Israel's Schools and Brain Drain Strain Its Economy

Around half of Israel’s children—including Arab Israelis, Haredim and pupils in geographic and social peripheries—are receiving a subpar education, according to new research warning that the country’s standing as an advanced economy is at risk. Prof. Dan Ben-David, president and founder of the independent Shoresh Institution for Socioeconomic Research, says these groups are among the population’s fastest-growing. That matters, he argues, because they will eventually make up a majority of adults.

“When they become half of the adults, and eventually a majority, they will only be able to maintain a third-world economy, which won’t be able to support first-world healthcare or welfare, or the first-world defense necessary for Israel’s physical survival,” Ben-David said.

It’s a stark warning. The numbers back it up.

The Education Gap

Israel’s average scores in math, science and reading sat near the bottom of the OECD in the most recent PISA exam, in 2025, as they have for the past two decades. The 2025 results were Israel’s worst, Ben-David said. He added that the national average would have been lower still if Haredi boys, who tend not to study those core subjects, had taken part in the testing.

The demographic shift shows up clearly in Jerusalem’s classrooms. From 1988 to 2025, the share of primary-school pupils in the city’s secular Jewish education stream fell from 33% to 9%. In 2025, Arabs made up 37% of Jerusalem’s primary-school pupils and Haredim 41%.

Ben-David said the Haredi fertility rate is three times that of nearly all other population groups in Israel. It runs more than 80% higher than the rate among national religious Jews and more than double the Muslim rate, which has fallen rapidly over two decades. Haredim accounted for 6% of the population aged 50 to 54 in 2023, while their grandchildren made up 26% of toddlers.

The sector’s rapid growth means future workforce skills “are being shaped – and constrained – decades before these children enter the labor market,” he said. Employment among Haredi men fell from more than 80% in 1979, the earliest year for which data exists, to about 60% in recent years. Ben-David blamed that decline on government incentives not to work. More Haredim are pursuing higher education, he said, but few can overcome the lack of core education in childhood.

Where the Money Goes

In 2024, the government spent NIS 37.5 billion ($12.2 billion) on subsidies, benefits and discounts for the ultra-Orthodox community, whose members include large numbers who neither work nor serve in the IDF, Ben-David said. That was NIS 10.83 billion ($3.5 billion) more than the state invested in hospitals and higher education combined that year.

Israel’s labor productivity in 2024 ranked below all G7 countries except Japan. It was 34 percent behind Germany, 30% behind the US, 28% behind France and 20% behind Italy. Even though 2024 saw mass reserve-duty call-ups during the war in Gaza, labor productivity didn’t significantly change from its 2022 figure.

Ben-David rejected the argument that unusually high defense spending explains the shortfall in civilian investment. “The problem was never a lack of resources, but a diversion of public funds from national priorities to sectoral and personal ones by the nation’s leaders,” he said. Until the Great Recession, from late 2007 to mid-2009, Israel’s civilian expenditures exceeded or equaled the OECD average. Decades of public investment in infrastructure let Israel close its productivity gap and surpass G7 countries by the mid-1970s, but that pattern has reversed, he said, citing underinvestment in physical infrastructure, healthcare, higher education and human capital.

A Narrow Base and a Draining Workforce

The technology sector, representing 10% of the workforce, is 22% more productive than the OECD average. The other 90% of the workforce averages 24% less. Ben-David found that 20% of workers fund 93% of income-tax revenue, while half earn too little to pay income tax. Arab and Haredi citizens, particularly Haredim, receive more than they contribute, he said.

Departures add to the pressure. The government’s judicial overhaul effort began in January 2023, and Ben-David said multifront wars sparked by the Hamas invasion and massacre on October 7 that year followed. Native-born emigrants from Israel, many of them highly educated professionals, exceeded returnees by 160% in 2026. From 2009 to 2022, annual emigrants exceeded returnees by 43%, except in the COVID pandemic year of 2020.

A Proposed Fix

Ben-David recommended merging the four current education streams—public secular, religious, Arab and independent Haredi schools, which receive different levels of public support—into one system with a largely uniform curriculum and room for parental preferences. He also called for shifting government funding from sectoral to national priorities and enforcing full public transparency.

Why This Matters: An economy that can’t educate half its children can’t pay for the hospitals, social safety net or security that its citizens, Jewish and Arab alike, depend on. The research frames the risk as one of long-term capacity: fewer skilled workers, a narrow tax base and a growing share of the population shut out of the productive economy. For Arab Israelis, who the data show are receiving a subpar education, the findings point to a systemic gap in opportunity, not individual failure. For policymakers, the choice Ben-David lays out is stark. Either funding follows national priorities, or the resources to sustain the country, and any future diplomatic or security strategy, will keep shrinking.