The discussion surrounding Israel’s ultra-Orthodox population has evolved beyond religious and political considerations into a pressing economic challenge, according to experts who spoke at a prominent policy conference this week.
As military expenditures climb toward 8% of the nation’s gross domestic product and approximately 25% of the government budget, while the ultra-Orthodox are expected to represent an increasing portion of military-age Jewish citizens, the issue has taken on new urgency.
Military service forms part of Israel’s social framework, defense costs consume an expanding portion of national resources, and the armed forces represent a shared experience for most Jewish citizens. Under these mounting pressures, ultra-Orthodox integration has transformed from a dispute about exemptions into a budgetary, military, and economic concern.
The implications are clear. As the ultra-Orthodox become a larger segment of Israel’s population, the mix of military exemptions, restricted core education, reduced male workforce participation, and political influence could burden the military, tax system, and skilled economy that Israel increasingly relies upon.
This theme permeated the Eli Hurvitz Conference on Economy and Society, hosted by the Israel Democracy Institute in Jerusalem. While the conference addressed defense spending, artificial intelligence, technology, living costs, reconstruction, healthcare, and the national budget, the ultra-Orthodox issue emerged repeatedly through discussions of human capital, labor participation, education, and public priorities.
The ultra-Orthodox community refers to Israel’s rapidly expanding religious population whose traditional male institutions focus on full-time religious study. Many ultra-Orthodox boys don’t receive the standard curriculum in mathematics, English, and science that other Israelis do; many men don’t serve in the military and enter employment late or remain outside the workforce for long periods. Ultra-Orthodox women work at higher rates, often supporting large families, but household earnings remain relatively modest.
Gilad Cohen Kovacs, a researcher at the Israel Democracy Institute who led a session on “The Economy as a Driver of Change in Haredi Autonomy,” contended that the matter also involves how a separate institutional framework affects growth, employment, and social services.
Cohen Kovacs stated that subsidies supporting the current ultra-Orthodox model total approximately 35 to 37 billion shekels annually, roughly 5.5% of the national budget. Without modifications, he cautioned, that amount could increase to more than 60 billion shekels yearly in coming decades. These numbers were part of his conference presentation analyzing ultra-Orthodox autonomy and government support.
He emphasized that the issue shouldn’t be viewed as simply transferring “money to Haredim.” In his assessment, some funding encourages behaviors that keep ultra-Orthodox men out of the workforce, while other portions strengthen what he called a parallel system of authority, educational networks, community institutions, and political influence.
A welfare system, Cohen Kovacs explained, aims to assist those unable to work, protect those who have been harmed, and enable advancement. In the ultra-Orthodox situation, he maintained, part of the subsidy supports the reverse pattern: reduced use of earning potential, partial employment, large families, and a religious study-centered lifestyle.
“These are not the conditions for which the welfare state was built,” he said.
This perspective redirects attention from individual poverty toward policy incentives that, according to Cohen Kovacs, maintain dependence and separation. His overall finding was that the present model creates a substantial cross-community 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 research on this balance. According to Bennett, what he termed a “Zionist household”—a non-ultra-Orthodox Jewish household participating in military service and the job market—contributes about 6,000 shekels more monthly to the state than it uses or receives, while an ultra-Orthodox household receives about 4,000 shekels more monthly than it contributes. He characterized this as approximately a 10,000 shekel monthly difference between the two household categories.
The comparison brought the budget discussion from national figures to family income levels. It wasn’t presented as claiming one specific family directly supports another, but as an overall measurement of taxes, government services, subsidies, benefits, and participation in public duties.
Dr. Gilad Malach, a researcher at the Israel Democracy Institute who presented separate research on defense burdens, told The Media Line that his work examined one particular aspect of the broader subsidy discussion: security. He noted Israel typically views defense spending as a national budget matter, without examining how this burden distributes across different community sectors.
Malach said it would be “too simplistic” to attribute the disparity solely to the ultra-Orthodox community being poorer and therefore paying 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 apparent security budget totals about 120 billion shekels annually, but the actual cost approaches 150 billion once hidden burdens are included: conscripts paid below their market value, delayed workforce entry, and costs to employers when reservists leave jobs for extended service.
If the ultra-Orthodox represent about 14% of Israel’s population, he said, they should bear roughly 21 billion shekels of that burden. In reality, he estimated, they contribute about 6 billion.
“So, the gap is 15 billion,” he said.
This figure carries political weight because it positions the draft discussion within a broader fiscal framework: who funds security, who serves, and who bears the indirect costs of a society structured around extended military service.
