ISSEI KATO / REUTERS reducing them for a period of time to less than full employment.” Another area where Margalit points out a need for a major improvement is the education system. “We have to improve the system so that we don’t have to rely on people having to catch up later in life,” he says. “If the education system is better, then people have better skills and are better equipped to deal with a changing labor market.” A changing labor market doesn’t just present challenges to people’s careers. Prof. Eytan Sheshinski, who recently joined the Center as a senior researcher, explains that pensions are being dramatically affected by market dynamics and all the more so as a result of the increase in longevity. Sheshinski, who headed the commission that created the eponymous Sheshinski laws on taxation of natural resources, is also an expert on pension design and has worked with several foreign governments. “Longevity is a paradox,” Sheshinski says. “On the one hand, life expectancy rises, but on the other, the pensions blanket is too short.” Sheshinksi’s current IDI research looks at how to “balance” the system to protect weaker groups in society. Pensions today, unlike in the past, depend on accumulation, he explains and that puts people with a lower participation rate in the labor market and those who find themselves having to change jobs frequently at a disadvantage. Women for example tend to work less and retire earlier than men so they have lower accumulation. Furthermore, longevity increases disproportionately for the rich because life is extended today by costly medicinal means and therefore people at a higher end of the income scale are living longer. So with a uniform conversion rate (the factor by which the sum of accumulation is converted into an annual retirement benefit based on life expectancy and mortality rates), the poor are subsidizing the rich who get a pension for more years. As for the problem of transitional unemployment, Sheshinski says that with an increase in the mobility of labor, the government should fill the gap by maintaining worker’s pension rights for a limited period of time when they are between jobs. He supports use of interest and capital gains, but not principal, from the sovereign wealth fund created by the Sheshinski laws on excess profits on natural resources, to beef up pensions. Humanoid robots work side by side with employees in the assembly line at a factory near Tokyo, Japan. Will robots leave humans without jobs in the future? Perhaps the hottest topic today, when it comes to the debate on the labor market, is automation and the threat that machines and artificial intelligence will take over our jobs. “Automation is part of the reality that workers face,” says Margalit. “On the one hand, some jobs are becoming redundant, but, on the other, automation is creating new jobs. The jobs robots will do in the future will require people to operate them. There will be new jobs of which we are currently unaware.” Sheshinski says there are more pressing concerns than robots. “I don’t believe in the theory of a fixed amount of jobs available, people can move into service industries, education, etc.,” he says. “The economy is resilient. I don’t believe robots will replace people. Robots will do some jobs and people will find other forms of employment. “I am a great believer in the flexibility of the economy.” DEMOCRACY 3.0 APRIL <strong>2017</strong> 15
HOW IS IT GOING? A SNAPSHOT OF ISRAELI DEMOCRACY FROM THE 2016 ISRAELI DEMOCRACY INDEX HOW DO ISRAELIS FEEL ABOUT ISRAEL? of respondents see Israel’s overall situation HOW DOES ISRAEL RANK AGAINST OTHER DEMOCRACIES? International Indicator The Israel Democracy Institute 4 Pinsker Street. POB 4702. Jerusalem Tel. +972-2-530-0888 | en.idi.org.il info@idi.org.il |
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