Israel Faces Economic Strain From Growing Ultra-Orthodox Population
Translated & summarized from Vesty by baba
An analysis by Ynet warns that Israel's economy faces severe strain from the rapidly growing ultra-Orthodox population, projecting a 24% drop in average household tax contributions by 2050. This demographic shift, driven by high birth rates, could necessitate significant tax increases and cuts to public services. The report estimates annual economic losses of 250 billion shekels by 2050 due to low employment and military service exemptions. Reforms in education and employment are deemed crucial to avert these economic consequences.
The story in 6 lines · by baba
- Israel's economy risks tax hikes and service cuts due to ultra-Orthodox population growth.
- Average household tax contributions could fall 24% by 2050 if trends continue.
- Ultra-Orthodox population projected to be 22% of Israel by 2045, 32% by 2065.
- Ultra-Orthodox families currently receive more state benefits than they contribute in taxes.
- Military service exemptions for ultra-Orthodox men cost the economy over 10 billion shekels annually.
- Reforms in education and employment are crucial to mitigate economic risks.
Israel risks significant tax hikes and drastic cuts to public services if the rapid growth of its ultra-Orthodox population is not accompanied by reforms in education, employment, and military service. This warning comes from Ynet's economic commentator Gad Lior and data analyst Yaron Druckman, whose analysis was published on October 15. They project that under current trends, average household tax contributions could fall by 24% by 2050. The Ministry of Finance estimates this would necessitate raising VAT from 18% to at least 22%, increasing income taxes, and reducing spending on healthcare, education, and social welfare.
The analysis highlights that the ultra-Orthodox population is projected to reach 22% of Israel's total population by 2045, and 32% by 2065, driven by significantly higher birth rates. By 2030, they are expected to constitute a quarter of residents under 20. This demographic shift poses an economic challenge due to a combination of population growth, low male employment rates, and lower average incomes among the ultra-Orthodox.
Currently, the average non-ultra-Orthodox Jewish family contributes 6,614 shekels more to the state annually than it receives in benefits, while the average ultra-Orthodox family receives 4,137 shekels more than it contributes. The economic cost of the current situation, including lost GDP and increased social welfare payments, is estimated to reach 250 billion shekels annually by 2050. Furthermore, the exemption of many ultra-Orthodox men from military service costs the economy over 10 billion shekels per year, a figure projected to rise significantly.
While the ultra-Orthodox population's growth presents challenges, the report also notes potential economic gains from the Arab population, particularly through increased female employment and higher educational attainment. However, without significant policy changes in education and employment for the ultra-Orthodox community, the state's ability to fund essential services could decline by at least 12% by 2065.
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