Israel Is Treading Along the Path to Bankruptcy

If Israel hopes to avoid bankruptcy, Israel's Arabs and ultra-Orthodox populations must be advanced.

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Haredim studying high-tech at the company Ravtech in December 2013.
Haredim studying high-tech at the company Ravtech in December 2013. Credit: Eyal Toueg

Jews who aren’t ultra-Orthodox make up nearly 70 percent of the State of Israel’s population. According to the Central Bureau of Statistic’s long-term demographic forecast, in less than half a century – by 2059 – the share of non-Haredi Jews will drop to only 50 percent. At the same time, Israeli Arabs will be 23 percent of the population, while the Haredim will constitute 27 percent.

This demographic forecast has political and diplomatic implications, but it has particularly dramatic economic ramifications.

Today the Haredim and Arabs are poor populations who study and work less than others. Both these groups are similar in their relative lag in education and in participation in the workforce, although the causes of these gaps are totally different. Israeli Arabs are poor because they suffer from exclusion and discrimination that don’t allow them equal opportunities. The Haredim are poor by choice, because they choose not to study core subjects and not to work, and then exploit their political power to assure that the state continues to finance this destructive way of life.

The reasons for the poverty of these two groups may be different, but the results are the same; Within a few decades half of the Israeli populace will be poor, with low workforce participation, and those who are employed will be working primarily in low-level jobs for low pay. From the State of Israel’s perspective this means a plummeting of productivity, GDP and tax revenues, and the accelerated migration of the better educated and the wealthy.

The office of the chief economist in the Finance Ministry set a price tag on this expected collapse, predicting that if there is no improvement in the employment rates, income levels and productivity of the Haredim and Arabs, Israel will go bankrupt within decades.

But this threatening reality is not an act of fate, but entirely manmade. Such a bankruptcy can be prevented. To do so, these two weak populations must be advanced. To do this we must stop excluding Israeli Arabs, and grant them full funding as equal citizens. For this we must also stop favoring the ultra-Orthodox, who benefit from government budgets to fund an educational system that doesn’t teach the basics, and a lifestyle in which men remain out of the workforce.

If Israel takes these steps, the risk of bankruptcy will be removed.

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