Bank of Israel chief: Inequality, poverty are key long-term challenges

BOSTON (JTA) — Poverty and income inequality are among the greatest long-term challenges facing the Israeli economy, the head of Israel’s central bank said.

These problems are fueled by low employment rates among Israel’s fast-growing haredi Orthodox and Arab communities, the Bank of Israel’s governor, Stanley Fischer, said Thursday night at the Harvard Business School.

Fischer said the employment situation, particularly among ultra-Orthodox Jews, is economically unsustainable.

“I say to ultra-Orthodox groups…this will end,” Fischer said. “The question is whether it’s going to end by your doing something in cooperation with the rest of the population or in social conflict. But it cannot go on.”

Fischer spoke to around 700 people at Harvard Business School at the opening event of the two-day Israel conference at Harvard. The student-organized conference is focused on entrepreneurship and innovation in Israel.

Dennis Ross, who played key roles in U.S. Middle East policy under President Clinton and President George H.W. Bush, was scheduled to give the conference’s keynote address Friday.

The sold-out conference comes less than two months after students at Harvard’s Kennedy School made national news by organizing a conference called “Israel/Palestine and the One-State Solution,” which critics saw as an attempt to delegitimize the Jewish state.

Fischer spoke alongside Harvard historian Niall Ferguson and Dan Senor, author of “Startup Nation” and a foreign policy adviser to presumptive Republican presidential nominee Mitt Romney.

Fischer, who immigrated to Israel from the U.S. to take his current job in 2005, said that the Israeli economy is doing very well in the short term but faces structural problems in the long term. In the short term, he said, Israel has a robust economy, has brought its budget under control and generally kept the inflation rate in a reasonable range.

But in the long term, there are dangers. He noted that among advanced countries, Mexico, the U.S. and Israel have the highest levels of income inequality. The rate of poverty in Israel has grown from 18 percent in 1997 to 24 percent in 2010.

Fischer noted that large families and those with less education tend to be poorer. But the “stunning” statistic, he said, is that 60 percent of haredi Orthodox Jews and 57 percent of Arabs are poor, according to the Israeli definition of poverty.

Fischer said only 40 percent of haredi men and 20 percent of Arab women are employed.

“Their incomes are based as much on payments from the government and from charity as from what they earn in the labor market,” Fischer said. “Government allowances and charities have not kept pace with the growth in the economy.”