Economic growth and workforce diversity go hand in hand
Author: Taub Center Staff
January 27, 2019
More and more Israelis are working and Israel’s labor market is strong, yet employment trends differ across population groups
As we say goodbye to 2018 and start the new calendar year, Israel’s labor market continues to be strong and show many encouraging trends: labor force participation rates are rising, employment rates of both men and women are increasing, and unemployment has reached a historic low. The number of job vacancies has also increased, and wages have been continually rising. This increase in employment has also contributed greatly to Israel’s economic growth in the past few years.
In a recent Taub Center study, Researcher Hadas Fuchs and President Prof. Avi Weiss find that over the past decade and a half (since 2003), employment has risen among both men and women and across all population groups: Haredim, non-Haredi Jews, and Arab Israelis. This is a change from the previous decade during which employment rates had declined or remained stagnant among all groups except non-Haredi Jewish women.
The employment rate for Israeli men has risen by 7 percentage points and the increase was most impacted by a rise in the employment rate of 55-64-year-olds. Among women, on the other hand, employment increased by 13 percentage points and was driven both by increased employment among 35-44 year olds and among 55-64-year-olds, but for different reasons: the former because there has been a major increase in the percentage of mothers of young children who are working, the latter because women close to retirement work more than their predecessors and women’s retirement age was raised from 60 to 62.
All in all, these increased employment rates put Israel in a good position relative to the OECD. In fact, the employment rates of non-Haredi Jewish women and men and Haredi women in Israel are higher than the average employment rates in the OECD, and among non-Haredi Jewish women it is the second highest in the OECD (after Iceland).
But what about Israel’s other population groups?
Despite the gains of the past decade and a half, there are two groups whose employment rates remain particularly low: Arab Israeli women and Haredi men. In 2010, the government set target employment rates for these two population groups to reach by 2020.
After several years of stagnation, the employment rate of Arab Israeli women has increased substantially and stands at about 40%. This is nearly double the rate in 2003 and an increase of more than 6 percentage points since 2016, bringing the rate very close to the government’s 2020 target for Arab Israeli women of 41%. Furthermore, there are indications that this trend will continue. Most of the employment increase for this population group (72%) stems from the improved education of Arab Israeli women, and, because more Arab Israeli women are pursuing higher education, it is likely that their employment rates will continue to rise.
In contrast, the employment rate of Haredi men, after rising by more than 15 percentage points between 2003 and 2015, has declined slightly in recent years. It now stands at about 48% – far from the government’s 2020 goal of 63%. Of those who are working, about 42% of Haredi men ages 30-64 worked part time in 2017 (compared to 15% of non-Haredi Jewish males), mostly due to yeshiva studies.
It is important not only to look at employment trends in Israel in general, but also to break it down by industry. For example, 50% of Arab Israeli men, whose education levels have not risen as much as those of Arab Israeli women, worked in occupations characterized by low wages in 2017: manufacturing, construction, and agriculture. These are physically demanding occupations, and, consequently, Arab Israeli men show a major decline in employment rates from age 50 and on.
In high tech, the sector that attracts the greatest attention in Israel both because of its high wages and its disproportional contribution to Israel’s GDP, tax revenues, and exports, the share of those employed in the industry has increased from 8% to 15% among non-Haredi Jewish men, but among Arab Israeli and Haredi men the percentage has remained negligible. The percentage of women working in the field is also low (as it is in the rest of the world); women made up 32% of those working in high tech in Israel in 2017, and most of them are non-Haredi Jews. Nonetheless, there has been an impressive rise in the share of Haredi women employed in high tech: from less than one percent in the middle of the last decade to about 3%.
If labor market participation is to keep rising in Israel, the participation rates of Haredi men and Arab Israeli women and men must increase. Providing training to population groups that are currently underrepresented in the labor market, or in specific industries, and encouraging employers to aim for diversity in the workplace could help these groups not only join the workforce, but integrate into prestigious, high-paying fields, and thereby strengthen the Israeli economy and society as a whole. Moreover, in addition to training for adults, it is important to improve Israelis’ skill levels earlier on by providing high-quality education from a very young age.
As Director General Suzie Patt Benvenisti put it so poignantly at the Taub Center’s latest international conference (on Israel’s future labor market): “The issues of economic growth and enhancing diversity of the workforce really go hand in hand…Getting more segments of the population – like Arab Israelis and Haredim – more engaged in the workforce is not something that we need to do just because it’s the right thing to do, but because it will have a very positive impact on our economic growth as a country.”