The Ministry of Finance recently dropped a bombshell when it included in its three-year budget plan the forecast that the National Insurance Institute will not have enough money to meet its obligations by 2029, after it has already been in deficit in recent years.
According to the Ministry of Finance, there are two reasons for this. Firstly, reforms that have dramatically expanded eligibility for nursing care and disabled children. Secondly because of the National Insurance premiums paid and the discounts given. However, the problems with the National Insurance Institute's cash flow are not new and are rooted in past mistakes, some of which were made by the Ministry of Finance itself. Every year, the National Insurance Fund transferred surpluses to the Ministry of Finance, which were given in exchange for special bonds with an average interest rate that decreased over the years from about 5% to about 3% (only part of the fund had a fixed interest rate and the remainder had a variable interest rate).
To close the deficit, the Ministry of Finance is promoting a dramatic change in collection. Currently an employee whose monthly income is the average wage in the economy (about NIS 13,500) pays annual national insurance contributions of NIS 5,880. The unemployed receive a discount and pay NIS 1,716 - 30% less than those employed at the average wage. Yeshiva students and students receive an additional discount and pay NIS 576 a year - less than 10% of the amount paid by an employee with an average income.
The jobless will pay more
The Ministry of Finance proposal says, "The deficit can be cut by raising National Insurance contributions across the board for workers in the economy, but this step will increase the effective tax burden on the working population and may have negative effects on the employment market."
"In addition, major amendments are needed in the collection policy of National Insurance, in a way that will increase the payment base and adjust the amount of insurance for those who are not working, so that National Insurance receipts will be collected more equitably."
In other words, the Ministry of Finance does not want to raise National Insurance contributions for workers, but to raise them for the non-working population, including the unemployed, young adults, and students. The rate that students and yeshiva students pay NIS 48 per month, compared with the unemployed who pay NIS 143 per month. However, while the discount for students is valid for their first and second degree years only, Adv. Shlomit Ravitsky Tur-Paz, director of the Center for a Shared Society at the Israel Democracy Institute, explains that the discount for yeshiva students is given permanently until the age of 67.
"Unlike students, whose are studying professional training that will increase their future salary, and accordingly their National Insurance payments, for yeshiva students, this is a course of study that does not provide future professional training," she says.
A permanent discount for yeshiva students
A comparison of the discount given to yeshiva students compared with the unemployed, as conducted by the Institute, shows that the cumulative gap until the age of 67 stands at NIS 55,800, while the proportion of working haredi men is only 53%. According to another calculation that compares the discount to the average salary in haredi society (NIS 9,961 per month, on which NIS 238 in National Insurance contributions are paid), this is a maximum loss of NIS 111,700 for a yeshiva student who remains in yeshiva throughout his adult life.
However, Ravitsky Tur-Paz notes that going out to work is a gradual process: "While in the mid-30s most of them were still studying in yeshiva, in the 60s it was only a few. Examining the cumulative discount up to the age of 35 shows that in relation to the payments of the unemployed, there is a gap of NIS 19,400, and in relation to the average salary for a haredi worker, there is a gap of NIS 38,700 per haredi.
Since January 2026, following a ruling by the High Court of Justice on conscription, the discount was denied to yeshiva students aged 18-29 who are subject to conscription and this affects 90,000 people who currently pay National Insurance contributions, similar to the unemployed.
The number of yeshiva students in Israel is estimated at 175,000. According to Ravitsky Tur-Paz, the last official number was in 2023, which was 169,000 at the time, but since the Ministry of Education stopped budgeting for the haredim, it also stopped counting. "We can estimate, since the growth rate of haredi society is over 4% per year, that the new cohort is larger, and therefore it concerns about 175,000 people."
Payments will not be sufficient
Sources familiar with the details told "Globes" that this calculation by the Israel Democracy Institute is also conservative. This is because the average wage in haredi society is low because the incentives to go to work are limited and training is not provided. If structural changes were made to the incentive system and more haredi men worked, the average wage would increase and, accordingly, National Insurance contributions.
Dealing with payments alone will not be sufficient. Public committees over the years have made many recommendations that were not implemented.
The Israel Democracy Institute published recommendations five years ago including the separation of old-age and nursing care benefits into a separate system, a kind of actuarial balanced fund using an automatic mechanism; raising the retirement age for women; linking retirement ages to life expectancy; and unifying the institution's payment system with that of income tax to streamline collection.
According to National Insurance data, the institution's deficit will reach NIS 18 billion in 2030 and NIS 48 billion in 2050, in line with the aging of the population and anticipated demographic changes. The forecast is based on projections that the proportion of haredim in the population will double by 2065 to 30%. The proportion of haredi men and Arab women who integrate into the labor market is still low. The Ministry of Finance indicates that 350,000 Israelis of working age are not integrated into the market and pay minimum National Insurance contributions of NIS 143 per month. In addition, about 150,000 yeshiva students and students do not work and pay reduced insurance premiums (NIS 48 shekels per month).
Published by Globes, Israel business news - en.globes.co.il - on August 4, 2026.
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