During discussions by the Knesset Foreign Affairs and Defense Committee, the Ministry of Finance presented its estimates of the growing defense costs in the wake of the war and the potential benefits of conscripting haredi soldiers.
Among other things, the Ministry of Finance says that extending conscription and reserve duty will cost more than NIS 10 billion annually. However, every 1,000 haredi soldiers conscripted for combat service could save the country NIS 1.3 billion annually and that the IDF's current approach of only conscripting haredi soldiers who are working is a mistake and would damage economic growth.
At the beginning of the discussion, the Ministry of Finance emphasized that the employment rate in Israel of non-haredi Jews is particularly high, and this has resulted in the main growth in the last decade. But now there is a big gap with Arab women and haredi men being integrated into the job market representing Israel's main growth potential in the coming years. The quality of jobs is also a problem in itself, with working Arab women earning only 56% of what non-haredi Jewish women earn, and haredi men only 49% of what non-haredi men earn. So even when they do work, these populations earn only half of their counterparts.
Since the haredi community is expected to make up almost a third of Israel's population in 2065, this is an acute problem that is critical to solve in order to secure the future of the Israeli economy. According to the Ministry of Finance, without the inclusion of haredim in the job market, 13% annual damage to GDP is expected, and a need to raise direct taxes by 16%.
However, the more urgent matter is the security implications. The needs of the war are putting pressure on the IDF's manpower, which has led to it demanding an extension of the mandatory service. According to the Ministry of Finance, a six-month extension of mandatory service costs NIS 6.35 billion shekels annually, including costs to the soldiers themselves who must postpone the start of their careers. In addition, the extension of reserve duty will create additional economic damage, including financial to the partners of the reservists, estimated at NIS 10 billion annually.
The Ministry of Finance also stressed that reservists cost the economy much more than conscripted soldiers, due to the need to compensate them at the same level as their wages and due to the loss of output though them not working. The Ministry of Finance calculates that five reservists cost as much as nine conscripted soldiers, so expanding conscription to haredim will dramatically ease the financial burden.
According to the Ministry of Finance, every 1,000 haredim who are recruited for combat service will lead to a saving of 833,000 combat reserve days per year, which would reduce the burden on the combat reserve soldiers by between 10 and 14 reserve days per year. This adds up to a total economic saving of NIS 1.3 billion every year, for every 1,000 ultra-Orthodox soldiers who are conscripted for combat service.
Published by Globes, Israel business news - en.globes.co.il - on July 16, 2024.
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