This research examines the growing paradox in the relationship between human capital and labor productivity in Israel. Although the rate of applicants for higher education has multiplied since the early 1990s, it appears that Israel is on the same trajectory of growth in labor productivity that it has been on for the past four decades with little substantial improvement. This prompts the obvious question: Why are increases in education attainment not translating to an increase in the output per worker? Why is more education not leading to faster economic growth?