The standstill in private sector productivity in Israel is attributable to the fact that most of the new jobs that were added in the economy in 2016 were low-wage and low-productivity jobs. This was mainly a result of haredim (ultra-orthodox Jews) and Arabs joining the workforce, according to Ministry of Finance chief economist Yoel Naveh's weekly economic survey, published today.
This week's survey sets out to analyze the factors behind the stagnation in private sector productivity in Israel, a phenomenon that has also characterized most of the developed economies in the West in the past few years.
Productivity is a measure of the productive capacity of workers in the economy, or the average output per worker in relation to the inputs invested in him. High productivity is an indication of a rich and competitive economy (though not necessarily big in terms of GDP).
The chief economist's survey finds that in addition to the growth in low-wage jobs (which lower average productivity per worker), another factor that has halted the rise in productivity is that investment in the Israeli economy last year was skewed towards areas that affect quality of life, such as residential construction and purchases of cars, and away from areas that boost productivity, such as research and development, plant and equipment, and infrastructure.
Published by Globes [online], Israel business news - www.globes-online.com - on October 2, 2017
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