Israel Drops Below OECD Average in Proportion of Academics

Jerusalem, Israel — Article continues...

The Key Findings of the Report

The Chief Economist's Headquarters at the Ministry of Finance has issued a new periodic review showing that Israel has fallen below the OECD average in the share of young adults holding academic degrees. Among 25-34-year-olds, the proportion with tertiary education stands at 47 percent in 2024, compared with the higher average across the organization of developed nations.

Israel's Dramatic Fall from 3rd to 20th in Two Decades

In 2000, Israel ranked third among OECD countries for tertiary education attainment in this age group. By 2024 the country has slipped to 20th place. The share of 25-34-year-olds with academic degrees rose only from 41 percent to 47 percent over that period, a modest increase that failed to keep pace with broader trends.

South Korea surged from 35 percent to 69 percent tertiary attainment among 25-34-year-olds between 2000 and 2024, while Ireland climbed from 30 percent to 63 percent and Canada advanced from 40 percent to 66 percent. Japan and several Nordic countries also recorded gains exceeding 20 percentage points, overtaking Israel through sustained public investment in universities and targeted STEM programs. These trajectories contrast sharply with Israel's modest six-point rise, which left the country trailing peers that prioritized scalable higher-education infrastructure.

In absolute terms, Israel's 41-to-47 percent increase added roughly 120,000 additional degree holders in the age cohort over two decades. Meanwhile the OECD average climbed from approximately 35 percent to 55 percent, reflecting an expansion that incorporated millions more graduates across member states. This divergence has compressed Israel's historical lead in human-capital rankings tracked annually by the organization.

Comparison with Other OECD Countries That Grew Faster

While Israel's attainment rate increased moderately, many other OECD members recorded substantially larger gains. These faster expansions in higher education participation have pushed Israel below the OECD average for the first time, eroding a long-standing advantage in human capital metrics tracked by the organization. For instance, Estonia and Slovenia each posted gains above 22 percentage points through aggressive public funding and vocational-to-degree pathways, data that underscore how Israel's incremental approach left it outpaced in the latest OECD Education at a Glance indicators.

What This Means for Israel's Economy and Tech Sector

The findings carry direct implications for the economy centered in Tel Aviv and the broader high-tech corridor stretching toward Haifa. A slower rise in academic attainment among young adults risks narrowing the pipeline of skilled workers that has supported innovation clusters and export-oriented industries across the country.

The hi-tech sector, which employs about 10 percent of the workforce yet generates over 20 percent of GDP and more than half of exports, faces an immediate constraint as the annual supply of new STEM graduates grows more slowly than demand from cyber, AI, biotech and fintech firms clustered in Tel Aviv, Haifa and Beersheba. Companies report extended recruitment cycles and rising salaries that threaten margins, particularly in cybersecurity and artificial-intelligence startups that rely on advanced degrees from institutions such as Tel Aviv University and the Technion.

Continued slippage risks eroding Israel's "Startup Nation" reputation, which has attracted billions in venture capital and multinational R&D centers. Without accelerated growth in qualified graduates, foreign investors may shift resources to faster-expanding talent pools in Ireland or South Korea, reducing the multiplier effects that currently support ancillary industries across the coastal plain and northern development zones.

Ministry of Finance's Perspective and Potential Policy Implications

Analysts at the Chief Economist's Headquarters at the Ministry of Finance frame the decline as evidence that Israel is rapidly losing its historical human capital advantage. The report points to the need for closer examination of how resources allocated to higher education in Jerusalem and regional institutions can better align with labor market demands in coming years. Internal modeling cited in the review estimates that closing the gap to the OECD average would require adding at least 15,000 new annual degree completions by 2030, primarily in engineering and computer science fields.

The Connection to Israel's Hi-Tech Economy and Human Capital Needs

Israel's technology sector, which draws heavily on graduates from universities in Jerusalem, Tel Aviv and Beersheba, depends on a steady supply of advanced degree holders. The review underscores that continued leadership in this field requires maintaining or expanding the proportion of young adults completing tertiary studies at rates competitive with leading OECD peers. Recent Central Bureau of Statistics figures show that hi-tech job openings outnumber qualified applicants by a ratio of nearly 1.8 to 1 in key subsectors, amplifying the urgency of reversing the attainment slowdown.

Education System Challenges

The modest growth in attainment rates highlights structural pressures within Israel's education pathways from secondary schools through higher education institutions. Policymakers in Jerusalem will need to assess how enrollment, completion and quality factors have contributed to the relative slowdown observed since 2000.

Low secular-education participation rates in the Haredi sector and persistent attainment gaps in Arab communities limit the overall pipeline feeding universities in Jerusalem and regional colleges. Military service of two to three years further delays entry into degree programs, compressing the window for completion before labor-market entry and contributing to higher dropout rates in demanding STEM tracks that begin in secondary schools.

Overcrowding at flagship institutions and uneven quality across newer colleges have compounded these pressures, prompting the Council for Higher Education to review accreditation standards and enrollment caps. These structural bottlenecks have slowed the translation of secondary-school cohorts into completed tertiary credentials at the pace required to match OECD benchmarks.

Regional Context Among Mediterranean OECD Members

As one of the Mediterranean members of the OECD, Israel now sits below the organization's average while other nations in the region have advanced their attainment figures. This shift alters Israel's standing relative to neighboring economies that also participate in the same comparative data sets maintained by the OECD. Portugal and Greece, for example, each added more than 18 percentage points since 2000 through EU-backed expansion programs, placing them ahead of Israel in the current rankings and highlighting the competitive pressure within the Mediterranean cohort.

What Needs to Change for Israel to Recover Its Position

Reversing the slide will require targeted measures to accelerate growth in the share of 25-34-year-olds completing academic degrees. The Chief Economist's Headquarters review suggests that coordinated efforts across the Ministry of Finance and education authorities could help restore Israel's earlier ranking among OECD countries and safeguard the human capital base essential to its economy.

Targeted increases in university funding and an expanded budget for the Council for Higher Education could support additional STEM seats and improved completion incentives. Parallel efforts to integrate Haredi and Arab populations through dedicated preparatory tracks and regional colleges in peripheral areas would broaden the applicant pool while aligning curricula with labor-market needs identified by the Ministry of Finance.

Strengthening high-school STEM instruction, offering financial stipends tied to timely degree completion, and creating tax incentives for employers who sponsor advanced study are among the measures under discussion. Coordinated action between the Ministry of Finance and education authorities could restore upward momentum in attainment rates and safeguard the skilled workforce that underpins Israel's export-driven growth.