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  • The cost to the economy of one month of service by a reservist (approximately 30 years old) is about NIS 38,000. A significant expansion of the enlistment of Haredi (ultra-Orthodox) men could substantially reduce the economic and personal burden resulting from the army’s extensive reliance on reservists.
  • An increase of annual enlistment cycles by about 7,500 Haredi men, for example (which would translate into an addition of about 20,000 mandatory service soldiers once the process matures), would allow a considerable reduction in the scope of reserve duty and would reduce the annual cost to the economy by at least NIS 9 billion (0.4 percent of GDP).
  • The proposed law intended to regulate the enlistment of Haredi youth into the IDF is deficient. The enlistment targets it sets are low, and the economic incentives for enlistment included in it are largely ineffective.
  • It is important to amend the wording of the law so that it meets the needs of the army and establishes effective positive and negative incentives.

Drafting the Haredi (ultra-Orthodox) public has been a major issue in Israeli society for many decades. During this time, the proportion of the Haredi community has grown significantly—from a few percent to more than ten percent today—and based on the population distribution among ages 0–15, it is expected to triple in the coming decades. In view of the sharp increase in the scope of reserve service required since October 7, 2023, the issue of drafting Haredi men has become a defense matter with significant macroeconomic implications. Therefore, we find it appropriate to present our position on this issue at this time.

According to Bank of Israel estimates, the capitalized cost to the economy of one month of service by a reservist (about 30 years old) is approximately NIS 38,000.[1] Eighty percent of this amount reflects the direct and immediate cost of lost output during reserve service[2], and the remainder reflects the future harm to productivity growth resulting from lost experience and/or delayed career advancement.[3],[4]

In contrast, the cost to the economy of drafting a young Haredi man for mandatory service is very low, since in most cases the enlistment does not replace participation in the labor market. In addition, enlistment itself may increase the incentive for young Haredi men to join the labor market at a younger age, due to the cancellation of the requirement to be registered as Yeshiva students as a condition for exemption from service. Accordingly, the enlistment of a young Haredi man for 32 months of service may, on average, yield a capitalized economic benefit estimated at NIS 22,000 per month of service, if his employment rate becomes similar to that of a non-Haredi man as a result.[5]

This means that the addition to the regular army of 20,000 mandatory service soldiers from among Haredi men (consistent with an annual increase of 7,500 Haredi recruits for 32 months[6]), in a way that allows a reduction in the number of reservists, would over time reduce the annual cost to the economy by at least NIS 9 billion[7] (0.4 percent of GDP). This is assuming that the employment of Haredi men after service does not increase significantly.[8] In a case where the employment of Haredi men increases substantially following enlistment, the additional income over time would reach up to NIS 14 billion per year[9] (0.7 percent of annual GDP).

The Knesset’s Foreign Affairs and Defense Committee is currently discussing the draft “Security Service (Integration of Yeshiva Students) Law,” whose purpose is to regulate the enlistment of Haredi youth. In our assessment, and after reviewing the Ministry of Finance Budget Department’s position dated December 1, 2025, the wording of the law is deficient in that it will not lead to Haredi enlistment that meets security needs while reducing the economic cost. In our view, the problems in the draft law are concentrated around two main points:

(1) The effective level of enlistment targets (the annual minimum threshold for avoiding sanctions) is lower than the IDF’s needs and not significantly higher than the current situation; and
(2) The economic incentives for enlistment (in the form of avoiding sanctions) are largely ineffective, such that it is doubtful they will lead to even meeting the modest enlistment targets set.

The enlistment target for the first period (from the law’s commencement until June 30, 2027—about a year and a half) is 8,160 Haredi men. However, in annual terms, and after accounting for the possibility that 10 percent of the target will be fulfilled through civilian-security service (in security-affiliated units of the Prime Minister’s Office, the Police, or the Prisons Service), this amounts to only about 4,900 men. In comparison, prior to the law (since July 2024), about 3,000 Haredi youth have already enlisted, so the law’s targets require only a very limited increase in enlistment and certainly do not meet the army’s need for thousands of additional combat soldiers.[10] In the second year of the law (July 1, 2027–June 30, 2028), the effective target is 6,156 men. Only from the fifth year onward does the effective minimum enlistment threshold reach 50 percent of the cohort (that is, about 7,000 out of 14,000 men).[11]

Moreover, the enlistment targets do not refer to military roles or even to the age of recruits, so a situation may arise in which a significant portion of those enlisted are not designated or suitable for combat roles, where the army faces shortages, and will therefore only slightly reduce the economic cost of the increased security needs.

