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Karnit Flug: main Israel's problems - poor education, low productivity

Israel is in second place among developed countries in its dependency ratio, or the number of people dependent on a single wage earner, according to figures presented today by Governor of the Bank of Israel Karnit Flug. Japan, which has the highest dependency ratio among developed countries, suffers from an aging population. In Israel, on the other hand, the high ratio is caused by the relatively large number of children, who are also classified as being dependent on wage earners.

Flug emphasizes the problem of low skill levels among certain groups in Israel, including haredim (ultra-Orthodox Jews), Arabs, and teachers in the education system. Flug stated that graduates of teachers training colleges receive especially low marks in skills tests, and that there was a direct link between their low level and the poor performance of Israeli students. For example, in mathematics studies, students and teachers in Israel have the lowest marks among the reference countries after Turkey.

In her lecture today at the "New Horizons for the Welfare State" conference held at the Jezreel Valley Academic College, Flug said that inclusive growth was the best way of narrowing gaps in Israeli society, because it would make more money available for welfare. According to the indices presented by Flug, Israel is in fifth to last place in inclusive economic growth, while the new figure in the presentation shows an improvement in the past four years. Flug attributes the change to the enormous growth in the employment rate resulting from the entry of many haredi women and Arab men into the labor market, and the declining ratio of public debt, which has reduced the financial burden of debt and made resources available for welfare. At the same time, Flug said that while the government's policy of giving incentives for entering the labor market was contributing to higher employment rates in all population groups and a drop in economic inequality, the system of vocational training was not providing parts of the population with the skills necessary in order to ensure successful integration in the labor market.

Flug emphasized the negative effect of the relatively low productivity of the Israeli worker on the ability to achieve inclusive and sustainable growth. She said that the right and most effective way of increasing productivity was to improve employee's skills. The skills to which Flug was referring are measured in the ability to solve difficult problems in a technological environment, literacy, and mathematical ability.

According to Flug, Israeli society features very wide skill gaps, with the haredim and Arabs having an especially low skills level. A survey of skills found that the gaps between haredim and non-haredim have been widening in recent years. For example, there are almost no differences between haredim and non-haredim over 40, but there is a significant skills gap in the 16-40 age bracket.