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2018 OECD Economic Surveys: Israel 2018

image of OECD Economic Surveys: Israel 2018

Israel’s economy continues to register remarkable macroeconomic and fiscal performance. Growth is strong and unemployment is low.  The external surplus is comfortable, and the public debt-to-GDP ratio, already well below the OECD average, is still falling. However, Israeli society remains marked by weak social cohesion and significant disparities, which penalise parts of the population and threaten the longer-term sustainability of these good results. Despite better employment outcomes among Israeli-Arabs and the Haredim, workers from these communities are often trapped in low-paid jobs due to their weak skill sets, implying persistent poverty and weak aggregate productivity. Moreover, low social transfers imply that the often large families in these communities face deprivation that contributes to child poverty. High cost of living and house prices also weigh on the social situation and well-being, and public transport deficiencies are detrimental to work-life balance and cause urban congestion and poor air quality. The authorities have continued their reform process over the last few years to address these issues. Making growth stronger, more inclusive and more sustainable will require further action and more public investment in education to improve the skills of Israeli-Arabs and Haredim together with additional product market reforms and better transport infrastructure.  

SPECIAL FEATURES: EDUCATION AND SKILLS; INFRASTRUCTURE

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The simulated impact of increasing employment rates on poverty in typical families of the main Israeli communities

This Annex provides additional information regarding the results of a simulation exercise evaluating the potential benefits of an employment increase for lowering the poverty rate for different family types belonging to the Israeli-Arab, Haredi and Jewish non-Haredi communities. In its first part, it describes the main characteristics of the OECD Tax Benefit model that was used for this exercise. The second part presents the main assumptions retained to perform these simulations, and the last part provides a short discussion of the main results.

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