Tel Aviv — Israel has basked in international praise the last few years for its technological prowess and for sailing through the global financial crisis with few blows to the economy.
But the picture that emerged from a conference on Tuesday on Arab Israeli integration into the mainstream economy is that the future prosperity of the so-called “start-up nation” is at risk if the policymakers and the private sector don’t take drastic measures to reverse decades-old marginalization of one-fifth of the country’s population.
“We have to understand this is a macro-economic problem. It’s not the problem of a small minority,” said Eran Yashiv, a Tel Aviv University economics professor who recently published a study on the chronic underemployment of Arabs in Israel’s economy.
The failure of Israel to effectively integrate Arabs into the work force “is unprecedented among developed economies,” Yashiv told the conference.
The employment problem is most acute among Arab women, where the labor force participation rate was just 22 percent in 2011, compared to slightly more than 50 percent among Israeli Jews.
Among Arab men, the rate was 62 percent, but the overwhelming majority work in labor-intensive blue-collar jobs that force them to start leaving the workforce for good in their 40s. In addition, most Arab college graduates are unable to find jobs suited to what they studied in college — a challenge that is especially acute.
That’s contributed to a situation in which a disproportionately impoverished population of Arab Israelis is not sharing in the success of the broader Israeli economy.
“We live in two separate states in the same country — the gaps are huge,” said Alean Al-Krenawi, president of Achva Academic College, which is located on the border between central Israel and the Negev. “Arabs and Israelis don’t know each other. … If we are training [Arab] engineers at the Technion, how much of a chance do they have to integrate into the workforce and make a contribution?”
Part of the problem lies with pushing the private companies to open their doors to Arab candidates. The government in recent years has put a placed special focus on encouraging high-tech companies hire Arab programmers for their research and development.
Those inside and outside the high-tech industry say that hiring too often depends on connections formed in the army. At the conference, sponsored by the Prime Minister’s Office and held at Tel Aviv University, Economics Minister Naftali Bennett encouraged high-tech executives to look past prejudices and seek out Arab employees.
Despite a government campaign over the last two years aimed at having high-tech companies hire more Arabs, only 2 percent of employees in the tech sector are Arab. Even though several hundred Israelis of Arab descent have been hired, the tech sector more or less remains closed, said Aiman Saif, director of economic policy for the Arab sector in the Prime Minister’s Office.
“It can’t be that only 2 percent of the employees are from the Arab population,” Saif said in an interview. “What we are saying is that human-resources managers are not aware of the potential in the Arab population. We need to explain to them, ‘Guys, there is a quality sector, and take them into consideration.’”
Both Saif and Minister Bennett said that Israel’s government will need to consider affirmative action measures to boost employment. Bennett said although he is queasy about government intervention, he said it’s necessary because of a “malfunction” in the labor markets.
Integration of Arab citizens of Israel into the mainstream economy has been cited by the Organization for Economic Cooperation and Development as a necessity for the economy to keep growing long term. Underrepresentation of Arabs is chronic problem in the government, where only 8.5 percent of the employees are Arab, and in government-owned companies as well.
The Israeli government has made economic integration a national priority, and Saif oversees a multi-year plan that’s dispersing about $1.2 billion on public transportation, microfinance, job training and career counseling. It has also pledged to subsidize 25 percent of the salaries of Arab professionals hired by Jewish companies for two years. Broadly, the government wants to create 170,000 new jobs for Arab Israelis by 2020 on top of 130,000 expected to be generated by natural growth of the economy.
Michael Sarel, a chief economist at the Israeli Finance Ministry, painted the economic future for Israel in stark terms: even in an optimistic scenario in which there is a high degree of workforce integration (what he called the “optimistic scenario”), social gaps between Arabs and Jews are projected to widen, albeit modestly, over the next 50 years.
If there is minimal integration, however, inequality in Israel will grow so fast that Israel will be come the country in the world with the largest social gaps. Sarel also predicted that government subsidies will increase so much that Israel’s national debt will more than double over the next five decades as a portion of GDP.
The obstacles to integration are many, and formidable. They range from improving elementary and secondary public school education in Arab municipalities to boosting the number of Arabs attending universities in Israel.
Arab students at universities require additional preparatory courses to fill out core curricula before they start classes. Their language skills are often not strong enough. And they also require an extra layer of social support to ease the transition from Arab towns to Israel’s main cities, said Daoud Bashuti, a Technion University mathematics professor who said that the percentage of Arab students at Israel’s MIT is 20 percent, up from 10 percent a decade ago, and that the dropout rate has been cut by nearly 75 percent.
“There is potential and there is a critical mass of students,” he said. “The problem is job placement. They don’t know how to apply for jobs.”
Once in the job market, Arabs need assistance in preparing resumes and even in help strengthening Hebrew-language conversational skills, said Jihad Awad, who oversees El Fanar, an employment center in the Galilee financed by the government and the Joint Distribution Committee.
On the sidelines of the conference were several of the 2 percent of Arab Israeli engineers employed in Israeli high-tech companies. They said that Arab youths see the success of Israeli start-up entrepreneurs and have the same aspiration. But there’s a gap in confidence and access to investments.
“If Jews think that the sky is the limit, Arabs always see the ceiling,” said Assad Khamaisee, a director of systems at Mellanox Technologies. “When you get a person who has an idea to conquer the world, they always run into financing problems.”
The Arab techies, however, said they were encouraged by the conference and the push toward integration, saying “better late than never.”