Israel's economy

OECD Observer

More active education and employment policies, particularly targeted at minority groups, are needed to bolster its economic performance and bridge deep divisions within its society.

These are key conclusions of an OECD Review of Israel’s Labour Market and Social Policies and an OECD Economic Survey of Israel, which were issued in the context of negotiations for Israel to become a member of the OECD. Israel’s economy has weathered the crisis, with GDP growth in 2009 of around 0.5%, above earlier projections.

But there are weaknesses to address, particularly on the social welfare side. One in five Israelis lives in poverty, a higher ratio than in any OECD country, according to the OECD Review of Israel’s Labour Market and Social Policies. Poverty is highest among the youngest and fastest growing population groups: just over half of Arab Israelis and 60% of Haredim, or ultra-Orthodox Jews, have disposable income that is less than half the national median, compared with just over 10% of the rest of the population. This reflects low employment levels, particularly among Arab women and Haredi men, and low basic support for pensioners. Most low-paid jobs with little security are filled by Arabs, Haredim and foreign workers.

At the equivalent of 16% of gross domestic product, public spending on social policies in Israel is low in comparison with the average for OECD countries of 21%, and getting more people from under-represented groups into employment will require increased public spending.

To achieve these objectives, the OECD recommends investing more in active labour market policies and in making it worthwhile for low-skilled workers to take jobs. It calls for action to promote fair employment opportunities for minorities in both the public and private sectors and to enforce labour laws and minimum employment conditions more effectively.

On the education front, the OECD urges action to reduce the inequalities faced by Arab Israelis and calls for efforts to encourage the Haredim to strengthen their vocational skills.

The OECD’s economic survey is also critical of the Bank of Israel’s intervention in foreign-currency markets and the finance ministry’s direct supervision of some financial markets. The survey emphasises that while there are legitimate calls for increased spending, such as in social policy, the Israeli authorities should nevertheless reduce the burden of public debt, and it stresses the need to cut back on areas of public spending that are the least effective.

The report also makes several recommendations on taxation, urging caution in pursuing further corporate and personal income tax cuts and advises the elimination of low-priority tax expenditures.


©OECD Observer N° 276-277 December 2009-January 2010

Economic data

GDP growth: +0.6% Q4 2017 year-on-year
Consumer price inflation: 2.2% Jan 2018 annual
Trade: +2.7% exp, +3.0% imp, Q4 2017
Unemployment: 5.5% Jan 2018
Last update: 12 Mar 2018


Stay up-to-date with the latest news from the OECD by signing up for our e-newsletter :

Twitter feed

Suscribe now

<b>Subscribe now!</b>

To receive your exclusive paper editions delivered to you directly

Online edition
Previous editions

Don't miss

  • Ambassador Aleksander Surdej, Permanent Representative of Poland to the OECD, was a guest on France 24’s English-language show “The Debate”, where he discussed French President Emmanuel Macron’s speech at the World Economic Forum in Davos.
  • The fight against tax evasion is gaining further momentum as Barbados, Côte d’Ivoire, Jamaica, Malaysia, Panama and Tunisia signed the BEPS Multilateral Convention on 24 January, bringing the total number of signatories to 78. The Convention strengthens existing tax treaties and reduces opportunities for tax avoidance by multinational enterprises.
  • Rousseau
  • Do you trust your government? The OECD’s How's life 2017 report finds that only 38% of people in OECD countries trust their government. How can we improve our old "Social contract?" Read more.
  • Papers show “past coming back to haunt us”: OECD Secretary-General Angel Gurria tells Sky News that the so-called "Paradise Papers" show a past coming back to haunt us, but one which is now being dismantled. Please watch the video.
  • When someone asks me to describe an ideal girl, in my head, she is a person who is physically and mentally independent, brave to speak her mind, treated with respect just like she treats others, and inspiring to herself and others. But I know that the reality is still so much different. By Alda, 18, on International Day of the Girl. Read more.
  • Globalisation’s many benefits have been unequally shared, and public policy has struggled to keep up with a rapidly-shifting world. The OECD is working alongside governments and international organisations to help improve and harness the gains while tackling the root causes of inequality, and ensuring a level playing field globally. Please watch.
  • Read some of the insightful remarks made at OECD Forum 2017, held on 6-7 June. OECD Forum kick-started events with a focus on inclusive growth, digitalisation, and trust, under the overall theme of Bridging Divides.
  • Checking out the job situation with the OECD scoreboard of labour market performances: do you want to know how your country compares with neighbours and competitors on income levels or employment?
  • Trade is an important point of focus in today’s international economy. This video presents facts and statistics from OECD’s most recent publications on this topic.
  • The OECD Gender Initiative examines existing barriers to gender equality in education, employment, and entrepreneurship. The gender portal monitors the progress made by governments to promote gender equality in both OECD and non-OECD countries and provides good practices based on analytical tools and reliable data.
  • Interested in a career in Paris at the OECD? The OECD is a major international organisation, with a mission to build better policies for better lives. With our hub based in one of the world's global cities and offices across continents, find out more at .
  • Visit the OECD Gender Data Portal. Selected indicators shedding light on gender inequalities in education, employment and entrepreneurship.

Most Popular Articles

OECD Insights Blog

NOTE: All signed articles in the OECD Observer express the opinions of the authors
and do not necessarily represent the official views of OECD member countries.

All rights reserved. OECD 2018