the same period, there was an increase of approximately 57 percent in Haredi (Ultra-Orthodox) Jewish preschool attendance, 15 percent in State preschool attendance, and 20 percent in State-religious preschool attendance.

The second figure shows how quickly the distribution in preschool enrollment has changed within the past decade. The largest group of preschoolers in both 2000 and 2010 was in the non-religious State schools. However, this group’s share fell sharply over the past ten years, from 43 percent of the total to 37 percent. The smallest group – in the religious State schools – also declined in its relative share, from 17 percent to 15 percent of the total number of enrolled preschoolers in Israel.

Eng Preschool fig 2A

Enrollment share increases occurred in the Arab Israeli and Haredi schools. Each of these systems enrolled 20 percent of all preschool children in 2000. By 2010, these shares rose substantially, to 23 percent in the Arab Israeli schools and to 24 percent in the Haredi schools. Within the Jewish community alone, the share of Haredi preschoolers rose from 25 percent in 2000 to over 31 percent by 2010.

As a side note, between 2005 and 2010, there was a 20 percent increase in the number of 6 year-olds remaining in kindergarten for another year, a phenomenon that is most prevalent within the Jewish population. According to Blass, “many of these 6 year-olds remain in kindergarten without proper justification.” In practical terms, this results in 10,000 extra kindergarten pupils, requiring an additional 350 kindergarten classrooms.

A law in the books – but in the budget?

One finding of the study relates to the expected budgetary impact of immediate, full implementation of the law. According to the Taub Center study, universal implementation of the compulsory education law amended in 1984 will involve a start-up cost of NIS 2.3 billion with additional operating costs of NIS 1.4 billion a year. This is a sizeable sum, implying an increase of about four percent of the entire current education budget at a time when budgets for existing programs are being threatened with cuts.

These costs would include NIS 700 million currently paid each year by parents that would fall on the government, and NIS 670 million spent annually on operating costs for about 80,000 children aged 3-5 not attending public preschools as of 2010. This estimate reflects the addition of 2,700 preschool classrooms with 30 children per class and operating costs of NIS 250,000 per class. One-time costs could reach NIS 2.3 billion, including capital costs of approximately NIS 500,000 per preschool classroom for 2,700 classrooms, and teacher training for 4,000 additional teachers at NIS 250,000 per teacher. The authors suggest that these costs could be reduced through the use of existing structures and better use of manpower.

The Taub Center study concludes that universal access to pre-school education is a worthy and important goal, as pedagogical research from around the world confirms. In various sectors within Israel, public preschool attendance has increased over the last decade, yet many parents continue to pay large sums for their children to attend private preschools.

The Trajtenberg Committee, appointed by the government to suggest changes in socioeconomic policy, recommended implementing the Compulsory Education Law for children aged 3 and older throughout the country, moving gradually to a longer school day in preschools, passing legislation for universal supervision of preschools, and moving the responsibility for the daycare system for 0-3 year-olds to the Ministry of Education. Given the cost of implementation of the Compulsory Education Law for all children aged 3 and older and the historical foot-dragging in budgetary allocations for universal preschool, it remains to be seen whether the Trajtenberg Committee’s recommendations will, in fact, be implemented over the long term.

Pre-Primary Education in Israel: Organizational and Demographic Perspectives

It provides qualitative information based on a literature review and on interviews with representatives of different authorities and organizations involved in early childhood education. In addition, quantitative data analyses are provided that are based on detailed pupil-level and preschool-level data from the Ministry of Education.

Many socioeconomic indicators as well as school achievement test results indicate considerable gaps between the Jewish majority and the Arab minority in Israel. It is conceivable that the roots of these gaps lie in differential access to and quality of early childhood education in the two sectors. The study therefore highlights Jewish-Arab differences throughout.

Trends in the Development of the Education System

The initial part of the chapter shows that while Haredi (ultra-Orthodox) and Arab Israeli shares of the pupil populations are growing, there appears to be a recent slowdown in this growth.  An examination is conducted on how this trend is reflected in changes in the distribution of the preschool population.  The second part of the chapter concentrates on the national expenditure on education.  In recent years, there has been a large increase in education spending – although spending per pupil relative to GDP per capita has been falling further and further behind the OECD average.  The final section deals with the expected impact of the Trajtenberg Commission’s recommendations in the field of pre-primary education against the background of the latest developments in the budgetary realm and in relation to the OECD countries.

This paper appears in the Center’s annual publication State of the Nation Report – Society, Economy and Policy 2011-2012.

Employment Patterns Differ Between Generations, and Depend on Gender and Education

A major source of concern regarding the Israeli economy is that the rate of employment among Israeli males has declined markedly over the last three decades, and is considerably lower than in OECD countries. The female employment rate, on the other hand, has been rising continuously and is now higher than the OECD average (see first figure).

Eng employment fig 3

At the recent Sderot Conference for Society, Taub Center Deputy Director Professor Ayal Kimhi presented new evidence on the labor market changes underlying these trends. One finding was that the changes are mainly due to changes between generations, rather than changes within them. Kimhi’s study shows that the employment rates of each new generation of males are lower than those of the previous generation. By contrast, each new generation of females tends to have higher employment rates than the previous generation, as shown in the figure.

Eng employment fig 1

Another finding demonstrates the relationship between employment and education. Since men and women have much different labor force characteristics, the education gap has different effects on men and women. Nevertheless, within each group the impact of education is pronounced.

It turns out that the decline in Israel’s male employment rate over the past decades was primarily among relatively older men with low education. For example, among men born in the 1940’s, there is no observable relationship between employment rates and schooling until their late 30’s. Starting at around age 40, employment rates of men with 12 or less years of schooling decline continuously, while employment rates of men with more than 12 years of schooling start declining only at age 50 (figure).

Eng employment fig 2

By contrast, Kimhi finds that the rise in the female employment rate is almost entirely attributable to the increased acquisition of higher education; the employment rate of women with over 12 years of schooling is nearly double that of women with up to 12 years of schooling. Employment rates among women with 12 or less years of schooling increase until age 43, then remain stable until they begin to decline at age 48. On the other hand, women with more than 12 years of schooling exhibit continuously rising employment rates through age 49 and only then does the decline begin. Thus, as Kimhi explains, the substantial rise in employment rates in Israel is almost entirely attributable to the rise in female higher education whereas among men, employment rates tend to decline among younger generations in general and among the less educated men in particular.

Kimhi emphasizes that education is the key to reducing employment gaps among population groups in Israel. “The country should give top priority to providing pupils and students, who constitute the labor force of the future, skills relevant to the modern labor market. The issue isn’t merely years of schooling. Equally important is the content of the curriculum – which should fit the demands of the modern labor market – the quality of teaching and its effectiveness, and a supportive school environment. As we see from the achievements of its pupils, Israel is still way off the mark in this regard.”

