a direct result, overall welfare in the economy. furthermore, joining the labor supply has an impact on the next generation, including values, education, and more. there is further potential for increasing employment rates, among older workers. it is important to implement policy measures that support the ability of such workers to reach their full potential, and in this regard i again note the need to increase the retirement age. human capital should be increased, with an emphasis on education and professional training • improve the education system and the schooling infrastructure • furnish the skills that are critical to successful integration into the labor market, such as math, science, and english, to the ultra - orthodox population as well • reduce the high - school drop out rate, strengthen science and technology abilities, and improve hebrew language skills in schools in the arab sector • there is room to markedly expand the technological professional education. at the high school level, general scientific and technological content should be provided, which will allow a choice between a professional track and an academic track at a later stage, and to concentrate the professional education primarily on focused training after military service ( and not by placing students in specific tracks ). in the dynamic modern labor market, professional training in school is likely to be obsolete by the end of youths ’ military service. factors supporting growth and productivity should be dealt with : • infrastructure • improve the business environment and reduce regulation • competition – in those industries that are not exposed to domestic or foreign competition • promote reforms ( ports, electricity, and the energy and gas industry ) • improve and increase efficiency of public services systems – education, health ( with a view to the aging population ), welfare ( by improving employment tests that allow increased focus of support ) expand export industries and destinations. we have seen that in export industries, the need to compete vis - a - vis abroad leads to higher productivity. • new markets : israel ’ s exporting has gone a long way to gain access to new markets, and we should continue to work to expand the range, especially against the background of the low potential growth of our traditional export destinations. bis central bankers ’ speeches • new exporters : we should provide assistance to small / medium manufacturers to deal with difficulty of breaking into global markets, through already existing government mechanisms as well. • encourage r & d not only for high technology industries, but also for low and medium technology industries in which innovation can make the difference between success or failure, and to improve the ability to export and compete abroad. against

differences can be seen in the productivity level of different industries. in industries in which a large part of output is export oriented, and that are exposed to competition from abroad, there is a positive productivity gap – that is, their level of productivity is greater than the oecd average. in contrast, in industries that are oriented to the domestic market and are less exposed to competition from abroad, or to any competition, such as construction, electricity, water, and food, the level of productivity is lower than the oecd average. as such, i will focus on an attempt to answer the question of what has caused the output per hour of labor in israel to grow relatively slowly and to be lower in israel than in other advanced economies. i ’ ll present now a schematic diagram of the factors impacting on productivity and on gdp. gdp is affected first by factors of production – capital, human capital, and labor. these enter the production function – technology – and are affected as well by frictional factors, such as regulation, the business environment, etc. all these ultimately impact on output per hour of labor, which is the main factor in determining wages. likewise, each one of the components in the production function is likely to be affected by policy. thus, for example, the quantity of production factors available to the economy is impacted on by the level of investments, the labor input is impacted on by the government ’ s labor market policy and by the quality of education, and policy can also influence the production function itself – on the adoption of technology, and of course on the business cycle as well. capital stock per employee in israel is markedly lower than in advanced economies – and not only is there a gap in the stock of capital, but the gap is not closing because the rate of investment is lower than in advanced economies. the level of investment in infrastructures is also low, and in most years is around 2. 5 – 3 percent of gdp. extensive government investment in infrastructure is a complementary factor to investment by the business sector in productive capital. in a recent report, the international monetary fund found that investment in infrastructure makes a marked contribution to gdp growth. as such, the low level of investment adversely impacts labor productivity in israel. the relatively poor investment in infrastructure is also reflected in the poor level of quite a few infrastructures in israel, particularly in the areas of transport and shipping, and perhaps surprisingly, even the share of internet users in israel is low in comparison with other