Author: Calcalist (Israel) Posted July 10, 2012
The [public] debate on the enlistment of ultra-orthodox Jews to military or civilian national service, which captured the headlines following the dismantling of the Plesner Committee [by Prime Minister Netanyahu last week], has raised once again the question of values vis-à-vis the economic profitability of the enlistment of ultra-orthodox Jews to military service. Under the tentative proposal meanwhile formulated, as an alternative, draft-age ultra-orthodox Jews would be enabled to do civilian national service within their community.
While the political establishment is locked in a heated controversy over the issue, the Finance Minister is all for the proposed move of mandatory service for all, including the ultra-orthodox Jewish community in Israel. However, the question of the economic profitability of military service for all or civilian national service for all is raised in this context. Indeed, one may wonder whether the Treasury is expecting the move of mandatory military or civilian national service for all to promote the integration of the ultra-orthodox Jewish community into the workforce.
Axiomatic Premise: The Israeli labor market needs the ultra-orthodox Jewish workforce
There is virtually no dispute over the necessity for the participation of the ultra-orthodox Jewish community in the Israeli labor market. It emerges from research done by various bodies that the low workforce participation rate of the ultra-orthodox Jewish community is causing real damage to the Israeli market. In fact, in response to the Knesset Foreign Affairs and Defense Committee inquiry regarding the estimated economic impact of the absence of the ultra-orthodox Jewish community from the labor market, Eldad Shidlovsky, head of the Finance Ministry's Economics and Research Department, stated that "the direct loss in terms of the overall [gross] domestic product in 2009 due to the long overdue integration of the ultra-orthodox Jewish community into the workforce is estimated at some 1 billion dollars (about 4 billion shekels)."Israel's overall [gross] domestic product in 2009 amounted to roughly 195 billion dollars (765.9 billion shekels).
The loss in terms of the overall [gross] domestic product due to the exemption from military service of ultra-orthodox Jews, which precludes the shortening of regular and reserve periods of military service, is estimated at more than $500 million (around 2 billion shekels) annually. The loss of direct taxes due to the delayed integration of ultra-orthodox rabbinical college ("yeshiva") students into the workforce is estimated at approximately $230 million (about 0.9 billion shekels) [per year].According to the Treasury estimates, an increase in the number of soldiers in service would enable the shortening of [regular] military service by at leastfour months, as well as the reduction of the number of days of reserve service required each year. As a result, "the workforce is expected to grow by some 0.23 percent, which means an [annual] addition of nearly 460 million dollars (1.8 billion shekels) to the overall [gross] domestic product," the response submitted by the Finance Ministry's Economics and Research Department further states.
Another governmental body in favor of the integration of the ultra-orthodox Jewish community into the workforce [following military or civilian national service] is the National Economic Council. Addressing the Plesner Committee, Prof. Eugene Kandel, who heads the Council, warned that "if the current trends continue, the State of Israel is liable to reach a situation where it will not be able to fund its security needs." Prof. Kandel submitted his recommendations for the establishment of mechanisms that would enable the use of economic incentives, both positive and negative, with the aim of encouraging ultra-orthodox Jewish populations to join either the military or the civilian national service and, later on, the labor market.
The question of whether there is a direct correlation between military or civilian national service and subsequent integration into the workforce has not received a clear-cut answer in the Plesner Committee. According to a slideshow presented to the committee members by the National Economic Council, it is estimated that while the workforce participation rate among secular Israeli men stands at about 85%, the corresponding rate in the ultra-orthodox Jewish community is only a little over a half (45%). According to the Council's estimates, if workforce participation rates in the ultra-orthodox Jewish community reach the rates common in the secular society, even while other characteristic parameters of the ultra-orthodox workforce, i.e. low wages and only limited number of work hours, remain the same, Israel's overall [gross] domestic product will increase by 0.5% to 2% annually. At the same time, governmental sources note that these are merely rough estimates and that the real numbers cannot be accurately forecast. Those same sources further note that the International Monetary Fund (IMF) forecast of last year suggested a totally different growth figure, of some 15% estimated increase of the overall [gross] domestic product. What's more, the Plesner Committee has not managed to reach a definite conclusion with respect to the question whether doing military or civilian national service will actually encourage the ultra-orthodox to look for work once they finish their service.
Mandatory service as a springboard to integration into the workforce
The key question on the agenda in this context, from the economic point of view, is therefore whether enlisting the ultra-orthodox to military or civilian national service will indeed boost their participation in the labor market. Rather gloomy forecasts emerge from the data concerning the ultra-orthodox Jewish community in Israel released by the Ministry of Industry, Trade and Labor's Research and Economics Administration. It transpires that only 22% of ultra-orthodox volunteers to civilian national service declared in 2011 that they worked during their civil service, which they are entitled to do under the law.
Governmental sources note that according to the rosy scenarios outlined, ultra-orthodox Jews doing military or civilian national service will succeed in leveraging their service "to get out of the Ghetto." They will acquire higher education, advance up the academic ladder and find lucrative jobs. Birth rates [in the ultra-orthodox community] will subsequently decline and eventually, the contribution to the overall [gross] domestic product will increase in proportion.The sources note, for example, that about 80 percent of the ultra-orthodox draftees to the "Shahar" vocational tracks of the army join the workforce following their military service. However, as of today, they number no more than a few hundred and it is a chosen group of highly motivated volunteers who are anyhow interested in joining the workforce. As to the ultra-orthodox "Nahal" infantry battalion draftees, there are no substantial data as yet regarding their integration into the workforce following their military service.
