NCPA - National Center for Policy Analysis


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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