Losing our best minds: Startup Nation sees brain drain, fall in productivity

Israel is losing some of its brightest and best minds as tech professionals, engineers and academics leave its shores, thus depriving the country of fuel for its economy, a policy report warns.

The figures presented in “Leaving the Promised Land — A look at Israel’s emigration challenge” — released by the Shoresh Institution for Socioeconomic Research, an independent nonpartisan center headed by Prof. Dan Ben-David —  are bleak.

For every Israeli with an academic degree who returned to Israel in 2014, 2.6 Israeli academics emigrated. By 2017, this figure had risen to 4.5 emigrants per returnee.

The number of Israeli physicians practicing in OECD countries other than Israel was 9.8% of all physicians in Israel in 2006. This share rose to 14% by 2016.

Illustrative photo of an Israeli hospital. (Miriam Alster/Flash90)

And while Israel’s population increased by 24% between the decades 1995-2005 and 2006-2016, the number of Israelis obtaining US citizenship or green cards increased by 32%.

Israel has a population of 9 million, but according to the report, an “exceptionally small” number of people, fewer than 130,000, are instrumental in keeping its economy and healthcare system forging ahead, and the nation is thus dependent on them.

These select few pay the most taxes and make up the staff of the hospitals and the workforce in the tech industry. Indeed, those in the top two income deciles accounted for 92% of revenue from income taxes. The tech sector accounts for 40% of the nation’s exports, yet it employs just 2.7% of its workforce.

In a global economy, the flow of people in and out of Israel is “like oxygen for us. It’s vital for the knowledge spillovers to reach Israel,” said Ben-David in a phone interview.

“The problem is when it becomes one-sided and the flow is primarily outward. When 4.5 academics leave Israel for each one that has returned then this becomes a problem. When we stopped building universities at the level of the Technion, Hebrew University and Tel Aviv University, though our population has more than doubled since the 1970s, then we have a problem. When the stock of Israeli doctors abroad continues to increase while the stock of foreign-born doctors in Israel continues to decline, then this no longer a full two-way street.”

Prof. Dan Ben-David. (Courtesy)

The total number of research faculty members in Israel’s eight universities (regardless of research fields) is just 0.1% of the population age 25 and up; the total number of physicians is just 0.6% of the population age 25 and up, with the majority of these physicians graduating from Israel’s universities.

“The fragile size of this group means that emigration by a critical mass out of the total — even if only numbering several tens of thousands — could generate catastrophic consequences for the entire country,” he said.

“I don’t think we are there, but the direction is the problem and the scale is also the problem.”

Israel basically has two economies, with one shouldering the burden of the other, posited Ben-David. Because this burden is becoming too heavy, higher-income, higher educated Israelis choose to leave, he further argued.

“There is the high-tech Israel, the university Israel, the medical sector Israel, the Startup Nation Israel,” said Ben-David. “But there is another Israel, and that other Israel is receiving neither the tools nor the conditions to work in a modern economy. And that other Israel is huge. Not only is it big, but its share of the total is growing — so it is a huge weight on the shoulders of those who are basically maintaining the entire country.”

Keeping a much larger share of the highest-producing members of the population would put the entire economy on a much steeper growth path, the report said.

Illustrative image of a car engine; Just like an engine, Israel must rely on all of the cylinders in its population to go forward, Shoresh report says. (AntonMatveev; iStock by Getty Images)

“Think of an engine,” Ben-David said. “You have all of the cylinders of an engine, but we are running on fewer and fewer cylinders, and we need the other people in the game here. You can’t have an entire country resting on the shoulders of fewer and fewer people, relative to the population.”

Israel’s productivity is falling further behind top developed countries, leading to greater wage disparity and poverty. Many, mainly Israel’s ultra-Orthodox and Arab populations, have been sidelined by the high-tech boom; the cost of living is rising faster in Israel than in other developed countries; the roads are clogged; the education system is failing its students by not teaching most of them at the levels needed for a tech-based economy; and hospitals are groaning under an acute shortage of beds and doctors.

