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GROWTH, SUSTAINABILITY AND WELL-BEING INDICATORS ISRAEL 2000-2010 נייר אקולוגי Ministry of Environmental Protection www.environment.gov.il /english Growth, Sustainability and Well-Being Indicators Israel 2000-2010 Jerusalem, November 2012 Initiation and Guidance: Galit Cohen Writing and Editing: Tamar Makov-Israeli, Amit Yagur-Kroll Final Editing: Dr. Ohad Carny Production: Publications, Information and Internet Division An electronic version of this report is available on the website of the Ministry of Environmental Protection: www.environment.gov.il/english Ministry of Environmental Protection Cluster of Planning and Policy Growth, Sustainability and Well-Being Indicators Israel 2000-2010 Foreword by the Minister of Environmental Protection It is generally believed that economic growth, expressed as an increase in gross domestic product (GDP), is synonymous with improvement in standard of living. It is for this reason that politicians, economists and businesspeople have focused on increasing the GDP as a central goal. While economic growth surely contributes to an improvement in standard of living, the one dimensional drive to achieve it has often led to shortsighted and narrow-minded policy which has created social and environmental problems which are no less severe than those it prevented. We sometimes tend to forget that economic growth is not the end in and of itself but rather a means to improving human quality of life and well-being while assuring that such improvement will continue for future generations as well. The measurement of economic growth, therefore, cannot be disconnected from the way growth is achieved or from the measurement of its impacts. For example, the devastating forest fire which took place in Mount Carmel in 2010 led to a rise in GDP without giving expression to the concurrent loss of human lives, the deterioration in the well-being of the residents and the destruction of some 3,500 hectares of shrubland and forest. OECD forecasts anticipate a major erosion of natural environmental capital on a global scale by 2050, with the risk of irreversible changes. Overexploitation of natural resources, similarly to bank accounts, can leave us in overdraft – both on the global scale and in Israel itself. It is the responsibility of Israel’s leadership to understand the economic challenges which confront the state and to manage the country’s resources accordingly, based on a long term outlook and a review of a wide range of outcome indicators that go beyond GDP. In light of the current economic crisis, we have an opportunity to spearhead a change in perception and to advance renewed thinking on the way in which we measure economic success and management. The time has come to propose a new and wider economic model, which internalizes environmental and social aspects as well. The Ministry of Environmental Protection, in cooperation with the Bank of Israel, the Central Bureau of Statistics and other ministries, has formulated a preliminary series of complementary indicators which alongside the GDP will provide a comprehensive and more reliable picture for measuring well-being in Israel. We hope that when the future state budget is presented, a series of additional indicators dealing with the social distribution of the fruits of growth and its environmental impacts will be presented alongside the GDP and growth data. These data will provide decision makers with a fuller and more reliable picture which will assure optimal decisions on state budget priorities. With this publication, I am proud to present the path we have taken to develop these indicators and believe that they will assist decision makers to navigate the State of Israel toward a better and more sustainable future. MK Gilad Erdan Minister of Environmental Protection II Executive Summary Background Contemporary economic and environmental discourse shows a marked preoccupation with the need to find means for the measurement of growth, development and well-being, based on the principles of sustainable development. In recent years, there has been growing concern that standard statistical macro-economic indicators, such as the GDP, which has been used to assess well-being for years, do not provide an accurate picture of contemporary and future human living conditions. To name a few examples, the GDP does not include the costs of environmental damages and resource exploitation; it does not take into consideration unpaid work (such as domestic chores); nor does it reflect growing or shrinking socio-economic gaps or changes in the quality of the services supplied to citizens. The ongoing fiscal and economic crisis and the wave of social protests have reinforced this concern and have prompted extensive agreement that GDP data provide only a partial aspect of the wide range of factors which affect human quality of life. As a consequence, many alternative approaches to the measurement of well-being have been suggested, advocating a broader perspective, which would take into consideration a more extensive gamut of well-being and sustainability factors. For example, according to the Stiglitz-Sen-Fitoussi report, which surveyed methodologies for the measurement of economic performance and social development on behalf of the government of France, well-being and quality of life are affected by the population's economic resources (income), as well as by the non-economic aspects of human life (subjective emotions and living environment). On the other hand sustainability has to do with the question of whether current quality of life levels may be sustained in the long