Opening the 2017 Eli Hurvitz Conference on Economy and Society, Shai Babad, Director General, Ministry of Finance, said that despite the growth of Israel’s market, the Jewish state’s economy suffers from too much regulation and bureaucracy. He also said there is a need for new solutions for integrating the ultra-Orthodox into the economy.
Babad said that market growth topped expectation in the last year, hitting four percent instead of the predicted 2.8 to 3 percent. However, he said that when you start to breakdown Israel’s economic standing in comparison to the world bank and by sector, the outlook does not look as good.
“We see that a lot of activity was done to help ultra-Orthodox women and Arab men. But if you take a look at ultra-Orthodox men and Arab women, you see their rate of participation is very low,” said Babad, noting there is also a large productivity gap between Israel and other OECD states.
Babad said it is time rethink efforts: “For many years, we have insisted that the ultra-Orthodox study core subjects…We have not been successful. The question is: Should we try to develop an alternative track?”
Babad said that instead of insisting that ultra-Orthodox children learn math and English, the state should offer two- to three-year technological training programs for ultra-Orthodox 19- and 20- year-olds, who will then get internships and jobs. He said he thinks that will be easier than convincing parents to let their children learn core subjects.
Babad also spoke about the need for de-regulation in the private sector to increase productivity: “We have a whole mess of regulation and bureaucracy. This is a real war. … It is not obvious that adding another Israeli lawyer or CPO to the market will increase productivity compared to adding a practical engineer.”
The conference was opened by IDI President Yohanan Plesner and Eugene Kandel, Chair, Eli Hurvitz Conference on Economy and Society.
Plesner said, “The way the economy is preparing for profound changes in the future labor market will have dramatic implications. Without proper preparation, the expected changes to the workforce are liable to undermine the stability of regimes and democracies around the world and lead to a sharp rise in unemployment worldwide."
According to Plesner, "there is a close connection between the functioning and strength of the labor market and the legitimacy and trust in national democratic institutions. When these state institutions are perceived as not functioning and not delivering the goods, it's a short leap to the evaporation of public trust. Such a lack of faith is fertile ground for the rise of populist initiatives; the weakening of democratic institutions; and the undermining of democratic values."
Kandel said that it is appropriate for Israel to speak about two economies with vastly different characteristics and “one size does not fit all.” He said that many forces are trying to pull Israel’s innovative economy out of Israel and to their countries and if we make it challenging for companies to stay – hard to access finances, distance from the rest of the world’s markets – we might have lost our innovation economy.”
“If the newspapers fail to write about these challenges today, they will write about them in seven or 10 years, but then it will be too late,” Kandel said. “We need to create a sense of urgency in finding a solution.”
Rakefet Russak-Aminoach, CEO of the Leumi Group, said that while other arenas are undergoing disruption, the banking sector is not there yet. But Russak-Aminoach soon predicts a banking revolution that will lead to cheaper banking, based in technology, and banking with greater transparency, accessibility and personalization.
“For my parents, digital was going to the ATM and withdrawing money,” said Russak-Aminoach. “Our children do not want to go to or see the bank branch. That is the gap and we need to manage this intergenerational transition.”
MK Prof. Manuel Trajtenberg, a member of the Knesset Finance Committee, said, “The state of Israel does not have a social policy – period,” he said.
Trajtenberg said Israel is failing at education beginning form birth – “Israel has the highest birth rate among OECD countries and does not know how to deal with young ages.” He said that childcare for a 1 to 2-year-old costs more than three times the amount of university tuition. “We have to turn the pyramid upside down.”
Also at the conference was Minister of Education Naftali Bennett, who spoke about the success of his ministry in increasing the number of Israeli students completing the five-unit mathematics matriculation exam, said that the guiding line in the next few years is a focus on “education for entrepreneurship.”
“We need to teach less and spend 30 percent of our time dedicated to active learning. Instead of sitting in a frontal lecture with a teacher, go and research something yourself,” Bennet charged. “In three words: Go for it!”
He said that “Kids are born with the desire to take action and we somehow kill that.”
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