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Study: Integrating Israeli Arabs into the labor market would provide major economic boost

In one of the most extensive studies ever conducted on the participation of Israeli Arabs in the labor force, Tel Aviv University and Bank of Israel researchers pinpointed problems and suggested policy changes.

Helping Israel's Arab population join the labor market would serve the country's best interests, according to conclusions reached by Prof. Eran Yashiv, head of Tel Aviv University's department of public policy and Dr. Nitsa Kasir of the Bank of Israel's research department. The two have just completed one of the most extensive studies ever conducted on the participation of Israeli Arabs in the labor force. "This would increase tax revenues and boost economic growth by NIS 35 billion to NIS 39 billion in GDP by 2030, and by NIS 114 billion to NIS 123 billion in GDP by 2050," according to the study's authors.

They propose that an investment totaling NIS 4.4 billion to NIS 5.3 billion over the next several years be added to the state budget for implementing a variety of mechanisms for helping Arabs integrate into the workforce. Recommending an additional one-time investment amounting to NIS 2.2 billion to NIS 3 billion for an overall NIS 6.6 billion to NIS 8.3 billion over the next five years, Yashiv and Kasir propose that most of the funds – NIS 5 billion – go into rehabilitating the ineffective state-run Arab education system, since education is the primary weak point of the Arab population.

Although massive in scope, the study says the investment would be one of the economy's most worthwhile undertakings, yielding a conservatively estimated 3.5% to 7.3% annual rate of return. Yashiv and Kasir point out that there is consensus among the heads of the Shin Bet security service over the importance of investing in the Arab population to reinforce its identification with the state.

Employment problems among Arabs are especially challenging: Only 22% of the women participate in the workforce despite a relatively high rate of academically trained women among those who are employed. The employment rate among men stands at 60% but over the past decade has fallen below the rate among Jewish men, likely because of fierce competition in low-skill occupations from foreign workers. Arab men are being driven out of the workforce at a young age as a result of being focused on physical labor.

"They suffer from geographic distance as well as discrimination, poor education, in addition to a lack of daycare and transportation infrastructure and cultural barriers," says Yashiv. "All these combined together to produce an incomparably complex social and economic problem. No other Western country faces such a challenge with 20% of the population so far behind culturally and occupationally."

Take an example from Intel

Yashiv and Kasir claim the barriers can be overcome if there's a will to do so. To illustrate, they bring up the example of Intel, which makes it a point to hire Arabs in Israel in keeping with its global policy of promoting a diversified workforce.

"To do this, Intel goes out to Arab localities, advertises in Arab media, has an Arab present at job interviews, encourages contact between its Arab employees and their communities, and more," says Yashiv. "Intel's experience with hiring Arab engineers has been positive, showing that when there's a will, there's a way."

The two researchers recommend setting up industrial zones near Arab towns and providing training in entrepreneurship, assistance in obtaining credit along with the establishment of state-guaranteed funds, as well as requiring that companies winning state tenders employ Arabs in proportion to their share in the population. They also suggested new steps to ensure that the state itself employs an appropriate percentage of Arabs.

As for education, Yashiv and Kasir recommend a long list of steps to be taken, costing billions of shekels. In the short run they suggest identifying schools in particularly bad shape and assigning monitoring committees to try to identify their shortcomings and rehabilitate them. In the longer term they propose setting up specialized schools in the Arab sector in fields like arts and sciences, establishing an Arab college in the Galilee, renovations on a massive scale of existing Arab schools, and setting up a support structure for Arab students. Another move would be enforced legislation banning discrimination against Arabs in the workplace, including fines for violations.

Meirav Arlosoroff