Illustrative view of central Tel Aviv, home to many of Israel’s tech and finance companies, August 29, 2016. (Miriam Alster/Flash90)

The Shoresh study shows that household prices in Israel are 28% higher than in the US and 66% higher than the OECD average. It takes 20.5 years of work to buy a home in Tel Aviv, and 18.5 years of work in Jerusalem, making them among the five most expensive cities in the developed world; Tel Aviv ranks second, just under London, where 22.8 work-years are needed to buy a house, and Jerusalem fifth, just under Seoul, South Korea, where 20 work-years are needed to buy a home.

Not all the emigration is about wages and jobs (for doctors and academics) or about being closer to investors and end markets (for the tech executives), said Ben-David. The issues at hand are also “lifestyle issues.”

If the hospitals and roads are crowded, and “if the schools are crummy and you don’t see any kind of hope in sight, because one government after another for the past 40 years is basically not changing the national priorities of Israel, then many people reach their own conclusions about this,” said Ben-David.

“I don’t agree with them. I think they should stay and fight and change things. But it doesn’t matter what I say. People vote with their feet.”

Illustrative image of movers and relocation: For every Israeli with an academic degree who returned to Israel in 2014, 2.6 Israeli academics emigrated. By 2017, this figure had risen to 4.5 emigrants per returnee, according to the Shoresh Institution for Socioeconomic Research. (XiXinXing; iStock by Getty Images)

The plethora of political parties have left governments at the mercy of smaller parties and strong, vocal lobby groups. To appease these groups, state funds in recent years have been spent on cutting home prices and raising salaries for police and prison officers, among other programs, as well as on defense. The interests of many of these groups’ constituencies do not necessarily match those of the nation as a whole. It is essential, Ben-David said, to refocus on prioritizing investment in education and transportation.

Both Israel’s left-wing and right-wing blocs have seen a falling share of the vote in the past 40-some years, said Ben-David, while the share of the ultra-Orthodox, or Haredim, has risen.

“Their share of the votes has tripled since the 1970s and they have become the kingmakers,” he said. “They have been in nearly every single government since 1977 and they were never in any government before that. As a result, they have had a huge influence on the direction of the money — where it is going or not going… They want it for their own needs and their own needs are not the national needs.”

Haredi children in Jerusalem. (David Vaaknin/Flash90)

The Haredim have long opposed providing their children with the core curriculum of studies, including math and English, preferring them to focus on religious texts. Israeli governments, much to the detriment of society, have pandered to their will, Ben-David said.

“Basically, we end up supporting schools that don’t give a core curriculum, among other things,” he said.

At the moment one fifth of Israeli children are Haredim who are not taught the core curriculum, he said. And while the Haredim make up only 7% of the country’s adults, they account for 19% of the children.

“That has huge ramifications,” he said. “In two generations they are going to be half the children in Israel — so if they don’t study what they need, who are the doctors going to be? Where is the high tech coming from and who are going to be the professors when we need them?”

“Government after government has caved in to the Haredi demand” of depriving their children of the core curriculum studies, he said. “We are the only nation in the developed world that deprives its children, that allows people to deprive their children of a core curriculum – in every other developed country it is a law not to deprive a child of what they need to grow up.”

Illustrative image of Israeli schoolchildren leaving school and celebrating the first day of summer vacation on June 30 2009. (Yossi Zamir/Flash90)

Moreover, on a nationwide level he insisted that there needs to be a “complete overhaul of the education system in terms of what we teach, the level taught, who are the teachers, how we choose and how we train them, how we compensate them, how the system is run.”

Investment in public transportation and hospitals is also needed, he added. A better public transportation system will allow residents in the periphery of the country to  get to their jobs in the center without having to drive to work on clogged roads. Meanwhile, the high occupancy rates at Israeli hospitals, the highest in the OECD, results in the highest mortality rates from infectious diseases in the developed world.

“It is an issue of national priorities,” he said.

The money has not gone to education, hospitals and transport, he added, “and these are things that keep people away.”