Israel Faces Economic-Social Collapse Risk, Warns New Report
Translated & summarized from Hamal by baba
A new report by the Shoresh Institution for Economic and Social Research warns of an impending economic and social collapse in Israel due to declining productivity, educational disparities, and demographic shifts. Authored by Professor Dan Ben-David, the "Shoresh Guide 2026" highlights a reversal in productivity trends and contrasts government spending on the Haredi sector with investments in healthcare and higher education. The report calls for significant reforms, including an "Israel 2.0" plan, to avert a crisis and ensure the nation's future development.
The story in 6 lines · by baba
- Israel faces a severe economic-social threat that could lead to collapse, according to a new report by the Shoresh Institution.
- Productivity has declined significantly since the mid-1970s, with Israel now lagging behind G7 averages.
- Government spending on the Haredi sector in 2024 exceeded that on hospitals, universities, and colleges combined.
- Demographic shifts and educational disparities, particularly among Haredi and Arab students, pose a major challenge to future workforce development.
- Brain drain is increasing, with significantly more Israelis leaving the country than returning in 2024.
- Professor Dan Ben-David proposes an "Israel 2.0" plan to reform priorities and strengthen the nation's future.
Two weeks before the upcoming Knesset elections, the Shoresh Institution for Economic and Social Research has released a comprehensive report detailing a significant economic and social threat to Israel's future. The "Shoresh Guide 2026: The Economic-Social Threat to Israel," authored by the institution's president, Professor Dan Ben-David, highlights declining productivity, educational disparities, demographic shifts, and brain drain as converging factors endangering the nation's development.
According to the report, Israel's total factor productivity, a key measure of sustainable growth, has reversed a decades-long positive trend. While Israel surpassed the G7 average in 1975, by 2023 it lagged 15% behind. Similarly, GDP per hour worked, which was higher than all G7 nations in 1972, fell behind six of them by 2024, including significant gaps with Germany and the United States. Ben-David refutes the notion that defense spending alone is to blame, pointing instead to a shift in national priorities.
The report highlights a stark contrast in government spending, noting that in 2024, subsidies and benefits for the Haredi sector amounted to NIS 37.5 billion, significantly exceeding the NIS 26.7 billion allocated to hospitals, universities, and colleges combined. This NIS 10.8 billion difference, the report suggests, could have funded eight additional hospitals or ten research universities.
Productivity in Israel's high-tech sector, which employs about 10% of the workforce, remains strong, exceeding the OECD average by 22%. However, the productivity of the remaining 90% of employees is 24% lower. The report underscores that the core groups driving Israel's excellence, high-tech workers, doctors, and senior academic staff, constitute only about 3% of the population, necessitating a significant expansion of the human capital base for future generations.
Demographic trends present a major challenge, with Haredi and Arab students forming a growing proportion of younger students. By 2026, 25% of first-graders are projected to be Haredi and 23% Arabic-speaking. International assessments like PISA 2025 reveal significant educational gaps, with Israeli state education students ranking below most OECD countries, and Arab students performing below all OECD and several Arab nations. The report also notes a concerning increase in Israelis leaving the country, with departures significantly outnumbering returns in 2024.
Ben-David proposes an "Israel 2.0" plan to address these issues, centered on an upgraded core curriculum for all students, a shift from sectoral to national budgetary priorities, strengthening governance, and enacting a constitution to protect fundamental rights. He warns that the upcoming elections will determine not just who governs, but in what kind of country, emphasizing that the window for change is closing.
