Israeli economy doomed without Chareidim & Arab workforce participation

Haaretz    The Israeli economy cannot thrive without ultra-Orthodox Jews and Israel's Arabs being more fully integrated into the workforce, the National Economic Council warned the cabinet at a meeting last week.[...]

The most serious problem here, however, is related to working-age populations that are not employed - meaning, the low workforce-participation rate of the country's Arabs and the ultra-Orthodox population. The problem is the product of a lack of desire to be employed, when it comes to the Haredim, as well as low skill levels. (A large proportion of Haredi men choose to engage in Torah study full-time rather than work. )

The council presented the cabinet with a slide, showing that between 1997 and 2012, the poverty rate of the non-Haredi, non-Arab population remained unchanged at 12%, while the rate among Arabs and Haredim skyrocketed from 38% to 58%. As a result, Israel's population consists of three separate countries: Arab Israelis, ultra-Orthodox Jews, and everyone else. And that last segment is actually contracting while the two weaker segments are growing.

In 2009, 71% of those aged 25 to 29 entering the labor force belonged to the third, more highly skilled, group (i.e., the non-Haredi and non-Arab sector ). The council said, though, that this group will decline to just 59% of the newly employed by 2019, and 53% by 2029. Israel is, therefore, moving in the direction whereby if things are not changed, the non-Arab, non-Haredi working population with relatively high productivity will become just over half of the new members of the workforce - a situation that is not sustainable. [...]

The council says that as a result of the situation, as early as next year the country will have a 3% structural deficit - an excess of government expenditures, including items such as social welfare payments to the poor - over government income from taxes and economic growth.

The structural deficit is a reference to a situation in which the government spends more than it is taking in, not as a result of transient factors but rather the entrenched structural characteristics of the economy. Even more alarming, the council says, is the fact that the structural deficit will be 10.5% by 2050, if the current situation is not addressed.

Israel needs to decide, the council says: It can continue down its current path of greater government outlays for the poor at the expense of increased taxes, and reduced government spending in other areas. This will perpetuate poverty among Haredim and Arabs and impose an impossible burden on the remaining working population.

Alternatively, Israel can better integrate the Arabs and ultra-Orthodox into the general workforce, increasing their participation and substantially enhancing their skill levels through education.

The council's assessment is that if the three population groups are indeed integrated into one productive workforce, by 2030 Israel will once more be competitive in the world economy.