Israeli central bank warns of Arab, ultra-Orthodox unemployment's negative impact on economy

Israel's central bank chief Karnit Flug warned Tuesday that the growing number of Arabs and Jewish ultra-Orthodox in the country could have a "negative impact" on economic growth unless they will be better integrated into the labor market.

Flug said that low employment rates, especially among Arab women and ultra-Orthodox men, are impeding the growth of the Israeli economy.

In ultra-Orthodox families, who make up about 10 percent of Israel's eight million population, men often favor religious studies over work, and relies on state stipends and the wife's low income. Arabs, who make up about 20 percent of the Israeli population, complain of discrimination and lack of job chances in the Jewish-dominated labor market.

Ultra-Orthodox and Arabs, who are the fastest growing communities in Israel, compose most of the population that lives below the poverty line.

"Within 50 years," Flug told a conference of the Israel Economic Association in Tel Aviv, "the share of the ultra-Orthodox population will increase from 10 percent to around 27 percent." Arab population is expected to grow slightly. Meanwhile, the share of non-ultra-Orthodox Jews, who compose Israel's main working force, will decline from 70 percent to around 50, said Flug.

Flug warned that if there won't be a drastic move to raise employment rates among ultra-Orthodox and Arabs, "the combined demographic changes are expected to reduce future annual growth by around 0.6 percentage points."

In contrast, "if the process that has begun, of an increase in the participation rates of these groups, will persist, the negative impact on growth can be reduced by about a third, to 0.4 percentage points per year," she added. Enditem