The Ministry of Finance opposes the Basic Law: Torah Study and warns of economic damage that will follow from extensive reserve military service by the non-haredi population and the incentive for haredim not to join the labor market. The ministry warns that the damage will be such that within thirty years the government will have to raise direct taxes by 16% in order to maintain the same level of service to the public.
The Basic Law: Torah Study was given a first reading by the Knesset last Wednesday, as the government attempts to pass it before the Knesset is dissolved. This is part of a deal struck by Prime Minister Benjamin Netanyahu with the haredi parties whereby they will support government legislation.
The bill establishes study of Torah as a fundamental value of the State of Israel, serving as a counterweight to the value of equality as derived from the Basic Law: Human Dignity and Liberty. The underlying intention is to create a constitutional structure that will allow exemption from military service.
In his legal opinion, the legal counsel in the Ministry of Finance states that the budgetary cost of the law cannot be estimated, but that a certain interpretation of it could lead to the allocation of extensive budgetary resources.
“There is a real fear that the bill will damage efforts to raise the number of those drafted into the IDF among the haredi male population and to reduce the number of reserve duty days and the burden on those who serve, when the economic burden arising from reserve duty is worsening,” the opinion states.
It also states that the law is liable to strengthen the incentives that prevent the haredi male population from joining the workforce.
The aim of the law as formulated is “recognition of Torah study as a basic value of the State of Israel in order to create a just balance versus other basic values of the state.” On this, the Ministry of Finance says, “To the extent that the interpretation of the basic law is that the right to study Torah supersedes the right to equality and other constitutional rights, as can be concluded from the preamble, this is liable to have extremely significant budgetary and economic consequences.”
The economic impact of reserve duty without conscription of haredim is dramatic. According to the Ministry of Finance, “The financial cost to the economy of one month of reserve duty by a single person averages NIS 50,000. For the period 2023-2026 the cumulative cost to the economy of reserve duty will amount to some NIS 170 billion.
“Therefore, if reserve soldiers continue to serve for several months a year, the annual economic cost will be in the tens of billions of shekels. In addition, drafting the reserves has heavy budgetary implications. From the beginning of the war to the end of 2026 government expenditure on reserve military service will amount to some NIS 115 billion.
The Ministry of Finance stresses that the proportion of haredi men who participate in the workforce stands at 50%, with no improvement in the past decade. This has an impact both on the economy and on poverty in haredi society. The impact is seen growing given the forecast of the Central Bureau of Statistics that in 2065 haredi society will account for a third of Israel’s population.
“As a result, in the absence of growth in employment of haredi men, in 2065 there will be a need to raise direct taxes on the citizens of the country by 16% in order to maintain the same level of services that the state provides today without increasing the permissible fiscal deficit in the state budget,” the opinion states.
“It should be emphasized that the failure to integrate haredi men into the labor market stems from various causes, but to a large extent it is a result of a set of economic incentives that encourages non-integration in the labor market, through government financial aid that is not conditional on joining the workforce and in some cases even reduces or is cancelled when someone does go out to work.
“The financial value of the benefits given to a person who does not work is estimated at thousands of shekels monthly for each household, amounting to tens of thousands of shekels annually, and representing an alternative income to joining the labor market, and one of the main obstacles to expanding employment among this group,” the Ministry of Finance paper states.
Published by Globes, Israel business news – en.globes.co.il – on July 6, 2026.
© Copyright of Globes Publisher Itonut (1983) Ltd., 2026.
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