A debate concerning Israel’s ultra-Orthodox community has evolved beyond religious and political considerations into a pressing economic question: Can the nation sustain its changing demographics?
During a major economic policy conference this week, experts examined whether Israel can maintain its current trajectory as defense expenditures climb toward 8% of gross domestic product and approximately a quarter of the national budget, while the ultra-Orthodox population is expected to comprise an increasing portion of military-age Jewish citizens.
Military service forms part of Israel’s social framework, defense expenditures consume an expanding portion of national resources, and the armed forces represent a shared experience for most Jewish citizens. As these pressures intensify, ultra-Orthodox integration appears not merely as a disagreement over exemptions or religious matters, but as a budgetary, military, and economic challenge.
The implications are clear-cut. As the ultra-Orthodox become a larger portion of Israel’s population, the combination of military exemptions, restricted core education, reduced male workforce participation, and sectoral political influence could burden the military, tax revenue, and the skilled economy upon which Israel increasingly relies.
This concern permeated the Eli Hurvitz Conference on Economy and Society, hosted by the Israel Democracy Institute in Jerusalem. The gathering addressed defense expenditures, artificial intelligence, technology sectors, living costs, reconstruction, healthcare, and government budgets. Nevertheless, the ultra-Orthodox matter repeatedly emerged, sometimes explicitly and sometimes through broader discussions of human resources, labor participation, education, and public priorities.
The ultra-Orthodox community refers to Israel’s rapidly expanding religious population whose traditional male institutions emphasize comprehensive Torah study. Many ultra-Orthodox boys do not receive equivalent core instruction in mathematics, English, and science compared to other Israelis; many ultra-Orthodox men do not perform military service, and many join the workforce late or remain outside it for prolonged periods. Ultra-Orthodox women participate in employment at higher rates, frequently supporting large families, but household earnings remain comparatively modest.
Gilad Cohen Kovacs, a researcher at the Israel Democracy Institute who delivered a presentation on “The Economy as a Driver of Change in Haredi Autonomy,” contended that the matter also involves how a separate institutional framework influences growth, employment, and the welfare system.
Cohen Kovacs stated that subsidies supporting the current ultra-Orthodox model total approximately 35 to 37 billion shekels annually, or roughly 5.5% of the government budget. Without modifications, he cautioned, that amount could increase to more than 60 billion shekels yearly in future decades. These numbers were presented as part of his conference examination of ultra-Orthodox autonomy and government support.
He emphasized that the matter should not be viewed as a simple transfer of “money to Haredim.” In his assessment, part of the funding encourages behaviors that maintain ultra-Orthodox men outside the workforce, while another portion strengthens what he characterized as a parallel system of authority, educational networks, community institutions, and political influence.
A welfare system, Cohen Kovacs explained, is designed to assist those unable to work, protect individuals who have suffered harm, and facilitate mobility. In the ultra-Orthodox situation, he maintained, part of the subsidy supports the reverse pattern: reduced utilization of earning potential, partial employment, large families, and a yeshiva-focused lifestyle.
“These are not the conditions for which the welfare state was built,” he said.
This distinction redirects attention from individual poverty toward policy incentives that, according to Cohen Kovacs, maintain dependence and separation. His broader finding was that the current arrangement creates a substantial intersectoral transfer from non-ultra-Orthodox Jewish households to ultra-Orthodox households through tax differences, public services, subsidies, and exemptions from shared responsibilities.
Former Prime Minister Naftali Bennett also referenced studies on that net balance. According to Bennett, what he termed a “Zionist household”—a non-ultra-Orthodox Jewish household integrated into military service and the labor market—contributes approximately 6,000 shekels more monthly than it consumes or receives, while an ultra-Orthodox household receives about 4,000 shekels more monthly than it contributes. He characterized this as a difference of approximately 10,000 shekels monthly between the two household categories.
The comparison brought the fiscal discussion from national budgets to family income. It was not presented as a claim that one particular family directly funds another, but as an aggregate measurement of taxes, government services, subsidies, benefits, and participation in public duties.
Dr. Gilad Malach, a researcher at the Israel Democracy Institute who presented a separate study on the defense burden, told The Media Line that his research addressed one specific aspect of the larger subsidy discussion: security. He said Israel typically treats defense spending as a national budget item, without examining how that burden is distributed across different sectors of society.
