##s on employment, output and the standard of living. while those sectors with low levels of employment are expected to grow as a share of the population, the working age population is expected to decline as a share of the total population. if there are no changes in employment patterns, these demographic trends will reduce the annual growth rate by about 1. 3 percent, every year. this is a strategic threat for the israeli economy and for israeli society – one that we must not ignore. even if labor force participation increases, it is vital that we create the conditions required for workers to be absorbed in industries typified by a high level of human capital as well. otherwise, employment growth will be able to make only a limited contribution to gdp growth, a reduction in poverty and an increase in the standard of living. the government has recognized the importance of integrating these population groups into the labor force and, in 2010, it adopted detailed employment targets to which the economy is supposed to converge in 2020. the target rates set for the arab population in 2020 – 41 percent employment for women and 78 percent for men – are ambitious but possible. at the same time, the rate of progress toward the goals thus far is not sufficient, and much more effort is required in order to meet them on time. the government made many important decisions that delineate a policy intended to help in achieving these goals. it is very important to continue implementing this policy, which is supposed to give the appropriate weight to the relevant issues in future budget priorities. among others, these include raising the level of education and skills relevant to the labor market, expanded early childhood care solutions, improved transit accessibility between places of residence and employment centers, methods for removing cultural obstacles to participation in the labor force, encouraging small businesses in the arab sector in various ways, encouraging the integration of workers from the arab sector who have the appropriate talents in industries typified by low rates from this population group, and combating discrimination. the arab population in israel contains immense untapped potential from the standpoint of the israeli economy ’ s growth capability. beyond the economic potential, the issue also contains highly significant social potential. the correct policy, and its correct implementation, will bear fruit both from the standpoint of the arab sector, increasing its integration in israeli society and improving its economic situation, and from the standpoint of the general population and the economy as a whole. our ability to continue existing as a society that is both multi - faceted and socially cohesive

##ilizing institutions ( the bank of israel and the ministry of finance ) ; improve the coordination and cooperation between the financial regulatory authorities and the stabilizers in analyzing evaluating, developing and operating tools and methods to prevent and reduce systemic risks ; issue warnings when a systemic risk could become a material risk ; make recommendations of measures to prevent or reduce systemic risks that are identified ; and track the actions taken as a result of the warnings and the implementation of the recommendations ( slide 15 ). it is proposed that the staff work for the committee be done by the financial stability division that was recently established in the bank of israel research department, with the aim of acting to promote financial stability which, according to the new bank of israel law, is one of the bank ’ s goals. a stable financial environment, and a financial system in which the public places its trust, are essential for sustainable growth and a continued increase in the standard of living. i am convinced that completing the steps that are currently being taken, including the establishment of the committee as i have outlined, will contribute to the economy ’ s ability to withstand shocks which, by nature, will come. we have the privilege of taking these steps during a period of relative calm and stability, and it is therefore important that we complete them soon. bis central bankers ’ speeches