Startup Nation? Israel's construction industry struggles to innovate

• Published date: 21 March 2024
• Author: OFER PETERSBURG
• Publication title: Jerusalem Post, The: Web Edition Articles (Israel)

According to the report, high accessibility to cheap and unskilled labor, alongside inadequate government investment in construction technologies, are the main factors hindering innovation and competitiveness in the construction sector in Israel

The data presenting the capital stock per worker, i.e., the level of investment in machinery and technology relative to the number of workers in the sector, is revealed to be low compared internationally and is described by the Bank of Israel as an "indication of lagging innovation and competitiveness in the sector". Furthermore, the report states that the main barriers to innovation adoption are limited knowledge, the need for coordination among various factors, and unsuitable regulation.

The report also highlights that productivity in the Israeli construction sector is very low compared to its counterparts in OECD countries. In international comparison, this data is 54% lower than the average, while overall labor productivity is only 11% lower. In this aspect, Israel ranks second to last in labor quality among OECD countries, with Belgium excelling in this regard.

However, the Bank of Israel notes that this method is criticized due to various measurement methods worldwide, so they prefer to examine the "capital stock per worker", i.e., all investments in machinery and equipment per employee, which also left us far behind.

Additionally, the skills of workers in Israel are low compared to their OECD counterparts, with Israel relying more on unskilled workers. This is attributed to the high availability of cheap non-Israeli workers, which reduces the incentive to innovate and exposes companies to unstable employment.

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