The Land of (Expensive) Milk and Honey

One of the final straws leading to the major summer protests in Israel was the high price of cottage cheese.  A comparison conducted by Nir Eilam, a Taub Center researcher, using OECD data from 2005 indicates that dairy products (specifically, milk, cheese and eggs) in Israel were 6 percent more expensive than the average prices in the OECD (first figure).  By 2008, this gap grew to 44 percent.  The prices of food and non-alcoholic beverages, which in 2005 were 16 percent cheaper than the OECD average, grew in the span of merely three years to 16 percent above the OECD average.  Agricultural commodities remained less expensive in Israel, although the gap narrowed from 40 percent below the OECD in 2005 to 13 percent below in 2008.

Eng prices fig 1

Taub Center researchers found that prices in Israel were not higher in all areas. It turns out, though, that even in areas where prices were relatively low in 2005 – including education, health care, communication, and fruits and vegetables – prices had risen considerably by 2008; in some cases, prices that had been lower than in the OECD in 2005 exceeded prices in the OECD by 2008.

Two of the largest household expenditures are on cars and housing. In 2005, motor vehicles cost 46 percent more in Israel than in the OECD. This price differential grew to 70 percent by 2008. According to Prof. Dan Ben-David, Executive Director of the Taub Center, the lack of free competition in importing cars to Israel allows a small number of importers to raise prices on vehicles disproportionately to the markup in Western countries.

Housing in Israel is quite expensive as well. As a rule of thumb, it is generally considered very difficult to purchase an apartment if its cost is greater than five years of income. Data from the Demographia International Housing Affordability study divides median house prices by annual median household incomes (see figure) and shows that in the U.S. only 2.9 years of income are needed on average to buy a home. In Canada and Ireland this rises to 3.7 years, in England to 5.1, in New Zealand to 5.7, and to 6.8 in Australia. In Israel, it takes more years of work than in each of these countries, with an average of 7.7 years of work needed to buy an apartment.
Eng prices fig 2
In fact, Israelis need to put in more years of work for a home than residents of 32 of the 33 English metropolitan areas (see third figure). Even in London, “only” 7.1 years of work are needed to purchase a home. Housing in Israel is more expensive than in any metropolitan area in Ireland and New Zealand, and it costs more than in 174 of the 175 metropolitan areas in the United States. Even housing in New York City requires fewer years of work than housing in Israel.

Eng prices fig 3

According to Professor Ben-David, a policy response focusing primarily on the symptoms is not the way to reduce housing prices. It is necessary to focus on the roots of the problem, and he proposes a number of policy directions:

  1. Reform in the Israel Land Administration. The State owns more than 90 percent of the land in Israel and the housing market is greatly affected by government behavior. A comprehensive reform of the Israel Land Administration is required so that it will cease to operate as a monopoly maximizing profits at the expense of the general public.
  2. Developing the periphery and making it accessibile. The low level of educational achievement in periphery areas and the lack of rapid, available and inexpensive access to workplaces in major cities prevent many young families from moving to towns where larger homes are available at lower prices. While comprehensive education reform is necessary countrywide, its importance is particularly critical in the periphery. In a country with only half as many cars per capita as the Western average, and roads that are more than twice as congested, the time has come to substantially increase the investment in transportation infrastructure, and to catch up after decades of lagging behind. Despite some increases in this regard, Israel’s national investments in transportation infrastructure have risen to average OECD levels (as a share of GDP), but that is far from sufficient if the country intends to close the very large infrastructure gap that has opened up over the years.
  3. Dormitories for students. Each of Israel’s four major cities is home to at least one university, with 18,000-29,000 students in each. The time has come to build sufficient housing on the existing campus areas – by building dormitory buildings vertically instead of horizontally – in order to significantly reduce student demand for what have become exorbitantly priced apartments in these cities. As a result, the investment demand for housing will decline and thousands of apartments will become available for young families who are unable to afford current prices. As a bonus, the students will live within walking distance of campuses, will be able to spend more time at their studies and will substantially reduce the congestion on the already-crowded roads.

One common factor contributing to the higher prices in Israel, be they in homes, consumer goods, or other areas, is a very cumbersome government bureaucracy. For example, Ben-David uses World Bank data and shows that the number of days required to open a business in Israel is higher than in 32 of the 33 OECD countries (fourth figure). Whereas in Australia it takes two days to start a business, in Canada five days, in the U.S. six days, and in France seven days, in Israel 34 days are required – nearly three times the OECD average. Instead of resources being devoted to lowering costs and hence prices, a substantial amount of time and money is lost in what should be a routine process of starting a business.

Eng prices fig 4

The summer protests in Israel did indeed touch a very basic nerve, even though they were based primarily on symptoms, or the “tip of the iceberg.”  The iceberg itself, which is the primary focus of much of the Taub Center’s research, reflects standards of living that since the 1970s have been steadily falling farther and farther behind the West (the current major recession is an exception to these long-run trends) and rates of poverty and income inequality that are much higher today than they were in the 1970s and 1980s and considerably higher than in most OECD countries.

The combination of relatively high prices and low incomes in Israel – compared to the industrialized West – is taking its toll in a number of ways.  One reflection of this during the past summer was the strike by the country’s physicians, whose cutting-edge training and abilities put them on a par with the best in the West, while their incomes lag well behind. In protest, many of the younger doctors quit en masse and the courts intervened to prevent their resignations for fear of the severely negative impact that this would have on healthcare in general and on emergency care in particular.  This issue has just been resolved in a manner that may have major reverberations on labor negotiations in the future.

In the academic realm, resignations have been substituted by a major brain drain from the country, one that is extremely severe in some fields that offer substantially higher compensation abroad.  Here, too, major inroads have recently been made to try and reverse the process.  Unfortunately, this is primarily symptomatic treatment for a major underlying problem.

Prof. Ben David summarizes that a situation combining state-of-the-art training with compensation that is increasingly not reflective of such ability is not a viable steady-state process.  When living costs are also rising disproportionately in relation to the West, it is not surprising that 400,000 Israelis in a country with less than eight million people took to the streets on one summer night in protest.  He adds that a combination of long-term planning focusing on a substantial improvement in the country’s human capital and physical capital is needed to deal with the primary underlying problems faced by Israel.  This needs to be complemented by a comprehensive policy emphasizing the common good versus that of narrow interest groups, one that is accompanied by appropriate regulation to deal with market failures.

Israel’s Shadow Economy

The severe economic problems experienced by a number of European countries emanating from the recent global recession have illuminated problems that are shared with Israel – even though Israel has thus far weathered the recession much better than most countries.  Large underground economies in Greece and Italy seriously limit the ability of these countries to garner urgently needed domestic resources for dealing with their predicaments, and do not provide much of an incentive for the citizens of other European Union partner countries to grant financial support drawn from the taxes that they pay. Israel, a country that is not immune to volatility, must learn from their example the extent to which a large underground economy restricts a country’s ability to respond effectively to an emergency situation.  This article is an excerpt from the chapter, “Public Spending in Israel – A Big Picture Perspective,” written by Dan Ben-David, Executive Director of the Taub Center and a Tel-Aviv University economist that appears in the recently published State of the Nation Report by the Taub Center.

The extremely high rates of non-employment in Israel reflect not only problematic work habits by a large and growing segment of the population, but also what would appear to be – from an anecdotal perspective – quite extensive levels of tax evasion. The severity of non-compliance with the country’s laws is very difficult to gauge, but its pervasiveness in some sectors of the population and business sectors is also difficult to ignore.

