Alarms Are Ringing in Israel (1)

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November 16, 2025

Israeli citizens have spent the past two years living with frightening siren alarms warning them, at all hours, to seek shelter from the 26,000 rockets fired from Gaza, Lebanon, Iran, and Yemen. These alarms have become part of daily life. So much so, many Israelis, trusting in the Iron Dome and similar defense systems, have recently begun ignoring the alarms and continued with their normal routines, thinking “nothing will happen to us anyway.”

The focus of this article is not on these alarms. The alarm I am talking about signals a far greater danger than rockets. However, because its effects are not immediately felt, and for other reasons, very few people hear this alarm. Even fewer take precautions, thinking “nothing will happen to us anyway.”

What am I referring to? The alarms sounded by academics warning of dangerous trends in Israel’s economy.

The alarms I am talking about are not from civil defense, but from academics conducting economic research. Unfortunately, there is no “Iron Dome” being developed against this threat. And those who need to take precautions dismiss such warnings with arguments like, “The economy keeps getting stronger; the shekel keeps gaining strength, Israeli entrepreneurs sell their ideas to companies like Google for tens of billions of dollars, Israeli scientists win Nobel prizes. How could things be bad?”

It’s worth noting that achievements such as Nobel Prizes and companies sold for billions of dollars are the fruits of past investments in education and carry no guarantees for the future. What matters for the future are today’s education, socio-economic policies, and investments. For the economy to be strong in the future, those responsible for taking precautions—namely, the country’s leaders—must first accept the seriousness of the situation. But for the same officials who have been in power for years, accepting the problem would mean admitting failure, which they are reluctant to do. Moreover, political leaders often prefer investments that win immediate voter approval over those whose benefits will only be realized by future generations. “After me, the deluge” is a sentiment attributed not only to Louis XV but to many leaders as well.

Dan Ben-David, a professor of economics at Tel Aviv University and founder of the Shoresh Institution for Socioeconomic Research, describes Shoresh as a research institution that provides politicians and the public with reliable, evidence-based analyses of the country’s socio-economic problems. In June 2025, he prepared a report titled “Israel’s Looming Socioeconomic Threat.” The entire report can be accessed at this link.

In summary, Dan Ben-David highlights these points in his report:

One of the main problems of the Israeli economy is that a limited number of qualified workers bear almost the entire burden of the country. The study explains that about 20% of the workforce carries 90% of the country’s income tax burden, while more than half the population earns so little that they don’t pay any income tax at all.

In short, a small number of talented and educated adults shoulder the lion’s share of the burden for both the economy and public services. With the rapidly growing Haredi population (doubling every 25 years), the demographic shift is expected to result in half of the working-age population being ultra-Orthodox in the future. This will put severe pressure on labor force participation and tax revenues.

In Israel’s high-tech sector, about 10% of the total workforce is employed, yet this sector accounts for more than 30% of the GDP and half of the country’s exports. In other words, Israel’s most important economic engine and the people responsible for the country’s health care and R&D—a major national asset—make up only 3% of the population, or about 287,000 people.

So, 10% of the total workforce has been able to keep Israel’s economy at the level of developed countries. Kobi Richter, a retired pilot and successful entrepreneur who has founded several high-tech companies, was criticized last year for saying, “We’re responsible for both the economy and security,” but the figures seem to back him up.

How sustainable is this? Wouldn’t long-term socioeconomic planning be needed to maintain or even increase this figure as much as possible? Unfortunately, that’s not how things work in Israel.

In another study from November 2024, Ben-David investigated the number of people who immigrated to versus those who left Israel from the announcement of the “Justice Reform” in January 2023 until the date of the study (which includes a year of war since October 7). The result: the net difference between departures and arrivals was 41,000 people. On a radio program today, I heard that 80,000 Israelis have left the country in the past two years.

Who are the ones leaving? If you follow the Israeli media and assume that those who leave have the means and ability to do so, it’s reasonable to think that many of them belong to the very 10% mentioned earlier: doctors, academics, engineers, entrepreneurs in global demand—in short, part of that critical 10%.

Politicians downplay these numbers; some even go so far as to call them traitors or not “real Jews.” They say, “If you don’t like the country, leave. We’re enough for ourselves.” Independent researcher Ben-David, however, warns, “If a critical portion of this 10% decides to leave, Israel will enter a downward spiral.” Don’t be fooled into thinking, “Education in Israel is very good. Let them leave, we’ll train new ones.”

In the same study, Ben-David compared Israeli education with OECD countries. He says, “Over the past twenty years, Israel’s average educational achievement in core subjects (mathematics, science, reading) is below almost every OECD country. If Haredi boys who do not take these subjects joined the exams, Israel’s average would be even lower. Secular schools perform below 57% of OECD countries; religious (non-Haredi) schools are below 80%. Israeli Arabs’ achievement levels are below many third-world countries. Just as Israel’s current success relied on past investments, the point we reach tomorrow will be a direct result of today’s education.”

Ben-David attributes this to several reasons: In regions outside the major cities—where 50% of school-aged children live—education is on par with underdeveloped countries. The reason is a lack of investment in these areas. The government frequently complains “elites run the country,” but those in power for years have not invested in these regions as a remedy.

The alarm bells don’t end there: while it’s estimated that 13% of Israel’s adult population is Haredi, among children aged 0-4, that figure is 25.7%. On the one hand, those who form the backbone of the economy are shrinking due to emigration, demographics, and insufficient education. On the other hand, 50% who do not pay taxes might become 70-80% by the 2050s. This is a frightening hint at Israel’s economic future.