If demographic trends remain the same, the percentage of Israelis participating in the workforce is expected to decline by 6 percent in the next 20 years, according to a new report titled “Changes in the structure and composition of the Israeli population according to cultural – religious sectors in the coming twenty years and their consequences on the labor market.”

The report, dated November 2011, was issued this week [April 9] by the Research & Economics Administration of the Industry, Trade and Labor Ministry, and predicts Israel’s demographic composition for the next 20 years and its expected impact on the workforce.

The findings were based on new demographic statistics compiled by Dr. Eliyahu Ben Moshe for the Research & Economics Administration.
The report shows that:

•Israel’s population growth is expected to decline in the coming 20 years, but will remain high relative to many other countries in the world.
•By 2030 Israel is projected to have 11 million people, and the population density will increase to 450 souls per km, the highest ratio for any developed nation in the world. [This obviously shows the imperative of planning building and zoning new land for housing, as well as long-term planning for transportation and services - AM].
•There will be a steady decrease in the number of people of working-age [15-64] from its current 62% [in 2010] to 59% in 2030.
•This decrease will bring with it serious ramifications for the dependency ratio. Increasingly, every working person will have to support more people through his/her labors.
•The number of Israelis of the primary working age [25-54] is currently at 38%. That’s just over one-third of Israelis who are ‘eligible’ to work by dint of their being within this age group.
•Of the overall percentage of general working age Israelis [15-64], the Haredim currently represent 8.5% and are projected to make up 15.1% of working-age Israelis in 2030.
•Only a drastic decline in the fertility rate can stop this trend.
•The secular sector’s percentage of working age people will drop from its current 36% to 29% in 2030. In 2030, there will be an increase of 1.8 million people in the 15-64 age group, from its current 4.8 million, up to 6.6 million.
•In the primary working age group of [25 - 54], another 900,000 souls will be added – obviously in an unequal proportion between the various religious-cultural sectors of Israeli society. A full one-third of these 900,000 people of working age will come from the Haredi sector, and 38% will come from the Arab sector.

Therefore, if current workforce participation trends continue [especially amongst Haredi men and Arab women] there will be significant consequences for the Israeli economy and the welfare of all of its citizens.

The population of Israel has historically grown at a healthy and fast rate, which, despite a continuing slowdown, has in the past years reached 2% annual growth. This is a high rate relative to international standards. Because of this growth rate, there is a high density of population [330 souls per km in 2010] which is one of the highest population densities in the world – similar to Japan’s [which could explain why we're always getting on each other's nerves all the time..]
The report focuses on workforce participation trends, and its findings do not make for pleasant reading.

Relative to other developed nations, Israel’s age dependency ratio (% of working-age population) is very high: 60.41

The number of people of working age versus the number of people not of working age within a given population is called the age dependency ratio. This ratio defines the number of people who are “dependent” – in our case those people between the ages of 0-14 and those over 65 – who are dependent on the people who are of working age [15 to 64] for their livelihood [the working age people are also meant to support themselves]. This number is reached by calculating the number of working age people [15-64] divided by 1,000. The dependency ratio figure shows quite clearly that even a small change in the ratio of working age people of several percentage points can have a dramatic impact on the number of dependents.

In Israel, a working person has to provide for more souls than other working people do in many developed nations. The high age dependency ratio in Israel is a factor of a very high number of young people under the age of 14, and the increasing number of elderly over the age of 65 [especially in the secular and traditional sectors]. In the coming decade, the percentage of people over the age of 65 will increase from just under 10% today to 14%.

Israel’s population in 2010 was 80% Jewish and 20% Arab [there is no significant change by the time the report was released for publication in early April 2012]. Within the Jewish sector the largest group by far is the secular sector (41%), followed by the traditional [not ultra-Orthodox] sector (23%), and the ultra-Orthodox [Haredi] sector, which makes up 14% of the population. After that are the religious Zionist population (12%) and other religious groups (10%).

Populations with a high fertility rate are projected to increase their percentage within the total population, while the other population sectors decrease, especially the groups with a low fertility rate. Leading the increase is the haredi sector: it’s percentage of the total population will rise from its current 11% to 17%-18% in 2030. The Arab population [Muslim, Christian, Druse] will increase from its current 17% to 19%-20%.

The sector that will see the greatest reduction is the secular population, whose percentage within the total population will drop from 33% in 2010 to 27% in 2030. The traditional religious [non haredi] sector will drop from 18% to 15%. [It is these two population groups that provide the vast majority of the workforce in Israel, and the reduction in their relative number, without the balancing effect of an increase in workforce participation by the Haredi and Arab sectors, the Israeli workforce will shrink, while the dependency on it increases, an untenable situation - AM].

The haredi and Bedouin sectors will double their absolute numbers within the next 20 years. The haredi population will grow from 830,000 to 1.8 -2 million. The Bedouin sector will increase from 200,000 to over 400,000 souls. The change will be felt especially in the 0-14 age group, where haredi children will increase their percentage within the total population from their current 19% to 30% in 2030 – 40% of all children in the Jewish sector [if these Haredi children are not taught any of the core subjects such as math, science and English, and their instruction is focused almost exclusively on Torah, once they join the working age group after school they will most likely be unemployable - AM]. The number of secular children in the 0-14 age group will drop from 23% now to 17% in 2030. Both the Haredi and Arab sectors will also see a significant increase in the number of over 65 year olds.

The number of Haredim of working age [15-64] will increase from 8.5% to 15.1% in 2030; that’s 405,000 in 2010 and 987,000 in 2030 – almost double. [This is ostensibly good news, but unless there is a political change which sees these young people actually join the workforce, they will add to the dependency ratio - AM].

