Taub Center: Israeli productivity falling behind OECD rivals

"The State of the Nation Report 2013," which the Taub Center for Policy Studies in Israel will shortly publish states that the problem of Israel's productivity has worsened from one decade to the next. Since 1970, the gap between Israel productivity and the productivity in the G7 (Canada, France, Germany, Italy, Japan, the UK, and US) has steadily widened and that the situation took a turn for the serious worse in 2012.

The Israeli worker's average productivity is $33.70, less than in most OECD member states; Israel is ranked 26th out of the OECD's 34 members. Even countries with severe economic difficulties, such as Greece and Italy, have higher productivity than Israel.

Productivity is the ratio between the value that an employee produces and his salary cost. The lower the output, the lower the productivity.

Taub Center executive director Dan Ben-David says, "What was surprising in the sharp drop in productivity in 2012 was not the drop itself, since it was apparently mainly due to a correction by the Central Bureau of Statistics, which resulted in more accurate labor data, but the fact that Israel's productivity was even lower than the previously very low figures."

Ben-David adds, "This has very serious long-term consequences. At a time when there are Israelis who will continue to live in the country come what may, others take economics into account. As the gap between possible income abroad and income in Israel widens, more and more Israeli families will decide to leave. It is no coincidence that the brain drain of university graduates from Israel to the US is more than six times the rate of the brain drain from European countries to the US, and these data are not unique in the world. Very educated young people have alternatives when it comes to employment, and even though Israel is the 'Start-up Nation', it is liable to lose its most educated and talented children as the national ability to pay a competitive wage erodes."

Published by Globes [online], Israel business news - www.globes-online.com - on September 1, 2013