Experts Urge Bold Israeli Government Reforms to Boost Long-Term Economic Growth

Former Chief Economist of Israel's Ministry of Finance Dr. Michael Shraal and Dr. Lev Drucker emphasize the urgent need for a future Israeli government to implement 25 critical structural reforms to sustain and enhance the country's economic growth. Despite Israel's current economic resilience, including a thriving high-tech sector and low unemployment, the authors warn of a gradual slowdown in living standards growth due to deep-rooted structural challenges such as demographic shifts, human capital disparities, heavy regulation, housing and transportation issues, and inefficient governance.

Their comprehensive study projects that without these reforms, Israel's per capita GDP growth could decline to about 1% annually by mid-century, leading to slower improvements in living standards compared to other developed nations. The proposed reforms span five key areas: education and human capital, labor market and public sector, taxation and savings, competition and regulation, and governance capacity.

Key recommendations include linking public education funding to measurable core skills achievements, expanding school autonomy, reforming teacher employment structures, liberalizing higher education, updating labor laws, increasing transparency and democracy in labor unions, regulating strikes in essential services, and promoting merit-based public sector employment. Tax reforms aim to lower direct tax rates while broadening the tax base and simplifying VAT, alongside pension system overhauls to ensure fiscal sustainability.

Additionally, the study calls for reducing bureaucratic burdens, opening sectors like agriculture to competition, and integrating planning reforms with housing and transportation to better connect peripheral areas to employment hubs. Governance reforms suggest streamlining government ministries, enhancing fiscal transparency, and decentralizing authority to local governments.

The authors acknowledge that these reforms will face political and social resistance but stress their necessity to prevent a gradual erosion of Israel's economic potential. They argue the debate should shift from dividing current growth benefits to ensuring sufficient growth for future generations.