term. The sustainability of quality of life is dependent upon bequeathing the resources which are critical to human life (economic, natural, social and humanistic) to future generations. A recent OECD report, entitled “How’s Life? Measuring Well-Being”, notes that even in times of economic hardship, when the recovery of growth is crucial for the achievement of various well-being goals, such as the attainment of better jobs or of affordable housing, policy-making should be based first and foremost on people's needs, concerns and aspirations, as well as on the sustainability of society as a whole. The Framework In order to advance a well informed sustainable development policy in Israel, the Ministry of Environmental Protection (MoEP) has initiated the first step in a long-term process for the development of an annual set of indicators, reflecting the Israeli environmental-social-economic milieu over time and the relationships between the different domains. To this end, the MoEP approached the Israeli Central Bureau of Statistics with a request to formulate a preliminary set of indicators for the years 2000-2010, based, at this first stage, on the existing database. With the full cooperation of other government agencies, including the Bank of Israel, the Israeli Ministry of Finance, the Israeli Ministry of Health and the Israeli Ministry of Industry, Trade and Labor, as well as external experts hailing from the third sector and from academia, a preliminary set of III Growth, Sustainability and Well-Being Indicators Israel 2000-2010 indicators for sustainable development and well-being was developed, which is presented for the first time in the current report. The results of the indicator analysis, comments, recommendations and insights, which emerged from this year's extensive discussion on the subject and which are presented in the current report, will serve as the basis for continued work in years to come. Main Findings The set of environmental indicators demonstrates a trend of improvement in indicators reflecting pollution loads which are directly linked to the present state of public health (such as quality of drinking water or quality of air). These changes mainly stem from the introduction of new technologies and from government policy which emphasizes pollution reduction. In contrast, other indicators which reflect the potential for future growth and the preservation of well-being and environmental quality over time (such as investment and resource efficiency) show deterioration over the past decade, or alternately no marked change, even where improvement was much needed at the start. These findings suggest that current environmental activity is driven by a short-term outlook, which mainly takes into account factors affecting present-day public health, while overlooking the negative effects of ongoing environmental degradation on economic growth potential and the ability to maintain well-being over time. This trend goes against the rationale underlying the green growth economic doctrine, promoted by the OECD, which is based on environmental planning and investment, combined with wise resource use. This point is especially relevant for the State of Israel, which is more vulnerable to the adverse impacts of environmental deterioration due to its scarcity of natural resources such as land and water, its insular economy and its high rate of population growth. An analysis of the set of social indicators demonstrates a trend of improvement in health and personal security, an increase in the number of years of education, and a decrease in political involvement. These changes correspond with the economic growth, the rise in standard of living and the increasing demands which characterize an advanced labor market. In addition, data show that over the examined time period familial and social ties were tightened and rates of participation in volunteer work increased. While these findings suggest a rise in social cohesion, which favorably affects well-being, the professional literature also notes that the sense of social cohesion likewise rises in times of crisis, so that there may be varying interpretations for this finding. Similarly to the findings in the environmental domain, indicators reflecting the potential for future growth and well-being demonstrate a worsening trend between the years 2000-2010, whose impacts will become evident in following decades. For example, while the expenditure on education as a percentage of GDP is high in Israel relative to other developed countries, in terms of purchasing power the expenditure per student is lower than the OECD average. The governmental expenditure on health has also decreased over the past decade, while private expenditures on health (funded by households themselves) have risen. These findings suggest that from a social standpoint as well, Israeli policy lacks a long-term perspective which takes account of the negative impacts of the widening of social gaps and the decrease in the quality of human capital on Israel's potential for economic growth and prosperity. IV Economically, Israeli policy also demonstrates a somewhat narrow outlook. A review of the data suggests that while Israel’s economy has grown over the past decade, the fruits of its economic success were not evenly distributed among various population groups. Even though economic development indicators show a positive trend (higher GDP per person together with a handsome economic growth rate which is especially prominent in light of the recent global financial crisis, as well as increased participation in the civil workforce and an overall decrease in unemployment