Education and unemployment in Israel, 1976-1994 - Reducing the anomaly

In industrialized economies, unemployment rates are inversely related to ed ucation levels. Data from 1963 to 1994 show that Israel is an anomaly exhib iting an inverted U-shaped relationship. Workers with 9-12 years of schooli ng consistently experienced a higher level of unemployment than the schooli ng groups with less and more education. Multivariate regression analysis of data for Israel during the 1976-1994 period indicates that this inverted U -shaped relationship is moderating. The national unemployment rate and a ti me trend variable had positive and significant effects tending to strengthe n the inverted U-shaped relationship. However an increase in the unemployme nt rate within the 0-8 education group relative to the 9-12 group and a dec line in the labour force participation rate of the 0-8 group overrode these factors, resulting in a flattening of the inverse relationship. The major factor responsible for the anomaly in the education-unemployment relationsh ip in Israel appears to be government policies intended to protect low-educ ated immigrants with large families. A reduction in government support over recent years seems to have increased the exposure of the least educated to labour market forces.