Israel’s Public Funds Shift From Shared Needs

In 2024, Israel’s government spent NIS 37.5 billion ($12.2 billion) on subsidies, benefits and discounts for the ultra-Orthodox community—NIS 10.83 billion ($3.5 billion) more than it invested in hospitals and higher education combined, according to Prof. Dan Ben-David. The Shoresh Institution for Socioeconomic Research president says political priorities have shifted from national needs to sectoral interests. That shift has a price tag in the budget.

Ben-David said large numbers of ultra-Orthodox community members neither work nor serve in the IDF. His figures set that spending against investment in hospitals and higher education, while Israel’s labor productivity in 2024 ranked below every G7 country except Japan. The state has money to allocate. The dispute is over who directs it, and whose needs get priority.

Budgets and the state’s priorities

Ben-David said Israel once used public investment in national infrastructure to close its productivity gap and surpass G7 countries by the mid-1970s. He said that pattern has reversed, pointing to underinvestment in physical infrastructure, healthcare, higher education and human capital.

He rejected the claim that unusually high defense spending explains the shortfall in civilian investment. “The problem was never a lack of resources, but a diversion of public funds from national priorities to sectoral and personal ones by the nation's leaders,” he said. He added that, until recent years, Israel’s civilian expenditures exceeded or equaled the OECD average.

The technology sector accounts for 10% of the workforce and is 22% more productive than the OECD average, Ben-David found. The remaining 90% of Israeli workers average 24% less. He said 20% of workers fund 93% of income-tax revenue, while half earn too little to pay income tax. These figures describe an economy where a narrow slice of workers carries a large share of tax receipts, while public support goes unevenly across sectors.

Education shaped long before work

Israel’s average scores in math, science and reading were near the bottom of the OECD in the 2025 PISA exam, as they had been over the past two decades. Ben-David said the 2025 results were Israel’s worst. He said the national average would have been worse if Haredi boys, who tend not to study those core subjects, had been included.

Around half of children—including Arab Israelis, Haredim and pupils in geographic and social peripheries—receive a subpar education, Ben-David said. He warned that the rapidly growing population groups’ workforce skills “are being shaped – and constrained – decades before these children enter the labor market.” More Haredim are pursuing higher education, he said, but few can overcome the lack of core education in childhood.

Jerusalem’s school figures chart the changing composition of the city’s classrooms. From 1988 to 2025, the share of primary-school pupils in the secular Jewish education stream fell from 33% to 9%. In 2025, Arab pupils represented 37% of primary-school enrollment and Haredim 41%.

Emigration and proposed fixes

Ben-David said employment among Haredi men fell from more than 80% in 1979 to about 60% in recent years, a trend he attributed to government incentives not to work. Haredim accounted for 6% of the population aged 50 to 54 in 2023, while their grandchildren made up 26% of toddlers, according to his figures.

The government’s judicial overhaul effort began in January 2023. Ben-David said multifront wars sparked by the Hamas invasion and massacre on October 7 that year followed. Native-born emigrants from Israel, many highly educated professionals, exceeded returnees by 160% in 2026, he said. From 2009 to 2022, annual emigrants exceeded returnees by 43%, except in 2020.

Ben-David recommends combining the four current education streams—public secular, religious, Arab and independent Haredi schools—into one system with a largely uniform curriculum and room for parental preferences. He also calls for shifting government funding from sectoral to national priorities and enforcing full public transparency. Those proposals would change how the state distributes resources. His research puts the 2024 spending at NIS 37.5 billion.