rates), indicators reflecting equality have deteriorated (rising income differences between quintiles, decrease in employees' share value out of the net national income, and increase in long-term unemployment). Since inequality and social gaps fundamentally affect present and future well-being and are recognized as sources of instability, it may be concluded that Israeli economic policy also lacks the long-term vision and planning necessary to advance sustainable economic development. In light of Israel's impressive economic growth and its acceptance into the global community of developed countries, more extensive investment in environmental and social domains and across the board improvements in indicators would have been expected. Just as the effects of decreased investment in education will only be manifested in a decade or two – in a decrease in the quality of human capital and a deepening of social gaps – so too inefficient utilization of natural resources and insufficient environmental investment will become evident not only in increased environmental burdens but in rising costs of living and growing inequalities. While the environmental and social services provided by the state serve all sectors of the population equally, their importance for weaker social strata is greater since these groups cannot privately finance such services. Therefore, it is imperative to adopt a comprehensive view and to examine ways in which Israel's relative economic power may be utilized to tackle social and environmental challenges on the basis of long-term plans which recognize the importance of minimizing present gaps, utilizing resources and preserving and developing Israel's human and environmental capital as a means of influencing present and future well-being. Recommendations and Proposed Outline for Future Policy Many factors affect well-being and its sustainability over time. Economic development is not an end in and of itself, but rather a means for the improvement of well-being. Therefore, during the formulation of an informed development policy, a wide array of indicators, including social and environmental ones in addition to the classic economic indicators, must be examined. The current set of indicators comprises the first Israeli attempt to develop indicators which will present policy-makers and the Israeli public with a more comprehensive picture of the links between growth, sustainability and well-being. Due to the interdisciplinary nature of the subject, the recommendation is to continue the present course of action, which is led by an inter-ministerial steering committee with representatives from the relevant ministries, the Central Bureau of Statistics and the Bank of Israel, in conjunction with a committee of external experts comprised of academic representatives and relevant non-governmental agencies. In addition, as is the case in other countries (such as the United Kingdom and Australia), it is recommended that ways should be found to increase public participation in the process of consolidating the indicators. V Growth, Sustainability and Well-Being Indicators Israel 2000-2010 With regard to the general structure of the set of indicators and their distribution into central subjects, the professional literature suggests two alternative approaches. The first is rooted in the perception of sustainability which is based on the three pillars of environment, economy and society. The second is based on the measurement of happiness and includes a more detailed distribution into major aspects such as environment, income, housing, employment, society, education, health, government, community, leisure and general life satisfaction. While the current set of indicators is based on the sustainability approach, it is recommended that the compatibility of the happiness approach should be examined in light of the emphasis on well-being. Additional work is also required on the indicators themselves. While the consolidation and publication of the current set of indicators is an important and welcome effort, it is based almost exclusively on existing indicators and therefore leaves many subjects without adequate coverage. Therefore, this set should not be seen as a recommendation on the final composition, but rather as the first step down the lengthy road toward the development of indicators. While it may be possible to develop new and more fitting indicators based on routinely collected data, missing or insufficient data may hamper the work in some areas. For example, although the annual social survey of the Central Bureau of Statistics collects data regarding the length of the commute to work, the range of possible answers (which includes only three categories: up to fifteen minutes, fifteen to thirty minutes or half an hour and upwards) limits the potential for analysis and the drawing of conclusions on the subject. In order to overcome such limitations, it is advisable to conduct an in-depth examination of the means and methods in which data is currently collected, to identify the gaps, to examine the most effective ways to complete the data and, on this basis, to formulate detailed and practical recommendations in each area. It is further recommended that prioritizing the implementation of the recommendations will be based on the importance of the indicator, while taking its economic cost into consideration. While the current study and the indicators formulated in its framework are not flawless, they do testify to the strides made toward a broader outlook, which no longer views economic growth as the be all and end all, but rather as a means of improving the well-being of Israel’s