The number of secular people of working age will decrease from 36% in 2010 to 29% in 2030. A similar decrease will be seen in the main working age [25-54].

According to the report, if the numbers of ultra-Orthodox, minorities, and elderly people in the workforce do not increase, the Israeli workforce in general is expected to decrease by 6% within 20 years, because these groups will represent an increasing percentage of the total population. Over 65s currently make up just under 10% of the population, a number expected to rise to 14% by 2030 [more than 1.5 million people by 2030, and here we're taking about increased health care needs, as well as pensions - AM]. If this expected increase in elderly people is not balanced by a reduction in the number of children in the population, then the percentage of working age people will drop by 3%. This will increase the dependency level in the country [in the number of non-working people that working people have to support - AM] and effect the quality of life of all citizens.

The demographic developments forecast in the next two decades present very difficult challenges for Israeli society:

The most significant change in the Israeli population is the sharp increase of Haredi people of working age, and especially within the younger working age group. Up until today, this sector has made up only a small fraction of the working age group, [and they generally do not participate in the workforce - AM]. Over the course of the next two decades their part of the working age group will cross the 10% mark, and towards the end of the second decade will approach the 20% mark. Assuming that this sector of the population, and especially the men amongst them, do not quickly equal their level of participation in the workforce to those of other sectors of the population, expect a significant decrease in overall workforce participation.

The same goes for the need to increase the participation of Arab and Druse women in the workforce. In other words, because there will be so many young Haredi men [and Arab women] of working age who are not working, the general workforce percentage of Israel’s entire population will decrease. This substantially increases the financial burden on those who do work. Amognst the Haredim and Negev Bedouin, the percentage of working age people in the general Israeli workforce is very low, under 50%. The meaning of this is that if all Israelis, and only those Israelis between 15-64 worked, then each person in this specific workforce would have to financially support a whole other person [including himself/ herself]. In the Haredi and Negev Bedouin sectors, for every 1,000 people who work, there are just over 1,000 people who do not and who are thus dependent on the working group for their survival. In the secular Jewish and Christian Arab populations, the percentage of working age is 66%, which means that for every 1,000 people who work, there are 500 or less people who are dependent on them [a person in this sector has to support 1.5 people: himself and 'half' of another person].

Another, not less significant challenge for Israeli society is that the increase in population will increase the population density in Israel to unprecedented proportions. This level of density brings with it consequences not only on the welfare and quality of life of the population, but especially on the coming generations. The combination of such a densely packed population divided along cultural-religious lines, who find it difficult to coexist in common spaces, could increase tensions and conflicts, examples of which have already become apparent in several high profile cases [Beit Shemesh, Modiin, Jerusalem].

Within the Jewish population of Israel, religiosity has turned into a demographic characterization. Groups which define and separate themselves according to their level of religiosity [Haredi, religious, traditional, secular] have a very different fertility rate. There is a positive connection between level of religiosity and rate of fertility, in which fertility becomes the central defining element separating each population sector. Within the Jewish population, the more religious a sector is, the higher their fertility rate is. In the Arab sectors, which have traditionally seen high fertility rates, these rates are falling across all the sectors [Muslim, Christian, Druse].

Within the Jewish population, the more religious a particular sector is, the more they display intermarrying within their own sector only. In a society built around the institution of the family, the level of interaction, marriage, and social contact with other sectors of the population [of a different level of religiosity] is very low. Even within a shared geographical space, groups of same-level religiosity live apart and do not share public spaces.

In response to the report, the Industry, Trade and Labor Ministry says it is working to increase employment rates among the ultra-Orthodox and minorities and has made this issue one of its top priorities. Stating the obvious, Industry, Trade and Labor Minister Shalom Simhon (Independence) says, “If the current employment rates of these sectors do not significantly change in the coming decades, the overall employment participation rate in Israel is expected to plummet.”

Minister Simhon added that such a scenario would damage Israel’s gross national product and lower the standard of living for the country’s entire population.
In summation, the Israeli population is becoming more religious, and its workforce participation is thus also decreasing as currently, the majority of ultra-Orthodox do not work. Religious sectors of the population are increasingly only marrying and associating within their religious group [of the same level of religiosity] and contact between groups is becoming more uncommon. The sector with the highest growth rate [the Haredim] has the lowest workforce participation [due to higher age dependency ratio, as well as ideological non-participation in the workforce]. The sector with the lowest population growth rate – the secular – has the highest workforce participation. Workforce participation amongst Haredi men is expected to decrease dramatically over the next 20 years.

Bottom line: Unless there is a political sea-change which sees a steady growth in the number of Haredi men and Arab women joining the workforce, the shrinking secular middle class will be increasingly burdened with the financial cost of supporting more and more people who do not contribute to the Israeli economy. Simultaneously, while it may be unreasonable to expect the Haredi sector to decrease its fertility rate, what is reasonable to expect [as we are all sharing this country and we all need to live in a functioning state] is that Haredi children are taught the basic core curriculum which will allow them to become active members of the workforce. This is a major political challenge, and is likely to occur only though dialogue with the ultra-Orthodox sector, in conjunction with changes to Israel’s political system. As things stand now, the secular middle class is carrying a heavy burden, and as this report shows, is slated to continue carrying this steadily increasing burden for the foreseeable future. This then begs the question: Will they agree to this state of affairs? Will they try change it? Can they change it? There are a lot of political possibilities and pitfalls here.

By the way, here’s a link to a story about Israel in 50 years time.