Economists and politicians complain a great deal about Israeli workers' low productivity levels. Other than its export-oriented industries, primarily high tech, Israel's labor productivity level is among the lowest in the OECD. Various explanations have been forthcoming for this state of affairs, among them low capital per worker, high security expenditure, a high proportion of young, inexperienced workers, black market business activity, and so on.
Today, the Adva Center published its annual report, "Workers, Employers and the Distribution of Israel’s National Income", in which it offers a more basic explanation: the consistent policy of aiding employers by lowering the cost of labor.
The Adva report, authored by Dr. Shlomo Swirski, Etty Konor-Atias, Adv. Noga Dagan-Buzaglo, and Rotem Zelingher, argue that this policy, which has been in place at least since the emergency economic stabilization plan of 1985, is "a success story", in that the cost of labor has indeed been lowered, but that this comes at the expense of the economy as a whole.
The report notes that Israel has a high proportion of low-paid workers, many of them women and foreign workers. The share of both salaried and self-employed workers in Israel's national income has fallen from 65% in 2000 to 57% in 2015, a trend that is in line with most other OECD countries, although the causes vary from one country to another. At any rate, the result is a long-term decline in productivity, since the availability of cheap labor means there is little incentive to invest in professional education and training, and the workers themselves are unable to invest in the education of their children, at a time when the cost of social services such as education is being transferred from the state budget to families.
As far as foreign workers are concerned, the Adva report says that the Israeli government refuses to decide between two options: either recognizing that foreign workers are indispensable to the Israeli economy, and awarding them rights equal to those of Israeli workers; or else investing in the adoption of up-to-date technologies in construction and agriculture to obviate the need for imported cheap labor, and encouraging the employment of Israeli in nursing care, another sector dominated by foreign workers. The report also notes that the employment of low-wage Palestinian workers harms both the Israeli and Palestinian economies in the long term, by undermining efforts to build an independent Palestinian economy, and by reducing opportunities for Israeli workers and allowing a norm of low pay and lack of professional training to take root.
The authors of the report say that raising labor productivity in Israel means greater investment in productive sectors, as opposed to, for example, finance, and achieving a regional diplomatic settlement, but also a switch to a more egalitarian policy of higher pay, and more state financing for social services, including education and professional training.
Published by Globes [online], Israel business news - www.globes-online.com - on May 1, 2016
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