Developing Human Capital: An Opportunity for Competition under New Conditions

A report by the Ministry of Industry Trade and Labor highlights the vulnerability of unskilled workers in the Israeli labor market. Developing Human Capital will allow Israeli Arabs, in particular, to change the conditions under which they compete in the labor market.

A report by the Ministry of Industry, Trade and Labor describes the vulnerability of unskilled workers in the Israeli labor market: a high rate of turnover among workers with low educational background and skills, lower wages due to competition with foreign workers, and limited potential for promotion which lessens their ability to improve economic wellbeing over time.

The proportion of unskilled workers in the Israeli Arab sector is almost double that of the Jewish sector. Even though the Israeli Arab sector represents one fifth of the Israeli population, it accounts for only 8% of the total Israeli GDP.

Acquiring relevant Human Capital is a means to increase the wages of unskilled workers. The report shows that becoming a skilled worker results, on average, in a 2000 NIS increase in the worker's starting salary and enables a better stepping stone into the labor market.

In addition, acquiring relevant Human Capital will allow Israeli Arabs to change the conditions under which they compete in the labor market:

  • Acquiring Human Capital will create a situation in which instead of competing with foreign workers over low salary positions, unskilled workers will be able to compete over more lucrative jobs.

  • Acquiring Human Capital represents an opportunity to utilize the comparative advantage in the Israeli Arab sector. Educated Arab workers could bridge the gap with the Jewish sector by using their knowledge of both cultures and languages. Leveraging this advantage may result in new business initiatives, markets and products.

Sources

Ruth Sinai, Ha'aretz, 12/11/2007; full article (Hebrew).

The Sikkuy Report 2006