Economic growth in Israel was very high (11%) between 1948 and 1958, reflecting high immigration and accelerated development in order to achieve a reasonable standard of living. Then, from 1960 to 1972, annual growth was 9.2%, dropping sharply by 1985 to 3.2% (Figure 5). The growth rate per capita dropped from 5.6% to 0.4% during the same period. Three factors have contributed to this drastic decline in growth: (i) the necessity of spending more than 30% of the national budget on defense; (ii) increased energy costs; and (iii) recession in the world economy.

Israel’s employment structure is unusual, in that the economy is neither predominantly agricultural nor predominantly industrial. Agricultural employment though not production, or percentage of GNP peaked in the mid-1950s at 17%. Today, only 4.5% of the Israeli workforce is involved in agriculture; this figure continues to decline. Because most industry in Israel post-dates the 1960s, that sector has never been labor-intensive. Thus, in 1974 when industrial employment reached its highest level, it accounted for only 25% of the Israeli workforce. In the 1990s this percentage is expected to stabilize at about 20%. By contrast, the services sectors has grown consistently over recent decades. Among services subsectors, financing and business have grown most rapidly (from 5% in 1970 to 10% by 1989). Public and community services have also grown (from 24% in 1970 to 29% in 1989) (Figure 6).

In general Israel is shifting to more and more high-tech industries and to industrial activities with service characteristics. Information technology occupies a larger percentage of the workforce yearly. This transition makes sense for Israel, as the country is basically resource-poor: it lacks mineral wealth, fossil fuels, water and arable land. Human resources constitute the one asset which the country enjoys in abundance and will continue to exploit. The recent immigration wave, which includes a high percentage of skilled professionals, is expected to further strengthen this essential resource.