Ben-Ami: The huge challenges facing the Israeli economy

FS Daniel Ben Ami DBA byline

Walk around the streets of Jerusalem during the day on Saturday, the Jewish sabbath, and you get a sense of the divisions that afflict the city. Although these are most visibly religious, cultural and political they have economic implications too.

Perhaps the most conspicuous inhabitants of the city are to be found among its ultra-religious haredi (literally “fearful”) population. Even in the height of summer, when the temperature often exceeds 30 degrees Celsius, the men typically insist on wearing wide-brimmed black hats and long frock coats. On the sabbath itself they often switch to fur hats or shtreimels. The women wear long skirts with long sleeves and high necklines along with some kind of head covering.

On a Saturday the men typically go to pray at the “wailing wall” in the old city or they attend local synagogues in haredi districts such as Mea Shearim (a hundred gates). Meanwhile, the women generally after their large families and prepare celebratory meals.

At the same time many Palestinian families, who typically live in the east of the city, take a trip westwards to take advantage of its open spaces. There they generally share the parks with less devout members of the city’s Jewish population who are not engaged in sabbath prayer.

Perhaps most incongruous to foreigners are the large number of young and middle-aged Filipino women relaxing in the city. These are generally not tourists but care workers who look after aged and infirm Israelis. Saturday is often the Filipinos’ day off since Israelis themselves typically do not work on that day.

These are only glimpses of the complicated patchwork that makes up Jerusalem’s diverse population. But they give a hint at one of the most acute challenges facing the Israeli economy.

It has a significantly lower labour force participation rate than average for developed countries. That is a lower proportion of those of working age are actually working. The problem is particularly acute in Jerusalem where a 2009 survey showed the rate at Jerusalem at only 58 per cent compared with 71 per cent nationally.

Jerusalem Old City Israel 450 Large
Jerusalem: Has a significantly lower labour force participation rate than average for developed countries. Photo: Shutterstock

Of the different segments of the population there are two that stand out as having a particularly low participation rate: haredi men and Arab women. Although the specific reasons differ in each case it is difficult to detach them from the overall political situation.

In some respects the low participation rate of haredi men goes back to the founding of the Israeli state in 1948. At the time David Ben-Gurion, Israel’s first prime minister, did a deal with haredi leaders in which he granted young men exemption from the military draft if they studied in yeshivot (religious seminaries).

At the time the number of such students was small but since then it has mushroomed. Yeshiva students also typically receive state benefits although the level is meagre.

The situation of Arab women is more complex but it is notable that many Israeli Jewish families would prefer to have Filipinos in their homes than locals. This is not to suggest either than Filipino women should be barred from doing such work or that Arab women should be restricted to it. But it does illustrate that the level of distrust between the two communities has economic implications.

In Israel, even more than elsewhere, economics and politics cannot be easily untangled.

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Daniel Ben-Ami is a writer on economics and finance. His personal website can be found at www.danielbenami.com