Anyone familiar with the Israeli scene cannot help but marvel at the technological innovation generated by such a small country -- self-driving cars, drip irrigation, spectacular feats of cybersecurity and cyberhacking, and an atomic bomb (according to foreign sources). We’re Startup Nation and we’ve won quite a few Nobel Prizes.
Yet try to get your vacuum fixed, much less your laptop, and you meet another Israel. To put it gently you encounter the Israel that’s the polar opposite of Lake Wobegon, where the children are famously “above average." We’re a country where far too many of the adults are below average.
This isn’t idle ranting by someone who recently encountered manifold obstacles in getting a vacuum repaired, including baseless claims by the repair center that the product was working perfectly well, and later returning it covered with mysterious goo.
Israeli adults have lower levels of basic workplace skills than their peers in countries belonging to the Organization for Economic Cooperation and Development. That should come as no surprise because Israeli students score embarrassingly badly on international exams of student performance in science, math and reading.
All hail to high-tech, but in Israel it employs no more than 10% of the workforce and that share hasn’t been growing because there’s a shortage of Israelis with the engineering and other skills the industry needs. In any case, economies don’t run on high-tech alone.
You need construction workers, doctors and nurses, repairmen and women and teachers. Even a startup needs people capable of delivering late-night pizzas on time with the combination of toppings that were ordered.
Israel has been bedazzled too long by its high-tech prowess to pay much attention to the other 90% of the workforce.
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Thankfully the Bank of Israel this week sought to bring the issue to the public’s attention with a report and recommendations about how to boost the country’s poor level of labor productivity.
When they hear the word “productivity,” most people want to reach for the nearest revolver. They struggle enough with concepts like GDP and, more lately, inverted yield curve. Productivity is arcane but that doesn’t make it unimportant. It measures how much output a worker generates for an hour of labor. The more the output, the richer an economy becomes and the more he or she can be paid.
A business can increase it by harassing its employees to work faster and cut corners, but the more effective way is to ensure they are working with the best tools and equipment and have the right skills and education. Productivity can even be enhanced by making sure there is good public transportation that enables workers to get to their jobs on time and by an effective healthcare system that lowers the number of sick days.
Israel has problems in several of these areas, but its big problem is education and skills, as the Bank of Israel made clear.
Where opportunity doesn't knock
On a formal level Israelis are well educated, with the third-highest percentage of adults with a post-high school education in the OECD.
But in terms of a good education, it's an elite phenomenon limited to people who come from the highest socio-economic groups. They can pay to get supplementary education for their children. The army’s elite technology units provide a high-tech education perhaps unmatched anywhere in the world but they recruit from the top income deciles.
At the bottom of the socio-economic heap, the situation is quite different. Despite being centralized and almost entirely public, Israeli education is extraordinarily unequal.
On the international PISA exams, Israelis at the bottom 25% of the socio-economic ladder were about half as likely to be in the top 25% of test scorers as in other OECD countries. Indeed, socio-economic gaps account for most of Israel's underperformance in PISA.
The Bank of Israel has long to-do list of how to change things, such an improving the pay for starting teachers, adding more digital teaching technology into the schools, and upgrading their physical environment. It suggests programs to coax good teachers to teach in the worst schools.
It’s going to take a lot more than that to really make a difference. As the Bank of Israel concedes, teachers’ pay on the whole isn’t bad in Israel, but the profession has a terrible image and workplace conditions are often abysmal. Facilities are poor, the red tape is insufferable and teaching methods emphasize old-fashioned rote learning to get students ready for the high school matriculation exam.
There’s little room for a teacher to take any initiative and the dropout rate for new teachers is high.
There’s the added problem that the unemployment rate is at its lowest in decades and women, who used to provide a reliable supply of high-quality teaching talent, today have the entire job market open to them. Why teach high school science when you can work for a startup?
The problem for institutions like the Bank of Israel is they by nature take a top-down approach, looking to sweeping solutions and budgets for solutions. My guess is that the real answer lies at the level of the individual school and teacher and giving them more freedom to do their job as they see fit. It isn’t about money or new orders from on high but about encouraging initiative. However, that’s just the kind of thing bureaucracies like the Education Ministry would never tolerate.