“ strained ” and there are already focal points of very extreme congestion. thus, the number of hospital beds per 1, 000 people is relatively low, urgent care occupancy is especially high, and the share of doctors below age 55 is nearly 50 percent – the highest among advanced economies. without marked investments in the physical infrastructure and in training doctors and nurses, the service level will deteriorate rapidly, particularly in view of the expected aging of the population. regarding education level, the results of years of disregard are already seen – both in terms of israeli students ’ poor results on international standardized tests, and in the large gaps between students from families at various income levels. for example, in an index examining the share of students from low socioeconomic conditions who achieve high scores on these tests, we are nearly at the bottom of the list. this index reflects the fact that affirmative action is not succeeding in improving the chances of a student from a weak economic background reaching a high attainment level. crowded classes and a small number of computers relative to the number of children ( a computer for every … fourth student ) are only indicators that public expenditure per child is low, and the outcomes are in line with that. thus it is important to note in the past two years there has been a notable increase in government expenditure on education services, including a marked increase in teachers ’ wage, which will certainly be expressed over time as well in improvement in level of teachers. a positive example of the result of investment is the area of public transport. in the availability of public transportation services, which deteriorated until a decade ago, a marked improvement has been seen over the past decade due to significant government investment and the opening of the industry to competition, and together with the reduction in prices of public transportation that was recently set in law, we expect an increase in the use of public transportation, which will contribute to the public welfare, and to an improvement in the quality of the environment. in terms of inequality in the economy, the analysis presented in the report indicates that it is not a matter of fate, and that it can be reduced through increased use in policy tools that have been proven effective. it is worth noting the decline that occurred in gross income inequality ( economic inequality ), which today is not high in international comparison, against the background of a marked increase in labor force participation, which increased the share of families with two wage earners, and thus reduced the inequality in work hours per household. a decline in inequality in

short term challenges, and the economy ’ s reasonable situation relative to the global environment, permit an increased effort to act to reduce the gap, in a range of issues, between us and advanced economies, and to set the economic infrastructure for the future. it is important that the government formulate an order of priorities in a manner that will allow it to focus on dealing over the long term with fundamental problems of israel ’ s economy and society. how? the economic policy for achieving the long term targets – inclusive and sustainable growth – acts through provision of public services at an adequate level, support of the economy ’ s growth drivers, operation of policy instruments to reduce gaps, reforms to increase efficiency in the use of infrastructures and in public services, and increased competition in industries in which it is insufficient. what are the long - term challenges facing policy makers? a forward - looking view indicates that there are processes, some of them global and some domestic, serving as a headwind to growth – based on analysis by international institutions, the global growth rate is expected to be more moderate in coming years relative to the years prior to the global financial crisis, and the growth rate of world trade is expected to moderate even more, due to the weakening of the link between global growth and the development of world trade. here in israel, the combination of demographic changes ( an increase in the share of populations whose employment rates are relatively low, and a slowdown in the increase of the prime working age population ) alongside the exhaustion of the contribution from an increase in education, as reflected in average number of years of schooling, will act to slow the growth rate in the future. thus, active policy to offset these trends is required. against the background of these future trends, it is important to examine recent years ’ trends in labor productivity, quality of public services and income gaps, in order to outline the directions in which policy should act in order to deal with the challenges. labor productivity – measured as output per work hour : we are not closing the gap relative to advanced economies, and this is correct as well in the period since the global crisis. this gap, between output per worker in various industries in israel and output per worker in those industries in advanced economies, is focused at industries producing primarily for the domestic market, and they are domestic in their characteristics, and therefore are not exposed to competition from abroad. it is important to note that these are industries that are producing the main component of gdp, and also employ a significant majority