Israel's labor productivity 14% lower than OECD average

Karnit Flug
Karnit Flug

According to the Bank of Israel periodic fiscal survey, cognitive skills are particularly low for construction, food and accommodation service workers.

The Bank of Israel today published an excerpt from its periodic fiscal survey, taken from the chapter dealing with basic skills of workers in Israel and market sector productivity.

The Bank of Israel states that Israel's labor productivity is 14% lower than the developed country average and is particularly low in nontradable sectors and industry sectors that sell only to the domestic market. Productivity gaps in the food and accommodation services, as well as in construction and trade industries makes the greatest negative contribution to the overall productivity gap. In contrast, labor productivity in the electronics industry is higher than the OECD average and reduces the productivity gaps between Israel and other advanced OECD economies.

As for the workers' basic cognitive skills, the Bank of Israel claims that they are lower than the OECD average, even though the share of Israeli workers with an academic degree is higher than the OECD average. This is explained in the report, "This finding indicates that workers’ skills, and particularly their cognitive abilities, are not derived from years of schooling only, but also from the quality of education and from other personal and environmental variables."

The Bank of Israel claims that the relatively low level of skills of workers in nontradable industries correlates with a lower output per worker, and is reflected in low-cost, labor-intensive work methods that involve little advanced technology. According to the survey, skills are particularly low in the fields of trade and construction, as well as industries which sell mostly to domestic market even though the share of academic degree holders in the these industries remains higher than the OECD average.

The bank recommends adopting an approach of investing in basic cognitive skills through early childhood education in order to improve skills and bolster productivity. In addition, it is recommended to improve the basic proficiency of adults through designated programs for population groups for which the survey found especially low achievements.

Published by Globes [online], Israel business news - www.globes-online.com - on July 19, 2016

© Copyright of Globes Publisher Itonut (1983) Ltd. 2016

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