Shoresh Handbook 2026 Warns of Deepening Socio-Economic Threats to Israel
A new Shoresh Institution report warns that declining productivity, budgetary misallocations, and an education crisis threaten Israel's socio-economic future ahead of the 2026 elections.
Ahead of the Knesset elections, Prof. Dan Ben-David, president of the Shoresh Institution for Socio-Economic Research, has published the "Shoresh Handbook 2026: Israel's Socio-Economic Threat." The report highlights a series of long-term trends stemming from shifts in national priorities over the past fifty years, warning that the combination of declining productivity, growth-inhibiting resource allocation, an education crisis, and a brain drain could jeopardize Israel's viability as a developed nation.
Productivity Decline and the G7 Gap
A central finding of the report concerns Israel's relative standing in total factor productivity. In 1954, Israel's productivity was 27% below the G7 average. Within two decades, Israel closed the gap and even surpassed the average, reaching 9% above it in 1975. However, the trend has since reversed, and by 2023, Israel's productivity stood 15% below the G7 average.
Labor productivity, measured by GDP per hours worked, has also regressed. According to the report, Israel outperformed all G7 nations in 1972, but by 2024 it lagged behind six of the seven countries. The gap reached 34% compared to Germany and 30% compared to the United States.
Budgetary Priorities and Sectoral Disparities
The report also addresses the distribution of public resources, rejecting the claim that defense spending has undermined civilian investments. Its findings show that Israel's civilian expenditure has historically matched or exceeded the OECD average. Instead, the report points to a shift in budgetary priorities.
According to the data presented, benefits, tax breaks, and subsidies for the Haredi community totaled 37.5 billion shekels in 2024. This is significantly higher than the state's combined budgets for hospitals, universities, and colleges, which totaled approximately 26.7 billion shekels.
The gap between these sums stands at roughly 10.8 billion shekels. The report notes that this amount could have funded the establishment and operation of eight additional public hospitals or ten research universities.
A Divided Economy and Dependence on a Narrow Base
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The high-tech sector, employing about 10% of the workforce, boasts productivity 22% above the OECD average.
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In the remaining 90% of the economy, labor productivity is 24% below the OECD average.
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Excellence hubs rely on an exceptionally narrow segment: technological workers, physicians, and senior academics comprise just 3% of the population.
Education Crisis and Demographic Shifts
The report warns that demographic changes are already manifesting in the education system, signaling future workforce challenges. By 2026, roughly 48% of first-graders belong to sectors characterized by low employment and income rates: 25% Haredi and 23% Arab. Furthermore, PISA 2025 results show that 81% of OECD countries outperformed Israeli state-education students.
Brain Drain and Negative Migration
The share of Israeli physicians working in OECD countries, excluding the United States, nearly tripled from 0.7% in 2000 to 1.9% in 2023. In 2024, 35,993 native-born Israelis left the country, compared to 13,820 who returned, reflecting a negative migration gap of roughly 160% more departures than arrivals.
Four Steps to Reverse the Trend
In light of these findings, Prof. Ben-David outlines the "Israel 2.0" program, urging the incoming government to adopt four measures: a mandatory core curriculum for all students, a realignment of budgetary priorities away from sectoral allocations, governance reform to strengthen checks and balances, and the enactment of a constitution.
