Israel's rapid economic growth after the Six-Day War masked serious structural weaknesses in its workforce development, particularly stark educational disparities between ethnic populations. Drawing from longitudinal data collected since 1953, observational analysis reveals an economy operating at full employment yet struggling with acute labor shortages, requiring approximately 40,000 Arab workers from occupied territories to fill gaps. While defense and construction investments drove substantial economic expansion, they simultaneously created balance of payments challenges. Pronounced educational achievement gaps between Ashkenazi and Oriental Jewish populations persist, with matriculation completion rates favoring Ashkenazi students at a striking 7:1 ratio despite government intervention programs. Less than two-fifths of youth complete secondary education overall, with Oriental students accounting for merely one in seven completions. Military service provides valuable skill development but disrupts the civilian workforce through ongoing reserve duties. Western immigration has surged, notably reaching 8,500 American immigrants in 1970. Four critical challenges emerge requiring institutional reform: inadequate youth preparation for employment, substandard organizational performance, low labor productivity, and excessive politicization across sectors. Without addressing these structural issues, particularly educational inequalities and workforce development, Israel's path to economic independence and industrial viability remains uncertain, despite remarkable achievements in state-building and economic modernization since 1953.