The anecdotal evidence receives empirical support from research as well. A recent World Bank study by Schneider, Buehn and Montenegro (2010) provides a glimpse into the size of Israel’s shadow economy and how it compares with other countries.  They rank 151 countries according to a rough estimate of the size of their shadow economies, based on multiple indicators including currency demand and the rate of official labor force participation. The figure looks at how Israel compares to 25 OECD countries.

Eng shadow economy fig 1

While the apparent problems of Greece and Italy eclipse Israel’s as far as shadow economies are concerned, Israel, nonetheless, has some substantial economic activity that is hidden from the eye of the tax authorities. According to Schneider, Buehn and Montenegro, the size of Israel’s shadow economy reached 23 percent of its GDP in 2007. This is considerably greater than Germany (16.7 percent), the United Kingdom (13.2 percent), Japan (12.1 percent), and the United States (9.0 percent). This large a share implies an enormous amount of economic activity that is taking place outside of the formal public eye – a sum of 187 billion shekels in 2010 alone. Such an extensive shadow economy skews the shouldering of the public burden in a substantial manner, leading to high tax burdens on some portions of the population while other segments of the population who work – while formally appearing not to do so – not only do not bear their share, they actually artificially inflate the burden by receiving welfare assistance and subsidies while they appear to be much poorer than they are.

A Macro Perspective – 2010

Current data indicate respectable growth in terms of GDP and employment, relatively low unemployment, current account surpluses, and reasonable inflation. The long-term problems include relatively low investment, lagging physical infrastructure, and numerous labor market problems, which negatively affect the quality of human capital and labor productivity in Israel.

The chapter concludes with a discussion of the considerable problems that stand in the way of attempts to modify Israel’s fiscal policy in order to resolve these problems.

This appears as a chapter in the Center’s annual publication State of the Nation Report 2010.

Israel’s Educational Achievements

Even without the inclusion of ultra-Orthodox boys – who do not participate in the exams – the Israeli average achievement is lower than in every one of the 25 OECD countries that are relevant for comparison in the West. Likewise, gaps in achievement among the Israeli pupils are greater than the gaps within each of the 25 countries. While the country’s weakest pupils score below the weakest pupils in all of the 25 OECD countries, the level of Israel’s top pupils is lower than in 24 out of the 25 Western countries.

This appears as a chapter in the Center’s annual publication State of the Nation Report – Society, Economy and Policy 2010.

Fiscal Discipline Alongside Distorted Allocations Culminating in a Summer of Growing Unrest

In the early 1980’s, Israel’s government was one of the most profligate in the developed world, with public expenditure exceeding 70 percent of national income. The aftermath of the peace treaty with Egypt and the stabilization plan of the mid-1980s led to rapid improvement, but in 1990 Israel’s spending as a share of income reached 55 percent, a share that was higher than in 22 of 23 developed OECD countries (only Sweden spent more). By the year 2000, Israel’s public expenditures fell to 51.5 percent of GDP, still greater than in all but four of the 23 countries.  But as the Taub Center’s Executive Director, Professor Dan Ben-David, shows in the State of the Nation Report 2010, Israel had emerged by 2010 as one of the OECD’s thriftiest governments, with a 45 percent spending to GDP ratio that was lower than that of 16 of the 23 OECD countries.

The primary, and best-known, source of the spending decline has been reductions in defense expenditures as a fraction of GDP, from 12.6 percent in 1990 to 6.9 percent of GDP in 2009. Another four percentage points have been saved by the reduced interest payments on the smaller national debt. It seems, though, that there is little awareness of Israel’s noteworthy record in controlling civilian expenditures (that is, public spending minus defense expenditures and interest payments).

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In light of the very volatile events (wars, hyperinflation, massive immigration, political assassination, etc.) that Israel experienced over the past several decades, the relative stability of its civilian public spending – compared to what took place in the West over the same period – might come as a surprise (top panel of the figure). The share of civilian expenditures to GDP in Israel was the same in 2005 as it was in 1990.  In contrast, civilian expenditures (as a share of GDP) in the OECD countries exhibited some major fluctuations. These ranged from increases of 37, 23 and 21 percent in Portugal, Japan and Belgium to spending cuts of 21, 20 and 14 percent in Norway, New Zealand and the Netherlands, respectively.

The past five years have been characterized by a major global recession that affected many countries quite severely. Subsequently, civilian public expenditure rose in all but one of the 23 OECD countries, with an average increase of 12 percent between 2005 and 2010 (bottom panel of the figure). Having experienced its major recession at the beginning of the last decade rather than at its end like most other countries, Israel reduced its civilian expenditures by six percent, standing out – together with Switzerland – as the only countries that cut their spending share in 2005-2010. As a result, Israel’s civilian public expenditures in 2010 were below those in 21 of the 23 OECD countries.

With such low amounts of public funds available for civilian needs, Israel needs to make very judicious use of its resources. There is relatively less available from the overall pot in Israel for special interests and sectoral demands. In a region that is undergoing considerable unrest since the beginning of 2011 – and in light of its history of experiencing several  critical events each decade – Israel needs to preserve the precious few degrees of freedom that it has available in its budget and spend them wisely.

On the one hand, the ability to control spending in such a fluctuating environment, and to do so more rigorously than many other countries that have undergone much less traumatic periods, is a credit to the State of Israel. On the other hand, such fiscal responsibility also mandates a considerably more judicious use of the public’s money. In this realm, the country’s successive governments have been less than successful. This has also been the case with regard to government income, which is raised in a skewed and disproportional manner (as discussed in the companion piece in this Bulletin by Yarom Ariav).

Welfare payments per person have been increasing steadily for over four decades by multiples of the increases in the country’s income per capita. This is unsustainable in the long-run. It has occurred while a very large and growing share of Israel’s population has not been receiving the necessary tools and conditions for working in a modern economy. As a result, the share of families that would have lived under the poverty line today (had they not received assistance) is roughly one-third – compared to “just” one-quarter in 1979.  The resulting personal inability to cope in a global workplace also translates into an increasing national difficulty to assimilate and develop new ideas. Therefore, while Israel has justifiably been referred to as the “Start-Up Nation”, this attribute applies to an ever-shrinking share of Israeli society.

Instead of utilizing the limited resources at its disposal in a manner that could initiate a positive and permanent change in the country’s long-run socioeconomic trajectories, government after government have let an education system – once considered by many to be one of the best internationally – to sink to the depths of the developed world, with all of the growth, poverty and subsequent welfare implications that this has.

As Ben-David points out, many individuals who could work are receiving substantial amounts of government assistance while a large number of elderly and infirm are forced to live in abject poverty. The only systemic education reform passed by the government, a half-decade ago, was abandoned. The healthcare system, still one of the best in the world, is providing increasingly unequal care as the share of public expenditures has steadily fallen since the nationwide reform in the mid-1990s.

Fiscal responsibility is not just about controlling overall spending in unique circumstances. It also requires major, and often politically difficult, decisions regarding allocation. These are called national priorities – and Israel has a considerable distance to go in this realm.

