The allocation of billions of shekels in coalition funds that will mostly go toward increasing support for ultra-Orthodox institutions and programs is threatening to turn Israel into a third-world country, a group of 280 senior economists warned on Sunday.
In a letter signed by senior economists, the group urged the government to “come to its senses” and reconsider the allocation of discretionary funds worth at least NIS 13.7 billion ($3.78 billion) that have been promised to meet coalition commitments. The discretionary funds are part of the 2023-24 budget package coming up for a vote this week, which needs be approved by May 29 to avoid triggering new elections.
“We, lecturers in the fields of economics and management… warn that the transfer of funds that are part of the coalition agreements reflected in the upcoming budget is expected to cause significant and long-term damage to Israel’s economy and its future as a prosperous country,” the economists wrote. “The allocation of coalition funds is currently being granted for short-term political considerations, but they will transform Israel in the long run from an advanced and prosperous country to a backward country in which a large part of the population lacks basic skills for life in the 21st century.”
The economists cited the “unprecedented” increase in the allocation of funds to non-official ultra-Orthodox educational institutions, which are not subject to supervision by the Education Ministry and do not teach core studies such as math, science or English. They also raised concern about the financial boost for Haredi yeshiva students and the planned distribution of food vouchers, through channels outside the normal welfare system, without any employment requirement.
The sum of money known as “coalition funds” has in recent years been distributed from the state budget to meet parties’ sectoral demands and have evolved as a condition for their support to pass the budget. In recent months, Prime Minister Benjamin Netanyahu’s Likud party has made generous promises to secure the support of its ultra-Orthodox and far-right coalition partners.
Out of NIS 13.7 billion in coalition funds, about NIS 3.7 billion are promised to be spent on increasing spending for stipends at yeshiva student institutions. Another NIS 1.2 billion is budgeted for private, non-supervised educational institutions, which also do not teach core subjects. About NIS 1 billion is directed as an allowance for the food voucher program being pushed by Shas party leader Aryeh Deri.
Over the weekend, the Agudat Yisrael faction of the United Torah Judaism (UTJ) party, led by Yitzhak Goldknopf, threatened to thwart the passage of the state budget unless demands for an additional NIS 600 million for full-time religious scholars are met.
“These steps will prevent Haredi children from acquiring basic skills essential for their integration into the labor market in an advanced economy, and will reduce the incentive of Haredi students to enter this market,” the economists argued in the letter. “Children need to receive an education that enables their integration into the job market and graduates need incentives to join the labor market.”
“Unfortunately, the Israeli government not only does not deal with this issue, but also chooses measures that exacerbate the problem,” the letter read.
Among the signatories of the letter are senior academics, including former Netanyahu economic adviser and National Economic Council head Prof. Eugene Kandel; Prof. Omer Moav, a former adviser to the finance minister; Prof. Avi Ben Bassat, a former director of the Finance Ministry; Prof. Udi Nisan, former budget head at the Finance Ministry; and Prof. Manuel Trajtenberg, who held a string of key government positions.
Also signing the letter are a group of former deputy governors of the Bank of Israel, including Prof. Avia Spivak, Nadine Trajtenberg, Prof. Zvi Eckstein, and Meir Sokolov, as well as additional former senior Bank of Israel officials.
The Knesset is this week preparing to vote on the 2023-2024 overall budget, allocating NIS 484.8 billion this year and NIS 513.7 billion in 2024, up from NIS 452.5 billion in 2022.
“Already today, almost a quarter of children below school age are born to Haredi families, and this percentage is expected to double by 2050,” the letter read. “Harming the Haredi public’s ability to integrate into a modern labor market will, first and foremost, do damage to the economic situation of the Haredi public itself, reduce the chances of Haredi adults earning a decent living, and increase the poverty rate among the Haredi population.”
Last week the Finance Ministry issued a warning that the allocation of the promised coalition funds could lead to trillions of shekels in lost gross domestic product in the coming years, if the move hampers the integration of the ultra-Orthodox population into the labor market.
The Finance Ministry estimated that with no change in the employment rate of the ultra-Orthodox population, the loss of cumulative GDP by the year 2060 is expected to be NIS 6.7 trillion.
“It is not only the ultra-Orthodox population that will be harmed: when a significant percentage of Israeli children do not acquire basic skills, it is self-evident that Israel will not be able to continue to be among the world’s developed economies,” the economists wrote in the Sunday letter. “The socioeconomic price will be reflected not only in the loss of GDP, but also in the fact that the economy will find it difficult to provide Israeli residents with health, education, transportation, and welfare services at the level of an advanced economy.”
The letter cautioned that the “current growth trend of the Haredi population doubling every 25 years, and Haredi children failing to acquire basic skills essential for the integration into a modern labor market, poses an existential threat to Israel’s future, because only advanced countries can finance military technologies necessary to protect their residents from threats on the future battlefield.”