NCPA - National Center for Policy Analysis

WELFARE SYSTEM COULD CAUSE ISRAEL TO COLLAPSE, ECONOMIST WARNS

May 11, 2010

When people talk these days about Israel's economy, they use words like booming, resilient, even "miracle."  Weaning itself off socialist-influenced policies that once brought 400 percent inflation and 60 percent income-tax brackets, Israel's economy is now growing despite the international financial slowdown.  Debt is manageable, the currency is strong; Israel's high-tech sector is admired worldwide, says the Los Angeles Times. 

But one Israeli economist is warning that beneath Israel's back-patting lurks a hidden peril -- fueled by demographic trends and political choices -- that could eventually mean an end to the country.  Dan Ben-David, executive director of Jerusalem-based Taub Center for Social Policy Studies in Israel, says the problem is simple: Not enough Israelis are pulling their own weight: 

  • Nearly one in five Israeli men between the ages of 35 and 54 -- a group that he believes has "no excuse" for not working -- are not part of the labor force.
  • That's about 60 percent higher than the average among nations in the Organization of Economic Co-operation and Development, an international forum fostering market-based economies that Israel joined Monday.
  • Officially, Israel's unemployment rate is about 8 percent, but that doesn't include Israeli citizens who are not trying to find work, either because they feel disenfranchised, such as many Arab Israelis, or because they've chosen a life of state-subsidized religious study, such as many ultra-Orthodox Jews.
  • Nearly 27 percent of Arab men and 65 percent of ultra-Orthodox Jews don't work, government figures show.
  • The non-employment rate for ultra-Orthodox men has tripled since 1970. 

What worries Ben-David most is that the nonproductive part of Israel's population, which survives largely on welfare, is also the fastest growing: 

  • Today Arabs and the ultra-Orthodox together make up less than 30 percent of the population, but they account for nearly half of school-age children.
  • If trends continue unchecked, Arab and ultra-Orthodox children could make up 78 percent of Israeli classrooms, recent studies have shown. 

Source: Edmund Sanders, "Welfare system could cause Israel to collapse, economist warns," Los Angeles Times, May 10, 2010.

 

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