“A democracy is tested on its attitudes towards its minorities and we all know that if you are not wealthy, fair-skinned and educated, your chances of succeeding in life are reduced.” This statement could have been made by almost any pundit in a Western democracy. In this case, the pundit is Ms. Orit Zuaretz, a member of the Kadima political party in Israel. Zuaretz made her comment in the wake of a telling report from the OECD (Organization for Economic Cooperation and Development), the group of the world’s most economically developed nations.

Israel expects to be inducted into the Organization of Economic Cooperation and Development (OECD) in the near future, but a few impediments stand in its way. From www.haaretz.com: “Israel will be the poorest of the 30 nations comprising the Organization of Economic Cooperation and Development, assuming it joins this year, says the OECD’s report on Israel – and it has several suggestions, some revolutionary, for how to amend that situation. The report states that 19.9 percent of Israel’s population is categorized as “poor,” which is more than in Mexico (18.4 percent), Turkey (17.5 percent) or the U.S. (17.1 percent). The average poverty level for the OECD is just 10.9 percent, the paper states. Israel also has the highest rate of inequality, explains the OECD.

Israel’s average is also impacted negatively by the high proportion of poverty among the ultra-Orthodox haredim (60 percent) and Arabs (50 percent). Both sectors are characterized by a low proportion of working adults, relatively low salaries when they do work, and high birth rates, which lead to the statistic that a third of Israeli children are categorized as poor, compared with an average of 12 percent for the OECD. The report also states that 25 percent of Israel’s workers receive low pay, which is about the same proportion as in the other OECD member nations. But among haredim and Arabs, a majority of adults receive low pay.”

There is no doubt that the gap between the “haves” and the “have-nots” in Israel is huge, second only to the United States by many accounts. This is particularly disturbing when one considers the socialist background of Israel’s 1948 leaders, when the country was supported by the Soviet Union as well as America. Significantly more than 50 percent of Israeli families earn less than the “average” family of the same size. Consequently, the middle class has been reduced dramatically, similar to the American experience. But there are other, demographic reasons which threaten Israel’s economy and well-being in the next generation.

While about 20 percent of Israelis live below the poverty line, the two main groups comprising about three-quarters of the impoverished are somewhat self-selected. (In Israel, the poverty line is defined by this formula: when family income is less than half of the income of an average Israeli family of the same size.) The haredi segment of the population is about 10 percent while the Arab segment is about 20 percent. A large proportion of haredi men are not part of the work force and depend on government stipends given to yeshiva students and “scholars” as well as family welfare payments. Similarly, a large proportion of Arab women are not in the work force due to societal norms, while not all the men can find legitimate jobs. The remainder of Israel’s poor are new immigrants, the elderly, single mothers, and multi-generation welfare families.

How will Israel deal with this problem? Part of the solution depends on the ability of the government to withstand pressure from the haredi and Arab segments, both of which agitate for higher welfare payments for children, especially in larger families. (Haredi families average eight children, Arab families average four children and Beduin families average seven children.) In the past, child allowances increased after the third child and again after the sixth child, but this policy was ended several years ago when the current prime minister, Bibi Netanyahu, was finance minister. But since Israel’s coalition governments almost always include religious parties, whose constituents have large families, there is constant pressure to increase child allowances.

On the brighter side: for haredi men, serving in the Israel Defense Forces has become more popular in the last few years. Special combat units of ultra-Orthodox men, in which special kosher food is served and there are no female instructors or officers, are attracting more recruits, as are “intelligence” units. The stigma against serving in the IDF is diminishing. Recently, a reserve unit for haredi veterans was established, enabling these soldiers to serve for several weeks each year, as typical Israeli veterans do.

The problem with nonworking Arab women is even more difficult, due to the widespread lack of female employment among Muslim Arabs. Arab wives who work outside of the home challenge women’s traditional role in the household and Arab society as a whole. (There is a very small Christian Arab population in Israel, with birthrate, level of education, and workforce participation similar to Jewish Israelis.) However, civilian National Service, in place of military service which is only available to Beduin Arabs, is becoming more acceptable among the young Arab population. In addition, more young Arab men and women are attending college. Both of these developments lead to more integration into Israeli society and fewer children.

While there is a large “black economy” in haredi (and Arab) sectors, there is a growing recognition for the need to work in conventional, taxpaying vocations. In America, the ultra-Orthodox men combine learning with holding down jobs. Among the haredim in Israel, there is a growing realization that their population explosion cannot be supported by the government for much longer. When children mature and want to start their own families, the price of even an entry level apartment is out of reach, while family life is suffering due to the pressure of inadequate housing. There isn’t enough room in the existing haredi neighborhoods for more people, so new communities need to be built, since the rigid haredi lifestyle conflicts with the habits of nearly all other Israelis. Despite that, the haredim have taken over sections of many Israeli cities.

The National Planning Council has authorized construction of a new haredi city in the Negev Desert, not far from Arad and Beersheba, as well as one in the Galilee, next to Nazareth. These planned cities include room for service industries which can employ the local women. While both the projected communities have met with criticism from environmental organizations and local leaders in the nearby cities, these segregated enclaves will probably be built, as have many in the past. In my vicinity, the new community of El Ad was built in 1996 and is already halfway to its projected size of 65,000 residents. These communities are highly subsidized, but there seems to be no other solution for the burgeoning haredi population. Similar initiatives may have to be put forward for the Arab population.

Simultaneous with the construction of new towns is the increased investment in mass transportation, whose lack of sufficient infrastructure is a drag on worker productivity. The need is to connect the periphery (north and south) to Israel’s economic hub in the center of the country, which will increase the available work force and strengthen the Galilee and Israel’s southern region. Increasing the Jewish population of both regions is one of Israel’s top priorities, while integrating more Israeli Arabs into the workforce is also expected to improve Israel’s economy and internal security.

Joining the OECD is a big deal for Israel, which will benefit from a closer association with the world’s leading economies. For a country that gained independence only 62 years ago, it will be a great accomplishment. But it won’t signal the end of Israel’s economic problems. That will only come if main-stream Israelis are educated to be less discriminatory, if the haredim capitalize on the exceptional mental capacity of their Toraheducated youth, if the Arab Israelis want to fully cooperate in the building of a strong, viable State of Israel, and finally, if Israel produces political leadership with the vision and ability to make sweeping changes in Israeli society.

Stephen Kramer resided and worked in the Atlantic City area until 1991, when he moved to Israel with his wife, Michal Langweiler, and two sons. He can be reached at Sjk1@jhu.edu.