To promote compliance with the enlistment targets, the law defines sanctions on Yeshiva students who have not enlisted and have not reached the exemption age of 26. However, the sanctions defined—certainly until the second half of 2027, when compliance with the first enlistment target will be examined—are largely ineffective in creating incentives for individuals. For example, before a determination of noncompliance with enlistment targets (at least until the second half of 2027), the main sanctions on Yeshiva students are denial of a driver’s license and prohibition on leaving the country until age 23 (with exceptions)—measures that are largely irrelevant to the Haredi community[12],—and the cancellation of eligibility for student scholarships and denial of affirmative action in public sector employment, which are irrelevant since Yeshiva students are not permitted to work or study in higher education.

Even the effectiveness of the sanctions after noncompliance is determined is not particularly high. For example, the denial of participation in subsidized housing programs and of exemption from purchase tax can be circumvented by waiting until age 26 (when the sanctions expire). Likewise, the denial of daycare subsidies is a partial sanction, since it will not apply to a significant portion of the children of a Haredi man after he passes age 26.[13]

Beyond all this, sanctions or economic incentives that depend on collective behavior (general compliance with enlistment targets) are largely ineffective in motivating individuals or specific communities within the Haredi sector, since an individual has no real influence on overall compliance.

In view of all the above, passing the law in its current form may not lead to a significant change in the scope of enlistment and will thus preserve the personal and economic burden resulting from the army’s extensive reliance on reservists. This has significant macroeconomic costs, which will be reflected in continued harm to the functioning of the labor market, loss of national income, and extensive fiscal costs (for paying reservists instead of mandatory service soldiers), alongside loss of tax revenues. We therefore see great importance in amending the wording of the law so that it meets the army’s needs and establishes effective positive and negative incentives.

 

 

[1] This result is similar to the estimate of the Ministry of Finance’s Chief Economist (NIS 48,000), prepared at the beginning of the war under slightly different assumptions. See: “Pricing the Alternatives for Increasing IDF Manpower,” Chief Economist Department, Ministry of Finance, March 2024.

[2] The cost reflects the estimated wage cost of the reservist, plus the impact on other production factors—capital—which adds up to 50 percent to the cost (assuming a GDP labor share excluding housing of two-thirds). Over time, there may be a shift of workers to capital-intensive industries as substitutes for reservists, which would somewhat reduce the cost.

[3] The productivity loss due to lost experience includes, for young people, delays in studies and entry into the labor market. We assume the impact persists at declining rates for ten years.

[4] These costs do not include harm to the spouse’s employment, reduced employment between reserve periods or during extended leaves for service, and loss of leisure time during reserve duty.

[5] In this case, the assumption is that the employment rate of Haredi recruits after service will be 63% at age 21 and will gradually rise to 90% at age 30 (as among non-Haredi Jews). This is instead of the current average employment rate among Haredi men—21% at age 21, rising to 63% in their 30s (Labor Force Survey, 2022).

[6] Calculation method: 7,500 × 32 / 12 = 20,000.

[7] Calculation method: 20,000 × 38,000 × 12 = 9,120,000,000.

[8] In this case, the assumption is that the increase in the employment rate of Haredi recruits advances by about three years relative to the current trajectory in the Haredi community. For example, it would be 29% at age 21 instead of 21%, converging with the current trajectory in the early 30s.

[9] Calculation method: (22,000 × 20,000 + 38,000 × 12) = 14,400,000,000.

[10] In the years prior to July 2024, enlistment levels were 1,200–1,800 per year.

[11] Compared with 88 and 85 percent among enlistment-eligible men from the state and state-religious education systems, respectively (Knesset Research and Information Center Report, April 4, 2024).

[12] For example, according to the Central Bureau of Statistics Social Survey (2023–2024), the rate of driver’s license holders among Haredi men aged 20–24 was only 37 percent, compared with 86 percent among non-Haredi Jewish men. The rate of Haredi men aged 20–24 who traveled abroad in a given year was 19 percent, compared with 42 percent among non-Haredi Jewish men.

[13] According to the 2022 Population Census, most (55 percent) young men up to age 22 do not yet have children. By age 26, the vast majority already have children, averaging 1.9 children out of an expected six, based on the typical family size in the Haredi community.