"I believe that the enlistment of the ultra-orthodox to military service will motivate them to earn their living on a high level," says former Minister of Education Prof. Amnon Rubinstein."At least, I hope so. We have no scientific corroboration for it; however, we know that in general, military service is conducive to job success later on, since the army imparts know-how and professional skills, as well as social abilities. There is no doubt that those who do regular military service find it much easier to get on in the labor market. Such service is all the more significant for the ultra-orthodox, whose education is inadequate as far as the core studies are concerned."
Rubinstein further notes that "it all depends on the rabbis or, more precisely, on the pressure exerted on the rabbis. It's doubtful whether anything can change as long as they receive financial benefits for not serving in the army. Their motivation to do military service will no doubt be enhanced once the state benefits are no longer granted to those who do not do either military or civilian national service. As a matter of fact, their service in the army is a long-term investment. Those who have "made it" here, in Israel, invariably attribute their success to their army service, as aptly illustrated in the book Start-up Nation [Start-up Nation: The Story of Israel's Economic Miracle].The ultra-orthodox have outstanding skills, especially those required in high-tech, acquired by studying the religious texts of the Talmud and Gemara [which composes, with the Mishnah, the core commentary text of Jewish Rabbinical ancient sources], and if they enlist in the army, they will be able to advance and make a living."
Only a quarter of civilian national service veterans say they have personally benefited by their service
"If the ultra-orthodox enlist in the army, it will open their eyes, in the context of work as well," says Prof. Dan Ben David, Executive Director of the Taub Center for Social Policy Research in Israel and a professor of economics at the Tel-Aviv University. "However, unless they acquire the tools needed for work in the modern market, which they lack since they study the core subjects only up to eighth grade, and unless the funds they receive aboveboard, in the form of allowances, and under the table, through various associations, are halted, they will not be able to integrate into the labor market. And this is a problem that nobody has offered a solution to. This is the major issue that no one is dealing with, what skills does an ultra-orthodox young man have that qualify him for the labor market?"
It should be noted in this context that according to the data published by the Ministry of Industry, Trade and Labor, 80% of the ultra-orthodox volunteering for civilian national service have not taken advantage of the opportunity offered them to study during service, whether in vocational education frameworks or in higher education institutions. It emerges from another research conducted by the Ministry of Industry, Trade and Labor about six months ago that 37 percent of civilian national service veterans claim that the main benefit they derived from their service is the ultimate exemption from military service and only about a quarter of the service veterans (23%)say they have significantly benefited by their service, in terms of rich life experience and personal development.
"When all is said and done, nothing is going to induce them to enter the labor market. The ultra-orthodox will not enlist in the army and the civilian national service is bound to become another channel for streaming funds to the ultra-orthodox community, so that not only the State is not going to profit by it, it will actually lose," says Prof. Omer Moav, former adviser to the Finance Minister and a lecturer at the Hebrew University of Jerusalem and the London University. "I think that there are numerous advantages in enlisting the ultra-orthodox in the IDF and if it really happens, it will be great, both in economic terms and from the point of view of the sense of equality. However, they have to be motivated. In my opinion, the civilian national service is a big mistake. For one thing, it does not solve the problem of discrimination and beyond that, it will cause serious economic damage to the state, and it will certainly not lead to their integration into the workforce.Let's say they work a few hours a week in community service – we can imagine them helping the elderly in hospitals, for instance. However, even that will not happen, as they will do the service within their own community and end up as tutors to rabbinical college students or in some other similar job. It's a fiction that is going to cost the State of Israel a lot of money."
Moav goes on to explain his arguments, noting that in case the ultra-orthodox are enabled to get away with civilian national service, they will still enjoy the benefits granted to those doing full military service. And since they are entitled to deferment of military service and enlist when already married and with children, they stand to receive monthly wages amounting to some $1,300 (5,000 shekels), so that we, law-abiding tax payers, will go on financing them through this channel as well."
According to Moav, the ultra-orthodox are not enthusiastic about the proposal for civilian national service since "in the ultra-orthodox community they are vying for the top ranking on the scale of extremism, in the matter of national service as in other matters, notwithstanding the fact that it may serve as another channel for streaming funds to their community. The leaders of the ultra-orthodox community are interested first and foremost in assuring that the community members will not work and will not have money. The issue of civilian national service "is problematic from another aspect as well, as suppose that my son decides all of a sudden that he would rather do civilian national service than enlist in the army. In any event, they cannot be forced to do anything, and it is not going to be economically profitable for the Israeli market. There is something unhealthy, both socially and economically, about the possibility of employing people that cost nothing. An institution that has to pay for its workers would use them judiciously, since it eventually going to cost him."
In conclusion Moav says that "if we really wish to integrate the ultra-orthodox into the workforce, we should do three things: exempt them from military service, allow them to work, which they are currently barred from doing [as long as they are registered as rabbinical college students], and stop funding them, so that they will have no choice [but to go out to work].
Read More: http://www.al-monitor.com/pulse/business/2012/07/enlisting-ultra-orthodox-jews-to.html