"Raising the exemption age to 26 will put us back an entire decade in the efforts to integrate haredi men into the labor market," government sources dealing with this issue said today, commenting on the draft of the bill to amend the Conscription Law approved by the ministerial legislation committee today. "We are shooting ourselves in the foot," the same sources added.
Economists and researchers found it hard to estimate the extent of the damage to the economy that will result from adopting the bill in its current format. In 2009, for example, in response to a query by the Knesset Foreign Affairs and Defense Committee, the Ministry of Finance estimated at NIS 4 billion annually the direct loss of product to the economy as a result of the deferment of the entry of haredim into the labor market by one year. Since then, the number of those receiving exemption from military service has risen substantially.
"The function is basically yeshiva or army," says Asaf Malchi, a researcher at the Israel Democracy Institute and coordinator of research on the haredi community at the Ministry of Social Affairs and Social Services. "The rabbis and politicians are creating a trap for the students here. They are saying something very simple - the more we tie military service to the labor market, the later the age to which a haredi young man will have to be registered at a yeshiva. The Ministry of Finance and the economic ministries on the other hand would prefer to give the exemption at age 18, so that the haredim will enter the labor market as early as possible and start accumulating experience."
The wording of the bill on non-recruitment of Torah students to the IDF was approved by the ministerial legislation committee today. The draft that was approved states that the exemption from military service will be granted at age 26, instead of 24 under current law. The implication for the economy is clear: most haredi men will remain in the yeshiva for another two years before entering the labor market. This means the loss of two very important years from the point of view of acquiring the skills that will facilitate integration into the labor market in the long term. According to one estimate, raising the exemption age by two years is liable to reduce the rate of participation in the workforce by haredi men by 4 to 6 percentage points, which means taking the rate from 51% back to around 45%, a similar participation rate to that for Arab women.
The success of the integration of haredi men into the labor market is critically important for Israel's economic future. Governor of the Bank of Israel Karnit Flug, senior economists, and recently the OECD in its annual report on Israel, have described this issue as the number one problem for the Israeli economy in the long term. The problem concerns haredi men (and Arab women) - the workforce participation rate of haredi women is about 70%, which is higher than the rate for women in the OECD, and close to the general rate for women in Israel. The huge demographic growth in the haredi community will make the problem worse over time: according to the Central Bureau of Statistics' estimates, the haredi community as a proportion of Israel's population will grow from 19% today to 32% around the year 2050.
Reducing the age at which they become exempt from compulsory military service has emerged as the most effective means of encouraging the integration of haredi men into the labor market. A survey of the participation rate statistics over the past few decades shows that the rate among haredi men was in constant decline until 2002, when the Tal law was enacted. That year, the trend reversed, and a steady rise in the participation rate by haredi men began.
Further significant dates were 2012, when, following the striking down of the Tal law by the High Court of Justice, the Gabai committee set quotas for military service for haredim and thereby gave exemptions to thousands of yeshiva students; and 2014, when in the wake of the Law for Equal Sharing of the Burden initiated by Yair Lapid, tens of thousands of haredi young men again received exemptions from service. Following Lapid's law and the work of the Shaked committee, the age of exemption from military service was lowered from 28 to 24. The effect was clear: within a year, the rate of participation in the workforce shot up, from 44.7% at the beginning of 2014 to 53.8% in 2015. In other words, within a year progress was made in the integration of haredi men into the workforce that amounted to 60-80% of the progress that had been made in the previous decade. "If there is one community that responds very strongly to incentives, it's the haredi community," government sources say.
Published by Globes [online], Israel business news - www.globes-online.com - on March 12, 2018
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