Israel Faces Existential Economic and Social Crisis, Warns Report
Translated & summarized from Walla by baba
A report by the Shoresh Institution warns Israel faces an existential economic and social crisis due to declining productivity, educational gaps, and a brain drain. Authored by Prof. Dan Ben-David, the report highlights a reversal in productivity trends compared to G7 nations and significant disparities between high-tech and other workers. It also points to demographic shifts and a growing Haredi population with lower educational attainment as future challenges. The report proposes a "Israel 2.0" plan to address these issues before the upcoming elections.
The story in 6 lines · by baba
- Israel faces an existential economic and social crisis threatening its status as a developed nation, according to a new report.
- Productivity has declined significantly since the 1970s, with Israel now lagging behind G7 averages in total factor productivity.
- Disparities in education and workforce skills are widening, with Haredi and Arab students showing significantly lower performance.
- Government spending priorities favor the Haredi community over essential services like hospitals and universities, the report claims.
- A growing brain drain, with more Israelis leaving than returning, exacerbates the shrinking human capital base.
- The report proposes an "Israel 2.0" plan to reform education, budget priorities, and governance to avert collapse.
A new report by the Shoresh Institution for Economic and Social Research warns that Israel is on a path toward economic and social collapse, driven by a fundamental shift in national priorities over the past five decades. The "Shoresh Guide 2026: The Economic-Social Threat to Israel," authored by institution president Prof. Dan Ben-David, highlights declining productivity, educational disparities, demographic shifts, and a growing brain drain as key factors.
According to the report, Israel's total factor productivity, a critical measure of sustainable growth, has reversed a positive trend. After surpassing the G7 average in 1975, Israel fell 15% below it by 2023. Similarly, GDP per hour worked, which was higher than all G7 nations in 1972, lagged behind six of them by 2024, including a 34% deficit compared to Germany and 30% compared to the United States.
Ben-David challenges the notion that defense spending alone is responsible, stating that civilian spending has been comparable to OECD averages for decades. Instead, he points to a shift in priorities, noting that in 2024, subsidies and benefits for the Haredi (ultra-Orthodox) community amounted to NIS 37.5 billion, significantly more than the NIS 26.7 billion allocated to hospitals, universities, and colleges combined. This difference, he argues, could have funded eight additional hospitals or ten research universities.
The report also highlights stark productivity gaps within the workforce. While high-tech workers, comprising about 10% of the workforce, show productivity 22% above the OECD average, the remaining 90% are 24% below it. Furthermore, the report forecasts a challenging future workforce, with Haredi and Arab students forming a growing majority of first graders by 2026. PISA test results show Israeli students lagging significantly behind OECD averages, with the majority of Haredi boys not studying core subjects or participating in the tests.
Compounding these issues is a growing brain drain. The number of Israeli doctors in OECD countries (excluding the US) relative to those in Israel nearly tripled between 2000 and 2023. In 2024, the number of Israelis leaving the country exceeded those returning by 160%. Ben-David warns that this trend could accelerate as the human capital base shrinks and the burden on those remaining increases.
Ahead of the upcoming elections, the report urges the next government to address this trajectory. Ben-David proposes "Israel 2.0," a plan based on an upgraded core curriculum for all students, a shift from sectoral to national budgetary priorities, governmental reforms for stronger checks and balances, and a constitution to protect fundamental rights. "The upcoming elections will determine who rules Israel, but the deeper question is in which country the government will rule in a generation," Ben-David stated, emphasizing that the threat is not partisan but existential.
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