The OECD has issued a list of labor, education, and competition reforms key to sustain improvements in living standards of each of its member countries.
One of the major issues tackled by the OECD in the report for Israel is the socioeconomic gaps, mainly between Haredim and Arabs and the rest of the population. The main solution proposed by the OECD is the complete removal of subsidies for yeshiva students and conditioning childcare support on the employment of a child’s father as well as the mother.
This latter proposal was meant to be enacted by the previous government but was delayed by the Supreme Court and was dropped during the coalition crisis that led to the fall of the government. Subsidies for yeshiva students have been expanded by the current government despite the protests by Ministry of Finance officials, who are now backed by OECD economists.
On this matter, the OECD proposes to increase the provision of accredited child-care in Arab municipalities, where there is currently no access to such child-care, and to increase the education budgets in the Arab communities according to their socio-economic status. In addition, the OECD proposes re-introducing the negative income tax bonus for second working parents. In this way, it will be possible to encourage the entry of both mothers and fathers into the labor market in Arab and Haredi society respectively.
The OECD also recommends opening Israel to freer imports and removing tariffs and other import barriers while adapting to global regulations. This is because the exposure of the Israeli economy to imports is still very low compared with other OECD countries, and higher competitiveness vis-a-vis the world could lead to the adoption of new and more efficient production technologies.
In the field of energy, the OECD praises the 2018 reform that introduced private electricity producers into a competitive environment and a more efficient sale of electricity to consumers. The OECD recommends taking advantage of the benefits it brings and bringing “high-resolution pricing” over time that charges more when demand is high and less when demand is low. In addition, it recommends imposing a “carbon tax” on energy production and industrial activity to stress the environmental costs of such production.
Published by Globes, Israel business news – en.globes.co.il – on October 3, 2023.
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