The rising wave of public protests in Israel during this summer of 2011 reflect increasing unrest with the degree of distortion in Israel’s public expenditures that favor special interest groups with tremendous political clout – at the expense of the general public interest in the realms of education, health and housing.

Public Spending in Israel over the Long Run

While Israel has undergone some fairly seismic events government after government has managed to maintain considerable stability in civilian spending.  Israel’s uniqueness stands out especially over the past five years where the ratios of expenditures to GDP have fallen slightly while they have risen in most of the West.  But fiscal responsibility of this kind requires very judicious use of the available budgets and in this realm Israel has been far less successful.  It has one of the worst education systems in the industrialized world and it provides welfare assistance and subsidies on a scale that enables one of the highest rates of male non-participation in the labor force.

This appears as a chapter in the Center’s annual publication State of the Nation Report – Society, Economy and Policy 2010.

Welfare and Employment Among Single Mothers: Israel from a Comparative Perspective

Women raising their children alone attract considerable public attention as a group, due primarily to their economic vulnerability. This comparison will focus on the demographic characteristics of single mothers, both between Israel and other countries and within each country relative to mothers in two-partner families; the study will also look at single mothers’ economic status and their degree of reliance on state assistance. The family-type comparison will facilitate an understanding of the difficulties and constraints faced by single-parent families. The inter-country comparison will shed light on the causes of this group’s poverty, the group’s economic vulnerability, and possible ways of improving its economic status.

This appears as a chapter in the Center’s annual publication State of the Nation Report – Society, Economy and Policy 2010.

The 2010 Social Survey

The past year has seen a trend towards an improvement in the “Social Confidence Index,” that is tempered by population differences. The survey found that in Israeli society, not surprisingly, the individual’s income and educational level impact to varying degrees the differences in feelings with regard to social confidence as well as other societal areas. There are also differences by level of religious observance where the ultra-Orthodox are clearly differentiated from the “secular.”

Overall public opinion is that social gaps are continuing and even widening, although this feeling does not bring widespread support for policies of affirmative action for weak populations. Within Israeli society, three groups stand out, each distinguished by its value system and its approach to central problems on the social economic agenda – Arab Israelis, the ultra-Orthodox, and the immigrants from the former Soviet Union.

This appears as a chapter in the Center’s annual publication State of the Nation Report 2010.

Israel’s Healthcare System

Rather than aiding the public part of the system to cope with the challenge, the State has exacerbated the situation by reducing the share of public funding and by encouraging the private insurance funds to provide these services.

The result is an uncontrolled rise in service demand in the private part of the system that is largely met by personnel who are also employed in the public part. Thus, not only has the healthcare system declined in efficiency, reflected in a relative inflation of healthcare prices due to double pay and waste, but the situation has also worsened in terms of income distribution and access to medical services.

This deterioration also manifests in growing disparities between poor and rich, between central Israel and its periphery, and between incomes of interns, who cannot do privately paid work and those of specialists who can. Worst of all, early indications of these systemic flaws are becoming apparent at the public health level, as seen in a rise in infant mortality among the Bedouin of the Negev and other weaker groups in society.

This appears as a chapter in the Center’s annual publication State of the Nation Report 2010.

The Demographic Cost: Birth Rates and Achievement on International Tests

Research has shown that these two variables, family size and class size, adversely affect academic achievement. International studies show that pupils’ achievements are lower in Israel than in other developed countries.

An analysis of PISA 2000 and PISA 2006 data shows that the relative size of Israel’s young population which is related to high birth rates explains most of the gap between the average score of Israeli pupils and the international average.

The influence of the size of the young population on pupil test scores is correlated to family size and classroom crowding. Whereas, other studies have sought the explanation for low achievement in features of the education system itself, the current study shows the significant contribution of the broader demographic context to the comparatively low achievements of Israeli pupils.

This appears as a chapter in the Center’s annual publication State of the Nation Report – Society, Economy and Policy 2010.

Income Inequality in Israel

Wage gaps in Israel are higher than in any other developed country and are particularly evident where worker educational levels differ. Over the past decade the average Israeli worker’s educational level has risen greatly while at the same time, demand for educated workers has grown even faster, leading to the continued widening of wage gaps.

Policies aimed at narrowing socioeconomic disparities in Israel should, in the short term, promote employment and provide income support to low-wage earners. In order to succeed in the long term, though, policies should upgrade the skills of the future generations of workers, and minimize the skill gaps. For this to happen, it is not enough to increase the number of years of schooling, the percentage of those eligible for matriculation certificates, or the percentage of those with academic degrees. It is also necessary to upgrade the curricula and the level of training provided by educational institutions.

This appears as a chapter in the Center’s annual publication State of the Nation Report – Society, Economy and Policy 2010.

Education Reform and Narrowing Educational Gaps in Israel

The education system tries to minimize these gaps with its emphasis on the accomplishments of weaker socioeconomic sectors. Nevertheless, stronger groups in the population have an advantage in attaining an education.

This study examines the rate of education for those born between 1955 and 1981, and offers a method of tracking the gaps in education from the 1970s until the turn of the millennium. The results indicate a certain narrowing of the gap for matriculation eligibility between the varying socioeconomic levels. Within higher education, even with its significant expansion, socioeconomic inequality remains. The gap between Jews and Arabs in higher education that actually increased at the start of this period, decreased among those born in the 1970s and onwards as the rates of higher education among Arabs increased greatly. The gender gap for matriculation and academic rates among those born in the second half of the 1970s increased significantly in favor of women.

This appears as a chapter in the Center’s annual publication State of the Nation Report – Society, Economy and Policy 2010.

Working and Poor

The poverty rate among Israel’s working population is high and trending upward; working families currently account for most of Israel’s poor. Poverty among the employed stems from a combination of economic factors, in particular: low wage jobs and a lack of opportunities for low-skilled workers; demographic/family characteristics such as large families and a low percentage of two earner families; and, political factors, particularly the level of support provided to large families and to workers with employment difficulties. These factors lead to exceptionally high poverty rates among the working Arab population, which is characterized by barriers to employment, low levels of female participation in the labor market, and large families.

This appears as a chapter in the Center’s annual publication State of the Nation Report – Society, Economy and Policy 2010.

Too many cooks spoil the tax broth

The tax system has a pivotal role in the functioning of any economy. The first job of a well-designed tax system is to provide revenue for the services provided by the government effectively and fairly. Taxes also have a powerful influence on citizens’ behavior – for example, encouraging work or idleness, thrift, or irresponsible spending. They can redistribute income more fairly and also affect the macro-economy. Collecting more taxes in boom times and leaving more money in citizens’ hands in downturns helps to stabilize the economy. It follows that the proper functioning of the entire economy depends on a stable and well-designed system of taxes.

Yarom Ariav, the recent Director General of the Israeli Finance Ministry, concludes that the country’s current structure of tax administration constitutes a troubling obstacle to maintaining a consistent and stable tax system. In the Taub Center’s new State of the Nation Report, Ariav points to a recent series of problematic policy reversals reflecting Israel’s inability to implement such a tax regime: While direct taxes have been reduced, indirect taxes have been increased; the value added tax rate is constantly being changed; the gasoline tax was raised and almost immediately the increase was cancelled; a plan to end the VAT exemption on fruits and vegetables was suddenly revoked; there have been frequent changes in the taxation of real estate with no real policy in evidence; tax exemptions for foreign investors were followed by an announced intention to reverse the exemption; and so on.