residents over time. In light of the fact that what is not measured is not managed, the importance of the present study largely lies in setting the process into motion and recognizing its significance. The indicators must be further developed in years to come and must be published annually and regularly. Furthermore, ways of integrating the indicators as a work tool among decision makers in Israel should be found. VI Environmental, Social and Economic Indicators Main Findings Table 1: Environmental Indicators Indicators Trend Analysis Financial Investment Financial Investment in Environmental Protection Expenditure on environmental protection decreased over the decade and was lower than the average for OECD countries and developing countries (as Israel was defined during the examined decade), although environmental loads in Israel are relatively high (small area, limited resources, growing population and a rise in living standards). Transportation Infrastructure Investment in infrastructures for private vehicles was higher than investment in public transport infrastructures. This reflects a governmental preference for private vehicles. Utilization of Natural Resources Biological Diversity There is no adequate indicator which provides a comprehensive overview of the state of biodiversity in Israel. However, a deterioration in the number of endangered species over time was evident and the rates were high when compared globally. Land Resources Despite a shortage in lands, a trend of consistent reduction was seen in the proportion of residential apartments in saturated construction, out of the total of residential construction. This contradicts the declared governmental policy which favors saturated construction over single family homes and attests to the inefficient utilization of land resources, which may impede a reduction in apartment prices in the future. There is no sufficient monitoring of the utilization of lands, the conversion of open lands, etc. It is imperative to develop and regularly publish more sophisticated indicators on this subject, especially due to the fact that land constitutes Israel's most limited resource. Kilometers Travelled Kilometers travelled in practice by private vehicles steadily increased in contrast to the total kilometers travelled by buses, which remained constant. Position indicators show that nearly half of Israel’s residents are dissatisfied with the commute time. Indicators are lacking on the scope of use, accessibility and level of satisfaction from public transportation, and such indicators should be developed and published regularly. Energy Energy consumption per GDP unit decreased moderately, although this decrease was not significant in absolute terms. This trend may be largely attributed to the shutting down of traditional industries and the shift to hi-tech industries (which are characterized by lower energy consumption and a high GDP), as well as to the introduction of newer, more energetically efficient technologies. Israel’s energy intensity was lower than the average in developed countries, but the trend of improvement in this area was more moderate in Israel in comparison to the average improvement in these countries. This also holds true for improvements in the intensity of greenhouse gas emissions. Legend Positive Trend No Sufficient Indicator No Significant Change Negative Trend VII Growth, Sustainability and Well-Being Indicators Israel 2000-2010 Indicators Trend Analysis Wastewater Treatment The percentage of the population which was connected to secondary wastewater treatment systems rose steadily, reflecting the investment in environmental service infrastructures to the population. This large percentage attests to a high level of wastewater treatment and serves as an indicator for the efficiency of water utilization. In this context, Israel is on par with other environmentally leading developed countries, such as Denmark and Korea. Utilization of Water Sources While a significant change in mountain aquifer salinity was not discernible, a clear trend of increase in the average salinity of the coastal aquifer may be identified, which continues the consistent rise in aquifer salinity over the past forty years. This increase reflects the overexploitation of this water source and is attributed, among other things, to overpumping, which lowers the water level and leads to a penetration of sea water, to droughts which reduce the rainwater penetrating the aquifer, to irrigation which infiltrates salts, and to the recharge of effluent and water from the national water carrier. A more detailed indicator is necessary to represent the efficiency of water source utilization. Utilization of Waste Resources There is no adequate indicator for the utilization of water resources. Only very low percentages of waste were recycled or used for energy production in Israel in comparison to developed countries and most of the waste was landfilled, creating environmental hazards. Currently there is a lack of indicators which can comprehensively depict the efficiency of waste resource utilization, percentages of reuse, recycling, etc. There is also a lack of indicators which assess the environmenal harm and the external costs which stem from the inefficient treatment and the illegal dumping of waste in Israel. Environmental Health Drinking Water The percentage of exceedances of the drinking water standard decreased, although the rate of exceedances was also low in the base year of 2000. Based on this indicator, it may be concluded that the quality of drinking water is high. Beach Water No trend of worsening or improvement could be discerned in the