Malach was cautious not to claim the gap could close rapidly. He said the policy measures he presented could reduce it, but not eliminate it. At best, he estimated, the immediate impact could be several billion shekels, not the complete 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 projection was more alarming. Some forecasts, Malach noted, project the ultra-Orthodox population at around 30% of Israel’s total population within roughly four decades. The more significant figure, he added, isn’t the overall population percentage, but the proportion among draft-eligible Jews.
Among Jewish 18-year-olds, he said, the ultra-Orthodox percentage could surpass half. In his assessment, if this forecast materialized, “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 portrayed as more complex than necessary.
“All you need is to cancel the deferral,” he stated, referring to the legal process that has permitted many ultra-Orthodox men to avoid conscription while remaining in religious study.
In his opinion, eliminating the deferral would create a clearer choice: service, employment, or another publicly accountable framework, rather than a system where avoiding the army also discourages work. Aminoach said the army’s requirement is practical and urgent.
“The army lacks fighters, not clerks,” he said.
Shaul Meridor, a former senior Finance Ministry official, brought the discussion from national totals to individual Israeli family level. He described a middle- or lower-middle-class family in places such as Migdal HaEmek or Dimona, with five children, one serving in Lebanon, and struggling financially. Based on 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 theoretical.
“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 maintained that Israel’s current policies damage ultra-Orthodox children themselves by directing them toward poverty.
“As leadership, we must not condemn Haredi children to poverty,” he said. “And that is what we are doing today.”
His suggested principle was straightforward: those who serve should receive benefits, those who don’t serve should not. Combat service, he said, should receive the most; other service should receive less; avoidance should receive nothing. But he warned that dismantling ultra-Orthodox autonomy wouldn’t happen through one major law. It would require changes in thousands of government decisions, benefits, tax rules, and allocations that currently favor institutions over individuals.
Political speakers addressed the same matter from various angles. Bennett concentrated on education and subsidies, using his remarks to criticize daycare payments for families where the father doesn’t work and doesn’t serve. He also suggested broad education reform based on a shared state curriculum, while maintaining limited community autonomy.
Avigdor Liberman, chairman of Yisrael Beitenu and a former defense and finance minister, approached the issue through coalition politics. In a discussion with Yohanan Plesner, president of the Israel Democracy Institute, Liberman contended that Israel cannot maintain higher defense spending while preserving sectoral budgets and avoiding structural reform. He said meaningful change would require a government not reliant on the ultra-Orthodox parties Shas and United Torah Judaism.
Former Defense Minister Benny Gantz provided a more measured criticism. He said parts of the ultra-Orthodox leadership were making a serious error by continuing a situation where the community takes precedence over the state. Simultaneously, he stressed that there are ultra-Orthodox who work, study, serve, and contribute to the economy, and they deserve recognition.
Meirav Cohen, a Yesh Atid lawmaker and former minister for social equality, used Jerusalem as a cautionary example. Speaking as a Jerusalem resident, she said the capital already demonstrates what occurs when integration in the army, employment, and education doesn’t advance quickly enough. Jerusalem, she said, has dropped in fewer 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 bear some of Israel’s highest municipal tax burdens.
“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 focused on rising security costs and shrinking civilian spending space. Former Bank of Israel Governor Karnit Flug said in the opening budget session that Israel’s economy had demonstrated resilience, but the Israel-Hamas war had imposed a significant cost. Defense spending, she said, now reaches nearly 8% of GDP, compared with slightly more than 4% before October 7, 2023. Its budget share has increased to about one-quarter, compared with 16% before the war.
This broader fiscal context helps explain why ultra-Orthodox integration is no longer viewed solely as a dispute over religious exemptions. Israel is attempting to fund a larger defense establishment, increased rehabilitation needs, more reservist support, 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 increasing.
Artificial intelligence and technology added another dimension. The Israel Innovation Authority’s 2026 report, presented at the conference, showed that technology remains Israel’s primary 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 employment share stagnation, declining research and development jobs in Israel, activity expansion abroad, and growing pressure from currency appreciation.
This is why ultra-Orthodox integration now intersects with the artificial intelligence discussion. Israel wants to compete in a global economy based on advanced skills, data science, engineering, defense technology, and artificial intelligence. But a growing portion of its future workforce is educated in systems that often don’t provide the tools required for that economy. The point wasn’t 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 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 requirements for opportunity.
The challenge of ultra-Orthodox integration doesn’t fit easily into familiar categories of minority rights or welfare policy. In Israel, it connects to compulsory service, repeated wars, high defense costs, a knowledge-based economy, and a parliamentary system where 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. This is why the discussion has become one of the country’s central governance tests.
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 community institutions. Some warned against coercion that could backfire, while others argued that decades of gradualism have failed. But there was notable agreement 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 expressed the warning in the most direct 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 assessment of 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.
