The Pyramid of Growth in Israel’s Arab society

The labor income per individual in Israel’s Arab society has shown an impressive increase over the last decade (2012-2022), yet it still represents only 44% of the corresponding figure in the non-Haredi Jewish population.  This disparity in labor income per individual is an indication of the socio-economic inequality between these two population groups, while also pointing to the currently untapped economic potential of the Arab society within the Israeli economy.

In order to establish a measurement and reference framework which would help identifying the strengths and weaknesses underlying the gaps in labor income per individual, The Center for Economic Policy of The Israeli Arab Society at Aaron Institute developed the Pyramid of Growth in the Arab Society. This pyramid provides a tiered overview of the social and economic components which are necessary for reducing the gaps in the average individual income between Israel’s Arab and non-Haredi Jewish societies. Thus, the pyramid incorporates the various dimensions of the gap into an integrative presentation, forming the basis for discussing economic strategy and for prioritizing the areas of intervention and reforms required to promote growth and accelerate the integration of the Arab society in the Israeli economy, bringing it in line with the non-Haredi Jewish society.

Examining the 2022 pyramid reveals gaps between the Arab and non-Haredi Jewish societies across all components. Ongoing gaps are evident in economic metrics such as human capital level, public investment level, employment rate and quality, while the most severe disparities are evident in the social metrics – primarily crime, resilience of local authorities, and social cohesion. Examination of trends over time and comparison of the 2022 growth pyramid to that of 2012 shows significant advancement in components such as investment in human capital, digitization, and public capital, as well as reduction of the gaps in these areas. At the same time, there has been a marked downturn in the social metrics, particularly in regard to crime and social cohesion. This finding underscores the need for ongoing investment, not just in the economic aspects but also in strengthening social components as a precondition for realization of the growth potential.