·     The Bank of Israel Research Department, together with the Central Bureau of Statistics, is holding a conference today on “Skills of Employees in Israel”

·     Research conducted both at the Bank of Israel Research Department and outside the Department will be presented at the conference, a lecture will be delivered by Prof. Eric Hanushek of Stanford University, and a panel discussion is to be held with managers from the business sector and policy makers from the public sector discussing policy issues.


The Bank of Israel Research Department conference, held as a joint initiative with the Central Bureau of Statistics, is taking place today in Jerusalem.  The conference deals with the skills of workers and with ways to improve them, and examines the effect of skills on employment, wages, inequality and economic growth.


The Governor of the Bank of Israel opened the conference and presented Israel’s primary weaknesses in workers’ skills and scholastic achievements in the education system as reflected in standardized international tests, despite the fact that the number of Israeli workers’ years of schooling is not low compared to the other advanced economies.  The Governor focused on the link between workers’ skills and productivity in the economy, and emphasized that scholastic achievements in Israel are particularly low among students from low socioeconomic standing. 


The Governor noted the link between the low level of expenditure per pupil in Israel and scholastic achievement and workers’ skills, particularly among workers from economically weaker population groups, and emphasized that it is important that the expansion of resources allocated to education and worker training be accompanied by professional research to examine the effectiveness of the various programs.


“Maximizing the potential human capital of the entire population in Israel is the key to increasing productivity and growth in the long term in a way that will include all citizens.  We must act to increase the level of cognitive skills among Israeli workers so that they will be able to integrate into a changing labor market.  These skills are low by international comparison, despite the relative wealth of workers with higher education.


“In order to achieve these objectives, it is necessary to increase effective investment in the education system, with an emphasis on expanding affirmative action in all aspects of the system and all schooling levels.  In particular, it is necessary to provide broad technological education at all schooling levels, and investment in the professional training of the adult population must be expanded to provide them with the required skills.


“In order to efficiently gain the most out of public expenditure on education, it is important that education and professional training programs be accompanied by an array of research to measure their effectiveness, similar to practice around the world.”


Chief Statistician, Prof. Danny Pfefferman, conveyed greetings to the conference, and emphasized the importance of the skills survey conducted by the Central Bureau of Statistics in conjunction with the OECD to measure cognitive skills in Israel in gaining a better understanding of the issues connected with the development and distribution of skills, and devising a more informed economic policy based on this information.  “A year ago, we launched the skills survey at a festive event at the Knesset.  Today, a year later, we are happy to see that there is an increasing number of studies being conducted based on this survey, and that government and research bodies have discovered the potential of this survey.  The survey was conducted in three waves, and we are now working to turn it into a regular survey and to monitor its data over time in order to improve skills in the population and conduct international comparisons.  In order to build the survey, we had to build a complex computer system including complex sampling software, and bolster population groups.  I congratulate the Governor, Dr. Karnit Flug, on the astute use of the data gathered, and on promoting awareness of the survey’s findings.”


Michal Tzuk, the Supervisor of Employment at the Ministry of Labor, Social Affairs, and Social Services, presented issues concerning the training of workers for the labor market of the future, and the activity of government ministries intended to improve workers’ abilities to cope with the changing economic environment in Israel and around the world.  She presented the characteristics of the labor force in Israel, and emphasized the need to strengthen workers’ skills and adapt them to current and future demand for employment.


Sophie Artzav and Haim Portnoy of the Central Bureau of Statistics presented the skills survey, the measuring methods used in conducting it, and the main findings concerning Israel.  They then presented a statistical analysis of the link in Israel between reading books and skills.  The findings are that reading a greater number of books is consistent with higher literacy and numeracy skills, even after adjusting for the effects of variables such as education, parental education, age and sector.


A study by Leah Ahdut of the Ruppin Academic Center and Van Leer Jerusalem Institute and Noam Zussman and Inbal Ma’ayan of the Bank of Israel examined the return on schooling at universities compared with colleges in terms of wages and skills in the labor market, based on the skills survey and administrative data files.  The study found that skills are an important factor in explaining the wage variance of graduates of the institutes of higher learning, and that after controlling for psychometric scores there is no difference in return, in terms of skills, between the graduates of the different types of institutions of higher education.  But it was found that the return, in terms of wages, of university graduates is about 10 percent higher than that of college graduates, after controlling for skills.


Moshe Hazan of Tel Aviv University, and Shay Tsur of the Bank of Israel presented​ a study on economic growth and labor productivity in Israel—the function of workers’ skills.  In this study, they found that when comparing human capital in Israel with other advanced economies based on skills, Israel’s disadvantage is much larger than if the measurement is based on years of schooling.  This gap in human capital explains more than half of the gap in labor productivity between Israel and the other advanced economies—both directly and because lower human capital is also a cause of reduced investment in physical capital.


Yuval Mazar of the Bank of Israel examined the difference in the cognitive skills of educated workers in the private and public sectors and the link between them and the return on skills, in OECD countries.  He found that the return on skills in terms of wages as measured in the PIAAC survey is higher among educated workers in the private sector than in the public sector.  This return is reflected among educated men with a tendency of highly skilled workers to work in the private sector.


Michal Alfasi-Henley of the Ministry of Labor, Social Affairs and Social Services. Presented an analysis of achievements on skills tests and the characteristics of employment by health, based on an examination of the PIAAC survey’s findings in Israel.  The study found that poor health has a strong negative effect on skills and on employment, and that the negative effect on employment is robust  to controls of other characteristics of the worker such as education, age, gender and nationality.


The morning session was concluded with a study by Elad de-Malach and Noam Zussman of the Bank of Israel and Analia Shlosser of Tel Aviv University, who examined the effect of professional vs. theoretical education in the Arab sector on high school dropout rates, entitlement to a matriculation certificate, acceptance to academic studies, employment and wages.  The study found that opening up the possibility of professional schooling did not improve any of the result variables among boys.  Among girls, it did contribute to reduced dropout rates, but not to increased matriculation, improved employment rates or improved wages once the girls grew into adults.


At the afternoon session, Prof. Eric Hanushek of Stanford University will present an analysis of the link between the quality of education, workers’ skills and economic growth.  He will emphasize the main role that education and workers’ skills play in the economic growth of countries, and that the proper policy, including additional resources and the astute use of those resources can contribute much to a robust and inclusive increase of GDP and productivity in various countries.  Prof. Hanushek will emphasize the strong yield on investment in education, leading to the need to avoid negatively impacting education budgets even during periods of budgetary restraint.


The conference will conclude with a panel that will begin with a short lecture by the Director General of the Ministry of Finance, Mr. Shai Babad.  The panel, moderated by the Head of the Macroeconomics and Policy Division in the Research Department, Dr. Adi Brender, will feature Michal Dan-Harel, CEO of Manpower Israel; Mr. Boaz Hirsh, Director General of the Employment Service; and Mr. Haim Russo, an industrialist and member of the Council of the Innovation Authority, and will discuss the main questions concerning the development of workers’ skills in Israel.