Malach said it would be “too simplistic” to explain the gap just by noting that the ultra-Orthodox public is poorer and therefore pays less tax. “You might say, ‘OK, this is a poor society, so they pay less than their share in the population,’” he said. “But we see that the gaps between them and others—it’s much more than that.”
According to Malach, the visible security budget stands at about 120 billion shekels annually, but the actual cost approaches 150 billion once hidden burdens are included: conscripts paid below their labor value, delayed workforce entry, and the cost to employers when reservists leave their positions for extended service.
If the ultra-Orthodox represent about 14% of Israel’s population, he said, they should account for roughly 21 billion shekels of that burden. In practice, he estimated, they contribute about 6 billion.
“So, the gap is 15 billion,” he said.
The figure carries political weight because it places the draft discussion within a broader fiscal equation: who pays for security, who serves, and who bears the indirect costs of a society built around lengthy military service.
Malach was careful not to claim that the gap can be closed quickly. He said the policy tools he presented could reduce it, but not eliminate it. At most, he estimated, the immediate effect could be several billion shekels, not the full 15 billion.
“Just to make the situation less unequal, more equal than today, but not a real equality between the population,” he said.
The demographic warning was more severe. Some projections, Malach said, place the ultra-Orthodox population at around 30% of Israel’s total population within roughly four decades. The more significant number, he added, is not the overall population share, but the share among draft-age Jews.
Among Jewish 18-year-olds, he said, the ultra-Orthodox share could exceed half. In his view, that projection, if realized, would mean that “We won’t have manpower for an army if the situation would be that they are not serving in the army. And we can’t have a prosperous economy if so many people won’t have the ability to work in a modern labor market.”
Reem Aminoach, a senior researcher at the Institute for National Security Studies who previously served as financial adviser to the Israel Defense Forces chief of staff, told The Media Line that the problem is often made to appear more complex than it is.
“All you need is to cancel the deferral,” he asserted, referring to the legal mechanism that has allowed many ultra-Orthodox men to avoid conscription as long as they remain in yeshiva study.
In his view, canceling the deferral would force a clearer choice: service, employment, or some other publicly accountable framework, rather than a system in which avoiding the army also discourages work. Aminoach said the army’s need is practical and immediate.
“The army lacks fighters, not clerks,” he said.
Shaul Meridor, a former senior Finance Ministry official, brought the discussion from national aggregates to the level of a single Israeli family. He described a middle- or lower-middle-class family in places such as Migdal HaEmek or Dimona, with five children, one of them serving in Lebanon, and unable to make ends meet. According to figures he cited from a recent study, such a family subsidizes a comparable low-income ultra-Orthodox family by nearly 1,000 shekels monthly.
“Many times we talk about high-tech and the rich and all kinds of other people who subsidize,” Meridor said. “I am talking about socioeconomic cluster four. Whoever knows what that means understands that this is not high-tech, and these are not people sitting in Tel Aviv or Ramat Hasharon. These are people who do not finish the month.”
He said the moral question after October 7 was no longer abstract.
“Why should a family that does not finish the month have to allocate, from money it does not have, 1,000 shekels net a month to subsidize a Haredi family that chose a different life?”
Meridor also argued that Israel’s current policies harm ultra-Orthodox children themselves by steering them toward poverty.
“As leadership, we must not condemn Haredi children to poverty,” he said. “And that is what we are doing today.”
His proposed principle was direct: those who serve should receive, those who do not serve should not. Combat service, he said, should receive the most; other service should receive less; evasion should receive nothing. But he cautioned that dismantling ultra-Orthodox autonomy would not happen through a single major law. It would require changes in thousands of government decisions, benefits, tax rules, and allocations that currently favor institutions over individuals.
Political speakers approached the same issue from different directions. Bennett focused on education and subsidies, using his speech to attack daycare payments for families in which the father does not work and does not serve. He also proposed a broad education reform built around a shared state curriculum, while preserving limited community autonomy.
Avigdor Liberman, chairman of Yisrael Beitenu and a former defense and finance minister, framed the issue through coalition politics. In a conversation with Yohanan Plesner, president of the Israel Democracy Institute, Liberman argued that Israel cannot sustain higher defense spending while preserving sectoral budgets and avoiding structural reform. He said any serious change would require a government not dependent on the ultra-Orthodox parties Shas and United Torah Judaism.
Former Defense Minister Benny Gantz offered a more cautious critique. He said parts of the ultra-Orthodox leadership were making a grave mistake by perpetuating a situation in which the community is more important than the state. At the same time, he emphasized that there are ultra-Orthodox individuals who work, study, serve, and contribute to the economy, and that they deserve respect.
