Bank of Israel sees no benefit in conscription bill

The Bank of Israel opposes the conscription bill. In an opinion published today, the central bank warned that the proposed law is “deficient,” because the targets set by the bill are low and the economic incentives are ineffective.

“The issue of drafting haredim has preoccupied Israeli society for many decades,” the opinion states. “Over these decades, the size of the haredi community has grown greatly from a few percent (of Israeli society) to more than 10% today and based on the distribution of the population aged 0-15, it is expected to triple in the coming decades. Due to the sharp increase in the required amount of reserve duty since October 7, 2023, the issue of drafting haredi men has become a security issue with major macroeconomic implications.”

According to estimates compiled by the Bank of Israel, the economic cost of a month of enlistment for a reservist (aged about 30) is an estimated NIS 38,000. According to the bank, 80% of this amount reflects the direct and immediate cost of lost productivity during reserve duty, and the remainder reflects the future damage to productivity growth as a result of loss of experience and/or promotion at work. The Ministry of Finance estimated the amount at about NIS 50,000.

On the other hand, the Bank of Israel says, “The economic cost of conscripting a young Haredi for compulsory service is very low, because in most cases conscription does not replace participation in the job market. It is also possible that conscription itself will increase the incentive for young haredim to join the job market at a young age due to the abolition of the obligation to be registered as students in a yeshiva as a condition for receiving an exemption from conscription. Accordingly, conscripting a young haredi for 32 months of service could, on average, even achieve a capitalized economic benefit estimated at NIS 22,000 per month of service on average, if as a result, the scope of employment of the young haredi who enlists is comparable with that of a non-haredi Jew.”

Thus, any addition to the regular army of 20,000 conscripts from among haredi men consistently, with an annual recruitment of 7,500 haredi men for 32 months, in a way that allows savings in reservists, will reduce the annual economic cost to the economy over time by at least NIS 9 billion, which constitutes 0.4% of GDP. In the event that employment among the haredim increases significantly following recruitment, the extra income over time reaches up to NIS 14 billion per year, which constitutes 0.7% of annual GDP.

“The wording of the law is deficient in a way that will not result in the recruitment of haredi men that meets security needs while reducing economic cost,” the Bank of Israel stated.

Ineffective sanctions and incentives

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The Bank of Israel cites two problems contained in the bill. “The minimum annual threshold for avoiding sanctions is lower than the IDF’s needs and is not significantly higher than the current situation; and the economic incentives for conscription (in the form of avoiding sanctions) are “so ineffective that it is unlikely that even the modest conscription goals set will be met.”

The conscription target for the first period, about 18 months, is slightly over 8,000 haredi men. But the bank explains that in annual terms, and due to the fact that about 10% of the target will be filled by civilian security services, this is less than 5,000. However, currently, about 3,000 young haredi men have enlisted. Only starting in the fifth year is the effective minimum threshold for conscription 50% of the turnover (i.e. about 7,000 out of 14,000 young men).

“Moreover, the conscription targets do not refer to military positions, or even the age of the recruits, so that, A situation will arise in which a significant portion of those conscripted are not intended for or suitable for combat roles, in which the army has a shortage, and therefore will only slightly reduce the economic cost of the increased security needs,” the opinion states.

The sanctions proposed for those under 26 who do not serve in the army will have low effectiveness in creating incentives. Denial of a driver’s license and prevention from leaving the country are sanctions that, in the Bank of Israel’ opinion, have little relevance to haredi society. “Sanctions such as cancellation of eligibility for student scholarships and prevention of affirmative action in employment in the public sector are irrelevant, since in any case yeshiva students are not permitted to work or study in the higher education system. The effectiveness of the sanctions, once it becomes clear that the targets have not been met, is also not particularly high.”

The Bank of Israel noted, “Enacting the law in its current form may not lead to a significant change in the scope of conscription, thus preserving the individual and economic burden resulting from the army’s extensive use of reservists.”

The Bank of Israel calls for an amendment to the wording of the bill.

Published by Globes, Israel business news – en.globes.co.il – on December 11, 2025.

© Copyright of Globes Publisher Itonut (1983) Ltd., 2025.