Ariav explains that the problem originates with the ill-advised merger of two quite distinct taxation functions: policy and collection. Before 2004, there were two distinct collection bodies in the Ministry of Finance: the Income Tax Department and the Duties and VAT Department. Above these collection departments was an administrative unit, the State Income Administration. While the subordinate bodies implemented the tax policies, the supervising administrative unit devoted itself to strategic considerations such as  the design and harmonization of tax policies. In 2004, the two  departments were merged into the Tax Authority.

There may have been a certain rationale for merging the two collection departments, but practically speaking this has not yielded any meaningful savings thus far. At the same time, the merger was perceived as making the State Income Administration superfluous.  While the Income Administration ceased being the locus for organized strategic thinking about tax policy, no other body within the Finance Ministry filled the strategic policy making void that was created. The result is that now there are a plethora of different officials within the ministry working in virtual isolation from one another — and often at cross purposes — to craft Israel’s taxation policy. The Tax Authority is charged with collecting taxes, not designing them; the Budget Department is focused on overseeing expenditure, not income; and so on.

Ariav calls for the immediate restoration of the former status and function of the State Income Administration, stating that both logic and history make this the right office for examining and coordinating tax policy from a system-wide perspective, thus providing Israel with a tax regime that will promote growth, stability and fairness.

Living on Borrowed Time?

Israel’s macro economic performance in recent years has been enviable: above-average growth, below-average unemployment, a trade surplus, moderate inflation, and a shrinking public sector debt as a fraction of output. As Professor Eran Yashiv, Chair of the Taub Center’s Economic Policy Program shows in the new State of the Nation Report 2010, Israel weathered the 2007 to 2009 financial crisis better than most developed economies, with a downturn that was both smaller and shorter than that of the US and most of Western Europe.

While the current economic picture compares favorably to what other Western countries are experiencing, there is also reason for concern. In contrast to the current economic indicators, Yashiv shows that indicators foreshadowing future economic performance paint a more worrisome picture. Israel’s economic future requires investment in physicalcapital such as equipment, buildings, and public infrastructures, and it requires cultivating human capital including general work skills and habits as well as a high degree of training and specialization in the lines of work demanded by a highly specialized 21st century global economy. Though both kinds of investment are critical for its future, Israel has been lagging.

Private savings provide the main source for investment spending, but in recent years savings have declined from 24 percent of GDP to about 18 percent. Not surprisingly, investment is declining; as shown in the first figure.  Though levels of gross domestic investment in Israel have tended to fluctuate between 20 and 30 percent, they fell to an all-time low of just over 15 percent in 2010 – which is lower than the 20-24 percent of output that is common in comparably well-developed countries.

LBT1_4_3_fig_1_eng

Alongside the shortfall of private investment, Israel is also experiencing a shortfall of public investment. The capital stock of the government sector has been growing recently at just over one percent, below that of any OECD country, where the average is over three percent.

Finally, Israel lags in investment in human capital. Large numbers of Israelis, particularly Israeli men, do not participate at all in the work force. The second figure shows that even after a 1.2 percent increase in labor force participation among prime working age Israeli men, and a 2.6 percent decrease in the comparable figure for men in the OECD, Israel’s employment rate is still five percentage points below the OECD average.

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Among those who are in the work force, a very large number are in low-skilled, low-paying dead-end jobs. Yashiv refers to a “dual job market:” one sector of the labor force has job security, which also translates into on-the-job training and skill development; another sector has low skills, low pay, low levels of employment stability, and, concomitantly, a low degree of skill development alongside their already low level of skills. Five to six percent of Israeli employees are employed by manpower companies (outsourcing or temporary agencies) where even if the worker happens to work for the same nominal employer for a long period of time, he or she is, in fact, changing jobs all the time as locations and tasks are changed by the contractor.

Yashiv suggests a linkage between the lags in physical and human capital investments. The lack of skilled labor leads to a perpetuation of outdated production technologies that favor low-skilled, low-paid workers over more modern, capital intensive approaches that require more investment and more skilled workers with higher productivity. In other words, the labor force deficiencies reinforce those of the production sector and vice versa.  This economic problem is creating an acute social problem of economic stratification between two Israels: one that is benefiting from modernization and globalization, and one that is being left behind.

So, while competent management of monetary and fiscal policy has been keeping the Israeli economy in relatively good macro economic shape, compared to other OECD countries, Israel faces some major long run problems in the labor market and with regards to physical capital. These problems reduce the potential for economic growth and for standards of living that characterize developed economies, a process that may leave Israel farther and farther behind. In addition, these problems tend to aggravate inequality, which in turn reduces social welfare, engenders friction, and further perpetuates the long-term problems of the economy. The current system of government in Israel does not generate optimism for the possibility of adopting policy steps that will effectively deal with the dysfunctional aspects of Israel’s labor market.

The Working Poor

A phenomenon that has become increasingly common in the developed world and in Israel, in particular, is that of the working poor. Today in Israel, in the majority of poor households headed by a person of working age, that person is employed. Professor Haya Stier, Chair of the Taub Center’s Social Welfare Policy Program, undertook an in-depth study of this phenomenon. The study will appear in its entirety in the upcoming State of the Nation Report 2010.

Poverty in Israel is defined by having a household income of less than half the national median household income, adjusted for family size. It is easy to see that families without any earners are very vulnerable to poverty, unless they have significant sources of income other than from work. Government assistance programs are not generally designed to keep recipients out of poverty but rather to guarantee a very basic level of subsistence or to supplement families with low income from work.  But families with wage earners can also find themselves below the poverty line. This will happen if earnings are low, or if there are many household members.

In terms of net incomes – that is, after taxes and welfare payments – Israel has a very high poverty rate, among the highest in the developed world, and poverty rates have risen considerably since the beginning of the decade. The proportion of poor families headed by an employed person (among those headed by a person between the ages of 25 and 64) has also risen considerably, so that overall, the number of working poor has seen a particularly sharp rise. The first figure shows the total portion of poor households headed by a person at work. In Israel today, the majority of poor families in this age group fall into this category.

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One reason for this trend is the deliberate government policy of encouraging poor people to work rather than to live off of public assistance. The objective of this policy was to help people escape poverty, but so far one effect has been to move many families from the idle poor to the working poor, without much change in their standard of living. It is likely that the inducements to work involved too much “stick” (reduction of benefits) and too little “carrot” (improving the compensation from the return to work) and as a result, the program may have saved money for the Treasury but has not made a major impact on poverty levels.

Using disaggregated data, Stier discovered that the rise in the working poor has been to a large extent concentrated among Arab Israelis. The second figure shows that among Jewish Israelis, the proportion of working poor is considerably lower, and virtually unchanged. But among Arab Israelis, the share of poor rose since 1995 from about 20 percent to about 40 percent.