percentage of exceedances of the standard in beach water testing. It should be noted that the range of exceedances is narrow and relatively low. Air Pollution Air pollutant emissions decreased. Since air pollution is directly linked with morbidity and mortality and negatively affects well-being, realization of the potential for efficiency in this area is crucial to ensure continued growth and sustained well-being over time. The decrease is mostly attributed to the introduction of new technologies and to more stringent policy by the MoEP. Nevertheless, it is important to note that emission levels in Israel are still high when compared to the average in OECD countries and exceedances of air pollution standards are recorded on several days of the year. Pollution of Streams Pollution loads in Israel’s streams decreased significantly. This decrease is mostly attributed to the construction of infrastructures for large-scale wastewater treatment as well as to improved monitoring, supervision and enforcement. Land Pollution Thousands of areas with land pollution potential may be found in Israel. The overall estimated cost for the assessment and treatment of the suspected contaminated lands in the sectors and sites surveyed thus far is 8.2 billion shekels. Due to the extensive scope of this environmental problem, the development of indicators is crucial. Since the problem has historic roots, indicators which reflect the rate of treatment of this hazard are recommended. Legend VIII Positive Trend No Sufficient Indicator No Significant Change Negative Trend Indicators Trend Analysis Positions and Perceptions on Environmental Issues (Subjective Indicators) Satisfaction with Cleanliness and Green Areas No significant improvement on these issues was noted and nearly half of Israel’s residents were not satisfied with the green areas or the cleanliness in their vicinity. Satisfaction with Length of Commute to Work Nearly half of Israel’s residents were disturbed or very disturbed by the time it takes them to commute to work. This situation corresponds to the accelerated investments in transport infrastructure targeted at private vehicles and the constant increase in the kilometers travelled by private vehicles. Table 2: Social Indicators Indicators Trend Analysis Health Health Expenditure No significant change in the national expenditure on health as a percentage of the GDP was noted in the past decade. However, the rate of national expenditure was lower in Israel than the average for OECD countries and, in terms of purchasing power, the expenditure on mental health services was lower in Israel than in most developed countries. The decrease in national expenditure was accompanied by an increase in the privately funded portion of the national expenditure. While this increase may reflect a rise in wellbeing, it may be assumed that it also reflects a move to private medicine and services which are not included in the public health services basket and a decrease in the availability of public health services. Life Expectancy The life expectancy of Israeli residents rose and was among the highest in OECD countries. Nonetheless, it is important to note that this indicator does not necessarily reflect the level of health enjoyed by the citizen throughout his/her life, a factor which undoubtedly affects quality of life and wellbeing. It is crucial to develop and regularly publish the health-adjusted life expectancy – the number of years that a person is expected to live in good health (without major illness or disability). Infant Mortality The rate of infant mortality in Israel decreased and was somewhat lower than the average in developed countries. Education Expenditure on Education The national expenditure on education as a percentage of the GDP decreased. Although the national expenditure on education as a percentage of the GDP was higher in Israel than the average for OECD countries, the expenditure per student in terms of purchasing power parity (PPP) was lower than the OECD average, at all levels of schooling. It is important to remember that the extent of financial investment in education is not the only parameter which determines the quality of education and it is therefore important to examine outcome indicators (success rates in matriculation and international exams), as well as parameters which assess education and values (such as classroom violence or dropout rates). Matriculation Rates Despite the increase in matriculation rates, no consistent trend was evident since there were rises and drops in the percentage of students who passed the matriculation tests. Legend Positive Trend No Sufficient Indicator No Significant Change Negative Trend IX Growth, Sustainability and Well-Being Indicators Israel 2000-2010 Indicators Trend Analysis The number of 25-64 year olds with over 12 years of schooling as well as the number of individuals with an academic degree increased. This corresponds to the higher requirements in the modern job market. Education Society, Civic Engagement and Personal Security Civic Engagement The percentage of voters in Knesset elections decreased, similarly to the drop seen in most developed countries. Israeli voting percentages were slightly lower than the average for OECD countries and were similar to those of Finland and the Czech Republic. Volunteering The percentage of the population which reported taking part in volunteer activity increased. While this trend undoubtedly reflects a much welcome rise in civic engagement, it may also stem from a less favorable reduction of the state's part in the provision of services to the wide public, and an increase in the