Last March, the Israeli government passed its largest budget in history. Buried in the fine print, approved at midnight, through a parliamentary trick so effective that opposition lawmakers accidentally voted for it, was NIS 800 million in fresh funding for yeshivas and ultra-Orthodox institutions. For those who have not served a single day in the IDF or Reserves, and whose communities received NIS 2.2 billion in coalition funds in that same budget cycle.
The same week as that vote, a 23-year-old engineering student, returning from his fifth rotation in reserves, found himself falling behind as the classes had moved on without him. His reservist compensation? NIS 311 a day, the legal minimum. His tax benefit? Barely worth the form he filed to claim it.
This is not just a moral failure. It is an economic one. And it deserves to be called what it is: a system that taxes the future to subsidize inaction.
Israel’s hi-tech sector is the backbone of the state. It accounts for 17% of GDP and 57% of exports, and drives the country’s global competitiveness. The government’s own Inter-Ministerial Committee on High-Tech called technological education “Our Iron Dome.” Without a continuous pipeline of engineers and scientists, the pipes can break, and what we see now is.
That pipeline is cracking.
Ben-Gurion University, which trains roughly a third of Israel’s engineers, warned that hundreds of its students risk graduating a year late. From just their university. Multiply that across several major institutions and 70,000 student-reservists, and the scale becomes clear.
Israel's hi-tech workforce shrinks
The Israel Innovation Authority found the hi-tech workforce shrank for the first time in a decade in 2025. Junior candidates now have a 5% chance of landing a tech job. Not because the sector is declining, but because the people who would want to get the job are exhausted from reserves, busy catching up with their studies, or gone abroad.
Between 2023 and 2024, roughly 90,000 Israelis left the country. And they’re, for the most part, young, educated, and secular, the same demographic that is serving and fighting. Tel Aviv University researchers warned the trend could trigger a brain drain comparable to those that hollowed out Venezuela and South Africa. Nobel laureate Aaron Ciechanover called it an existential threat.
So what does the Israeli government offer?
A compensation system that rewards the reservists with a tax credit, the headline benefit, is worth NIS 242 per credit point per month. For a senior tech employee earning NIS 30,000 a month, this is great. Yet for a student earning NIS 4,000 to 5,000 from a part-time job, which most student-reservists do, it barely registers. The State Comptroller confirmed that 57% of student-reservists received only minimum compensation.
The Finance Committee chairman admitted the original bill “discriminated against lower earners.” The government’s answer to years of interrupted studies and financial loss was a digital wallet capped at NIS 5,000, usable only for government fees or leisure.
The more you earned before the war, the more the state gives back. The younger and less established you are, the more you lose and the less you receive.
In IPE terms, this is a misallocation of human capital at the national level. A state that draws its most productive future workers from the education system for years, undercompensates them, and then watches them leave is consuming its own foundations.
And while student-reservists filed for credits they could barely use, the Knesset approved, in the same budget and session, NIS 1.56 billion for yeshivas whose students are legally required to serve but do not.
The Bank of Israel estimated that haredi non-enlistment costs the economy NIS 9 billion annually. Each month of reserve duty costs NIS 50,000 per soldier in lost output, NIS 660 million every single week. That burden falls almost entirely on the secular, working, tax-paying population already doing the serving.
Finance Minister Bezalel Smotrich said of the reservist benefits law: “Those who contribute more, receive more.” He signed both bills.
This contradiction is not subtle. It is a political economy that extracts sacrifice from one group, rewards another for its absence, and counts on patriotism to keep this injustice quiet.
With elections due by October 2026, this should be the defining issue. Polls show that 60% of voters, including former coalition supporters, say the draft exemption is a dealbreaker. The people being failed most – young, overdeployed – are the same people being asked to vote for another term of the same government.
Every reservist who leaves Israel to work abroad takes years of state investment with them.
Every yeshiva funded by young reservists and students is a bet against Israel’s future.
The government likes to say that Israel’s strength is its people. It is time to govern like that is actually true. Go out and vote!
The writer is a lone soldier and oleh who moved to Israel 8 years ago. He is an active Israeli special forces reservist, having served nearly 400 days of reserve duty since October 7, and a 3rd-year Government student in the Argov Fellows program in Leadership and Diplomacy at Reichman University’s International School.