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Among the reasons Stier finds for the high rate of working poor among Arabs are:

  1. Low labor force participation rates for women. In those Arab households where the woman is employed, poverty rates are actually quite low. Thus, the gap in working poor between Jewish and Arab Israelis is due in large measure to the low proportion of two-earner couples among Arab Israelis.
  2. Deterioration in earnings. Arab men are concentrated in low-skill jobs which have faced sharply lower demand in recent years, and in addition have faced competition from cheaper foreign workers who, in many cases, are employed in virtually identical jobs. (See the March 2011 Bulletin which presents findings that foreign workers have been displacing Arab men.)
  3. Demographic differences. As a whole, the Arab population is younger and a larger proportion of household heads in this community are younger. Forty-two percent of Arab household heads are under 35 years old and thus before their peak earning years, compared to only thirty three percent of Jewish household heads. Furthermore, the Arab families have more children on average, and for a given household income, households with more children are poorer.
  4. Loss of child allowances. Since Arab households with a working head of household tend to have more children than comparable Jewish households, the marked decline in child allowances in recent years has had a disproportionate impact on Arab Israeli working poor.

The complete findings of Professor Stier also include a detailed study of poverty in families with a working single-parent. Her study will be published in full in the Taub Center State of the Nation Report 2010.

Fewer Workers Who Work More – With a Lower Standard of Living

As Taub Center Executive Director Professor Dan Ben-David shows in the Taub Center’s State of the Nation Report 2009, Israel’s living standards are not only lower than those of the G7 countries (the seven leading economies of the world), they have also been rising at a slower rate over the past decades, leaving Israel farther and farther behind the leading countries.

What are some of the primary factors distinguishing between living standards in Israel and in other developed countries?  A graph published in 2003 by Ben-David and updated here compares Israel with 24 OECD countries in 2009.  When it comes to standards of living – the common measure for these is GDP per capita – 21 of these 24 OECD countries have higher standards of living. (This measure is shown as the horizontal axis of the graph.)

The share of Israelis who are employed is below all but four of the other OECD countries (see red triangles graph).  On the other hand, Israelis who work tend to put in more hours of work each week than do workers in all but two of the other countries, regardless of whether those countries are wealthier or poorer than Israel (the blue squares on the graph).

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The primary factor determining standards of living in a country is productivity.  One measure of productivity is labor productivity (defined as GDP per hour worked).  The strong link between productivity and standards of living that exists across countries – and is visually evident in the figure (by the green circles) – is not a coincidence.  The more productive a worker is, the more he or she can be compensated and the higher the standard of living.  This is a major reason why productivity is lower in the three OECD countries with lower living standards than Israel’s and why it is increasingly higher in the wealthier OECD countries.

This figure shows an interesting relationship that appears to hold across modern Western economies: in countries in which a greater share of the population is employed, and each person – on average – is more productive, then employed individuals tend to work fewer hours during the week and the country’s average living standards is nonetheless higher.

Lagging productivity

Israel’s productivity picture is one of a steadily increasing gap that has developed between itself and the G7 countries (the second figure).  The relatively slower productivity growth since the 1970s has translated into relatively slower economic growth, with Israel’s standard of living falling farther and farther behind the G7 countries.

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The irony is, as Dan Ben-David shows in the Taub Center’s State of the Nation Report, that Israel invests extensively in research and development and, in certain areas, its creativity and innovation surpass those of the West’s leading economies.   But while some sectors of Israel’s economy are cutting edge, the overall human capital and physical infrastructures have not kept pace.

Increasingly congested roads (see January 2011 Bulletin) lead to higher transport costs and consequently lower productivity. Low levels of education and insufficient skills among large and growing segments of Israeli society reduce their ability to produce – and incomes tend to reflect this.

As a result, even when there are some areas in which the Israeli economy can successfully compete on a global scale, the heavy weight of the unskilled population enters the calculations of the national average. It turns out that the more advanced sectors of Israel’s economy are unable, on their own, to raise the country’s average standard of living to the highest Western levels. On the contrary. The large unskilled population pulls the national growth path downwards, so it is no coincidence that Israel’s long-run economic growth path has been lower and flatter than those of the advanced Western economies.

Low employment

The employment picture in Israel is a problematic one, particularly for men.  Though Israeli unemployment rates are below the OECD average, they only measure the share of individuals who cannot find employment out of those looking for work.  However, there is a very large segment of the Israeli population that is not even looking for work. Thus, the more relevant measure is non-employment – which includes the unemployed, those who are not participating in the labor force and those not looking for work.

As highlighted in the June 2010 issue of the Bulletin, the share of non-employed Israelis out of the prime-working age (35-54 year old) male population is more than half as much more than it is in the West: 19 percent were not employed in Israel in 2008, versus 12 percent non-employment in the OECD.  Two groups stand out in particular in this regard, Arab Israeli and haredi (or ultra-Orthodox) men.  In 2008, 27 percent of prime working age Arab Israeli men were not employed (double the share in 1979) while 65 percent of haredi men of the same age were not employed (over three times the share of non-employed haredi men in 1979).

It is important to note that even among non-haredi Jewish men, who are still the large majority in Israel, the share of non-employed (15 percent) is one-quarter more than the OECD average of 12 percent.  Three decades ago, in 1979, the share of non-employment among non-haredi Jewish Israeli men was the same as the OECD average. This means that there has been a deterioration in relative male employment rates across the board in Israel.  The marked increase in male non-employment has coincided with a multi-decade decline in the employment of less-educated and unskilled Israelis and steady multi-decade increases in welfare benefits per capita.  The result is that relatively fewer shoulders bear the weight of Israel’s economy and must work more hours to do so.

While the Israelis who work do so for more hours a week than is common in the West, the trend among Israeli men is towards fewer weekly work hours today than a decade ago (third figure).  In his study that will appear in the upcomingState of the Nation Report, Ayal Kimhi finds that non-haredi Jewish men, who represent the largest group of males in Israel, worked an average of 49.3 hours a week in 1998. By 2009, this fell by more than three percent, to 47.6 hours.  Weekly work hours among Arab Israeli men were below those of the non-haredi Jewish men in 1998 and in 2009, falling by one percent over this period, from 45.8 hours a week in 1998 to 45.3 hours in 2009.

3_3_fig_3_eng_f

Haredim and the labor force

The employment situation among haredi men is considerably different than for the other population groups.  Not only are their rates of employment very low, the Kimhi study shows those who work do so for considerably fewer hours per week than the other groups, seven percent less than Arab Israelis and 14 percent below non-haredi Jews in 1998.  In addition, the drop in haredi hours of work per week, of five hours – a 12 percent fall – was sharpest among all groups.  As a result, even among those relatively few haredi men who are employed, they worked fewer hours a week in the past than the other groups, and they reduced their weekly work load by far more over the past decade.

Hence, not only has there been a widening gap in employment rates between haredim and other men, this relative deterioration in employment is also evident in a large and increasing gap in hours worked.  As a result of the diverging work norms among haredim and others, it is not surprising that an increasing share of haredi families are falling below the poverty line.