Meirav Cohen, a Yesh Atid lawmaker and former minister for social equality, used Jerusalem as a warning. Speaking as a Jerusalemite, she said the capital already shows what happens when integration in the army, employment, and education does not move fast enough. Jerusalem, she said, has fallen in less than three decades from socioeconomic cluster five to cluster two. Every second household receives a municipal property tax discount, she said, meaning the other half must carry some of the highest municipal tax burdens in Israel.
“There is no economic model for this,” Cohen said. “You don’t need prophecies or warnings. Look at what happened to us in Jerusalem.”
The ultra-Orthodox discussion occurred during a conference dominated by the rising cost of security and the shrinking space for civilian spending. Former Bank of Israel Governor Karnit Flug said in the opening budget session that Israel’s economy had shown resilience, but that the Israel-Hamas war had imposed a heavy price. Defense spending, she said, now stands near 8% of GDP, compared with a little more than 4% before October 7, 2023. Its share of the total budget has risen to about one-quarter, compared with 16% before the war.
That larger fiscal picture helps explain why ultra-Orthodox integration is no longer treated only as a dispute over religious exemptions. Israel is trying to fund a larger defense establishment, increased rehabilitation needs, more support for reservists, reconstruction in the north and south, health-system gaps, transportation infrastructure, and a technology sector facing global competition. Speakers also warned that insufficient investment in Arab society carries its own cost in lost output, making the broader point that Israel cannot afford to underinvest in any large population group while defense and rehabilitation needs are rising.
Artificial intelligence and technology added another layer. The Israel Innovation Authority’s 2026 report, presented at the conference, showed that technology remains Israel’s main growth engine. In 2025, the sector contributed roughly half of the economy’s growth, reached 18.3% of GDP, accounted for 58% of exports, and employed more than 400,000 people. But the same report also warned of stagnation in employment share, a decline in research and development jobs in Israel, expansion of activity abroad, and growing pressure from the shekel’s appreciation.
That is why ultra-Orthodox integration now intersects with the artificial intelligence discussion. Israel wants to compete in a global economy built on advanced skills, data science, engineering, defense technology, and artificial intelligence. But a growing share of its future workforce is educated in systems that often do not provide the tools required for that economy. The point was not that every Israeli must work in technology, but that the next economy will demand basic quantitative and digital skills across far more jobs.
Eli Hurvitz, CEO of the Eddie and Jules Trump Family Foundation, told the conference that the children currently choosing what to study in high school will be the workforce of 2040. In an artificial intelligence-driven world, he said, mathematics, data, teamwork, and independent learning will become basic conditions for opportunity.
The challenge of ultra-Orthodox integration does not fit neatly into familiar categories of minority rights or welfare policy. In Israel, it is tied to compulsory service, repeated wars, high defense costs, a knowledge-based economy, and a parliamentary system in which sectoral parties can hold the balance of power. The ultra-Orthodox community is a growing part of Israel’s electorate, budget, labor market, and future security burden. That is why the discussion has become one of the country’s central tests of governance.
The conference produced no single, comprehensive solution. Some speakers emphasized immediate enforcement of the existing draft framework. Others focused on incentives, core education, tax benefits, or direct ties between the state and ultra-Orthodox individuals rather than through communal institutions. Some warned against coercion that could backfire, while others argued that decades of gradualism have failed. But there was a striking convergence around one point: the status quo is no longer to be treated as a manageable inconvenience.
The discussion, as reflected in the conference sessions and interviews cited here, was dominated by economists, former senior officials, and political figures warning about the long-term costs of the current model. Representatives of the major ultra-Orthodox parties were not quoted in those sessions or interviews.
Malach put the warning in the starkest terms. Israel has survived enormous shocks, he said, and remains a wealthy country with a strong economy. But if current patterns continue as the ultra-Orthodox population grows, the problem will not remain a matter of resentment or budgetary imbalance. It will become a question of manpower, productivity, and national resilience.
“Right now, it’s very hard, but we are handling,” he said. “The point is that if you call today’s situation very bad, things would be worse than that.”
What emerged in Jerusalem was more than an argument over the draft. It was a broader economic reckoning over who serves, who pays, who studies the skills needed for the next economy, and whether the state can continue financing separate rules for a growing part of its population. Israel’s next election may decide the coalition arithmetic. The harder question, raised throughout the conference, is whether any government will be willing to change the arithmetic of the country itself.