responsibilities taken on by third sector organizations and non-governmental, volunteer based organizations in this field. Personal Security No significant change was noted in the number of homicides or in the number of reports of physical harm. Similarly to most developed countries, the homicide rate in Israel was lower than the OECD average, which is raised by an especially high homicide rate in some countries. On the other hand, the number of reports regarding property damage in Israel decreased significantly, with most of the reduction occurring between 2005-2009. Social Ties Studies indicate a link between suicide rates and the strength of social support systems. No unified trend with regard to suicide rates in Israel was noted, though these rates remained low compared to the average in developed countries This reflects social cohesion as well as the stability of familial and social support systems in Israel, which are also expressed in the perception and position indicators in the set of social indicators. Nevertheless, it is important to note that suicide indicators do not provide a complete picture of the network of social ties, and are also affected by low reportage rates. Due to the issue's importance for well-being, it is imperative to develop indicators which provide a more comprehensive picture. Social Positions and Perceptions (Subjective Indicators) Self Reported Health The percentage of those reporting good or very good health increased, reaching some of the highest rates among developed countries, with rates similar to those seen in countries in which citizens report the best health conditions . This indicator supplements the impression formed by the positive trend in life span and infant mortality indicators. Social and Familial Ties The percentage of those reporting satisfaction with their familial ties did not change significantly, while a slight increase was noted in the numbers reporting satisfaction from ties with friends These rates are high in comparison to the average in developed countries. These data attest to a strong network of relationships, which undoubtedly favorably affects the well-being of Israeli residents. These indicators support the impression created by the low suicide rates. Sense of No One to Turn to in Times of Crisis or Distress The percentage of those feeling that they have no one to turn to in times of crisis or distress decreased significantly. Legend X Positive Trend No Sufficient Indicator No Significant Change Negative Trend Table 3: Economic Indicators Indicators Trend Analysis Economic Situation and Equality Economic Development and Growth Over the past decade Israel enjoyed economic growth, expressed by an increase in the GDP per person. Inequality Gaps widened and economic inequalities between various population groups in Israel increased. The income gap between the upper and the lower quintiles increased and was larger than that noted in European Union countries. This suggests that despite the growth trend which characterizes Israel, economic resources are not uniformly distributed and do not reach the lower deciles. Employee Compensation The percentage of compensation which reached employees' pockets in relation to the total net national income decreased. Employment Workforce Participation and Unemployment The percentage of 25-54 year olds which participated in the civil workforce increased moderately. In parallel, the proportion of unemployed out of the civil workforce gradually decreased. In comparison to other developed countries, Israel was characterized by low unemployment rates. Long-term Unemployment The rate of long-term unemployment increased, with the percentage of unemployed workers searching for employment for a year and above out of the total number of unemployed nearly doubling. While the rate was lower than the average in OECD countries, the consistent increase attests to a constant deterioration and reflects the difficulty of breaking the long-term unemployment cycle so that the burden of unemployment falls on a more limited group. Leisure - Work Ratio The average number of work-hours per week in Israel decreased. Nevertheless, the average number of work-hours in Israel was high compared to the average in developed countries. According to the OECD, a high number of Israelis work especially long hours, with only Turkey and Mexico exceeding these numbers. This impression is reinforced by the social survey of the Central Bureau of Statistics, which demonstrated that nearly half of employees in Israel with children under the age of 18 report occasional or frequent difficulty in family functioning due to work-related obligations. Housing Number of Inhabitants per Room The number of inhabitants per room increased slightly, but there was no significant change in this indicator. Economic Position and Perception (Subjective Indicators) Level of Satisfaction with Financial Situation and with Place of Employment Despite a rise in satisfaction from the economic situation, many of Israel’s residents expressed dissatisfaction from their financial situation. This corresponds to the social protest of the summer of 2011, which raised the public discourse on such issues as cost of living in Israel and the difficulty of preserving well-being among the middle class, which participates in the workforce. Level of Satisfaction with Apartment and Living Environment The percentage of those reporting a sense of satisfaction with their apartment and with their living environment increased slightly. This corresponds to the rise in the standard of living. Legend Positive Trend No Sufficient Indicator No Significant Change Negative Trend XI