The issue of haredim and work is becoming increasingly problematical as their share in the population rapidly increases.  Ultra-Orthodox children represent one-fifth of all primary school pupils today, with an increase in enrollment of 51 percent over the past decade alone – compared to a decline of three percent during this same decade in the State non-religious schools (whose share fell to just 39 percent of the total in 2008).  As this major segment of the population rapidly increases, their ability and willingness to be engaged in a modern competitive society has become a major issue that needs to be reckoned with by Israeli society and its leadership.

When this is coupled with the fact that the haredim refuse to allow their children to study core curriculum subjects at levels that could facilitate their integration into a modern and competitive economy, the implications for future labor productivity growth that would enable higher compensation are not encouraging.  The combined result of problematic employment habits and poor education is that there are increasing pressures for raising overall government assistance to these families, with all of the attendant tax and welfare implications that this has for the rest of Israeli society.

In light of the fact that the haredi population is increasing at a faster pace than all other segments of Israel’s population, what happens to this group is beginning to have wider repercussions on the average standards of living for Israeli society as a whole.

Dental Care in Israel – Still Out of Bounds

Israelis have had national healthcare coverage since 1995. Even before then, access to basic medical care was almost universal and insurance covered a large portion of the population. This legacy of wide accessibility to basic medical services for the whole population has contributed to comparatively high levels of health in Israel.

Dental care has been an exception. Access to it has remained a matter of household ability to pay. As a result, even basic dental treatments, including preventive care, are often beyond the reach of families with limited means. And, indeed, contrary to general health levels, dental health in Israel is inferior to that in other developed countries.

Prof. Dov Chernichovsky, Chair of the Taub Center’s Health Policy Program and a professor at Ben-Gurion University, and Dr. Guy Navon, from the Bank of Israel and a Policy Fellow in the Program, recently published a paper focusing on Israel’s dental health situation (Dental Care: The Burden on Households – Implications for National Health Insurance, Taub Center Policy Paper No. 2010.10) using survey data from the Central Bureau of Statistics. They found that with no public dental insurance, and with even private insurance options limited for the average resident, spending on dental care has become a central medical expenditure item for Israeli households. Dental care for most elderly is often quite prohibitive financially.

The first figure shows the amount spent in 2008 on dental care for families who reported such expenditures. The amounts are remarkably similar across the income spectrum. Spending by the richest households is less than 25 percent greater than that of the poorest households, even though the former’s income level is about five times as high. This strongly suggests that levels of dental expenditures are made according to need and are clearly regressive.

Fig_4B_Dental_Eng

This does not mean that poor families are not compelled to curb their spending on dental care. The second figure shows the percentage of families reporting that they had expenditures on dental care during the year; the percentage for poorer families is smaller, suggesting that they often simply do without.

Fig_5B_Dental_Eng

The skimping on dental care evident in the lower quintiles has a disproportionate impact on children, insofar as children up to the age of 18 constitute 50 percent of the members of the poorest households but only 20 percent among the wealthiest households.

On the basis of their findings, Navon and Chernichovsky propose that Israel should include dental care in universal healthcare entitlement for at least the population up to age 18 and for the needy elderly. Their research leads them to conclude that this would increase the performance of the Israeli healthcare system, would not increase costs, and would enhance both social and economic equity.

Dental Health: The Burden on Households – Implications for National Health Insurance

Expenditure on private insurance is common amongst a very low percentage of households and primarily in the higher income quintiles. While it improves their situation it also serves to widen inequalities in access to treatment as well as income disparities and general demand. The lowest income quintiles cope with the expenditures for routine dental care – which represent some 7% of their overall household expenditure when they need treatment and especially treatment for children – and they are not able to deal with expensive treatments related to surgeries or reconstruction. The lowest two quintiles almost completely forgo dental health treatments.

The study recommends a process for including dental health care in National Health Insurance, with the required budgetary back-up that will be required. This process is likely to bring real relief in the medium and long-range in terms of an improvement in dental health in Israel and a savings in national expenditure for dental health.

*Publication only in Hebrew.

Female High School Matriculation Rates Pulling Away From the Males

Access to higher education in Israel requires the successful completion of high school bagrut (matriculation) exams in core subject areas.  Due to the central place of the matriculation certificate in the educational system, it has long been a central policy goal both to improve bagrut completion rates for all Israelis and to increase the completion rate among those from less advantaged backgrounds. The Chair of the Taub Center’s Education Policy Program, Professor Yossi Shavit joined together with Vicki Bronstein to study the trends in attainment of the bagrut certificates and examine to what extent these goals have been reached.

Shavit and Bronstein first look at overall attainment, and find that it has greatly improved in recent decades.  Of Israelis born in 1955-1959, fewer than half ever attained a bagrut certificate; for those born in 1975-1981, the rate is over 70 percent.

In order to examine if disadvantaged groups have closed gaps in educational attainments, Shavit and Bronstein looked at bagrut achievement among groups differentiated by various background measures. The first figure shows how successful completion of bagrut (matriculation) exams changed over time for three groups: those with parents having only primary education; those with parents having a secondary education (some high school); and those whose parents have a college education.

Fig_1B_Bagrut_Eng

In Israel, as in other countries, educational achievements of children are highly correlated with the education levels of their parents – the higher the parents’ education, the greater the likelihood that children will graduate from high school. But over time this gap has been greatly narrowed in Israel.  The figure shows that children with the least educated parents showed the greatest improvement.  Children in the middle group, whose parents had a secondary education, showed a lesser but still substantial increase. Among the children whose parents hold academic degrees, there was no increase at all in bagrut rates.

Another aspect of inequality in high school graduation rates is that between Jewish and Arab Israelis. The second figure shows trends in bagrut rates for both Jews and Israeli Arabs over a period of more than twenty years. (Because year to year changes can be very sharp, the graph shows a moving average of five consecutive years.) The gap between those born in the late 1950s was about 15 percentage points; virtually the same gap is found between those born in the late 1970s. The bagrut attainment of Israeli Arabs has greatly improved, but it has not come closer to that of Israeli Jews.

Fig_2C_Bagrut_Eng

The pattern that is most striking, and perplexing, is displayed by changes in completion rates among men and women (see third figure).  Already among those born in the late 1950’s, women attained bagrut certificates at a much higher rate than men.  Almost 55 percent of women in that age cohort received a bagrut, compared to roughly 45 percent among men. But the men did not close the gap, as did the children of uneducated parents, nor was there even a parallel improvement, as was the case of Israeli Arabs relative to Jews. Instead, starting among men born in the middle 1970s there was a pronounced and persistent drop in bagrut rates over a period of years, even as women continued to increase their completion rates. As a result, the gap between men and women widened from about 10 percentage points to about 30 percentage points.

Fig_3C_Bagrut_Eng

The widening gender gap is especially marked among Arab Israelis. Over this period Arab men moved from a 15 percentage point advantage in completion rates over women to a 15 percentage point disadvantage – a total swing of about 30 percentage points in bagrut attainment.

Shavit and Bronstein consider various explanations for this phenomenon, which they conclude needs more attention than it has merited so far. While pupils with less educated parents did narrow the bagrut attainment gap with peers born to more educated parents, Shavit and Bronstein did not find evidence of a parallel narrowing of educational gaps with regard to attainment of university or college degrees. These students did see an increase in the percentage obtaining degrees, but the improvement was similar to that found among the students from more educated households.

The full article of Shavit and Bronstein will appear in Taub’s forthcoming State of the Nation report.

School Discipline and Scholastic Achievement in Israel

The current paper briefly summarizes a larger study on school discipline in Israel, its determinants, and its relation to pupil achievement based on TIMSS 2003 data. The fuller study is part of a nine-country international study on the relation between school discipline and pupil achievement. Its findings show Israeli pupils to be less disciplined than their international counterparts.

Moreover, Israeli pupils have been found to be lower achievers despite higher levels of parental education than in the other participating countries. Can poor discipline explain the relatively low achievements? The study’s conclusion is that if discipline among Israeli pupils matched the international average, the achievement gap between Israel and the other participating countries would diminish considerably but not completely vanish.

This appears as a chapter in the Center’s annual publication State of the Nation Report – Society, Education and Policy 2010.

Labor Productivity in Israel

The country is one of the developed world’s leaders in innovation, a central component in the productivity growth that drives economic growth.  However, its productivity is among the lowest in the developed world, and has been falling further and further behind other leading countries since the 1970s.  This chapter focuses on some of common factors underlying Israel’s low productivity and provides a sector by sector comparison of productivity, capital formation, and wages across countries.

This paper appears in the Center’s annual publication State of the Nation Report: Society, Economy and Policy 2013.

The Social Security System

This system focuses on providing allocations to varied population groups. Despite the growth in parts of the system’s components in the past years, the overall expenditure is lower than that of OECD countries and in terms of output it is lower than its average level a decade ago.

In some areas of social security, changes were made which increased accessibility to allowances and their overall level of support, especially with regard to the elderly and persons with disabilities, and, of late, also for families with children and the unemployed.

Conversely, the programs designed for people who live in poverty in Israel provide very limited assistance. The limited assistance by the social security system in various areas seriously restricts it ability to cope effectively with very high levels of disparity and poverty in Israeli society.

This paper appears in the Center’s annual publication State of the Nation Report – Society, Economy and Policy 2009.

The Healthcare System

Private funding currently represents about 43 percent of the overall funding, the highest beyond the United States among the developed countries, and the highest among countries in which universal health insurance is legally guaranteed for all residents via National Health Insurance.

The “Americanization” of the Israeli healthcare system is reflected at this stage in growing gaps in access to care and loss of income protection as well as efficiency, which can be measured by the developing inflation in the system. This reality is not reflected as yet in public health indicators. The growing gaps between the United States and the 22 high income OECD countries in favor of the latter may be signaling what can be expected in Israel in terms of its achievements in the health of its population. Against this backdrop, the efforts by the large healthcare service providers to deepen their focused activities in closing the gaps stand out.

This paper appears in the Center’s annual publication State of the Nation Report – Society, Economy and Policy 2009.

The 2009 Social Survey

The survey’s outcomes reveal a society in which the level of satisfaction from developments in the social areas over the past year is lower than during the previous year. The public is aware of the widening socioeconomic gaps and believes that the government, despite the public’s expectations, is not helping to close the gaps but rather is widening them further.

The public believes that the economic prosperity benefited primarily the established population and less the weak population. In recent years the public’s social confidence declined also due to the rise in the sense of vulnerability to violence.

This paper appears in the Center’s annual publication State of the Nation Report – Society, Economy and Policy 2009.

Personal Social Services

The expenditure for personal social services provided by the Ministry of Social Affairs and Social Services and many non-governmental entities is lower compared to other components of the welfare state in Israel, representing six percent of the social expenditure.

After a period of stagnation during the mid-2000s (2002-2006), there was a growth in the budget directed to these services in the past three years; at the same time changes took place in the Ministry of Social Affairs and Social Services’ policy, as reflected in expanding the privatization trend beyond services that can be provided in the community. Furthermore, as of late, a reform committee completed its deliberations and recommended substantial changes in the array of personal social services, including legislating a Social Services Law.

This paper appears in the Center’s annual publication State of the Nation Report – Society, Economy and Policy 2009.

Israel’s Labor Market – Today, in the Past and in Comparison with the West

 Three decades ago, Israeli rates of non-employment among men were very similar to those of the OECD. this chapter shows the change – sometimes, substantial – in work patterns among non-ultra-Orthodox Jews, ultra-Orthodox Jews and Arab Israelis. Not all of the conventional wisdom on Israel’s labor market turns out to be correct. The relationship between education, employment and income is described here while the extent of education and employment among different population groups is detailed according to gender, religion and degree of religious observance. The phenomenon of foreign workers in Israel is examined and the negative income tax programs in Israel and the United States are compared.

This paper appears in the Center’s annual publication State of the Nation Report – Society, Economy and Policy 2009.

A Macro Perspective of Israel’s Society and Economy

However, Israel entered the recession in a relatively good economic state and appears to also be coming out of the crisis relatively quickly. Israel is returning to long-term paths that have characterized the country for decades, paths that are not sustainable in the long run. Rapid demographic processes are at work within Israel, reflected in a steadily growing part of Israeli society that is not equipped with either the tools or the conditions to cope successfully in a modern economy. This chapter highlights the Israeli anomaly in terms of prospects and risks and proposes a strategic plan for systemic reform that can produce a turnaround.

This paper appears in the Center’s annual publication State of the Nation Report – Society, Economy and Policy 2009.

Israel’s Education System – An International Perspective and Recommendations for Reform

The achievement levels of Israel’s children are consistently below those of each country in the reference group of 25 OECD countries in nearly all of the years surveyed. Achievement gaps within Israel are wider than in each of the OECD countries in each of the years, while the achievement levels of both the weakest and the strongest pupils are at the bottom – or very close to the bottom – of achievements in the Western world.

If, in the past, it was possible to argue that the country’s education system was not short of money, budgeting cuts over the past decade have effectively removed this argument.

The chapter concludes with highlights of a proposed systemic educational reform.

This paper appears in the Center’s annual publication State of the Nation Report – Society, Economy and Policy 2009.

Israel’s Education System – A Domestic Perspective

This situation has potentially more damaging implications due to the fact that the achievements of Arab Israeli and ultra-Orthodox pupils in core curriculum subjects do not meet global market requirements and this will make it difficult for them to be integrated fully into Israeli society.

The Ministry of Education budget utilization data revealed that, despite the fact that affirmative action has long been an integral part of the Education Ministry policy, there are still significant gaps between different parts of the education system. An in-depth examination of the system in this chapter reveals its positive and negative aspects.

This paper appears in the Center’s annual publication State of the Nation Report – Society, Economy and Policy 2009.

Public Expenditures – A Look at Israel’s National Priorities

But the relatively higher civilian expenditures did not prevent rates of poverty and income inequality from rising higher than is common in most Western countries. Where did the money go? In contrast to the common practice, this chapter shows Israel’s budgetary allocations by areas of expenditure rather than by government ministries. This makes it possible to see Israel’s actual national priorities rather than its declared ones.

This paper appears in the Center’s annual publication State of the Nation Report – Society, Economy and Policy 2009.