New research: Lowering the Israeli military service exemption age for ultra-Orthodox men and its impact on their labor supply and other outcome variables
Research conducted by Avraham Zupnik, of the National Economic Council, and Noam Zussman, of the Bank of Israel’s Research Department, examined, for the first time, the effect that this exemption had on various outcome variables, including studies in a yeshiva, acquiring post-secondary and academic education, and employment and wages of ultra-Orthodox men and their spouses. The research population was limited to ultra-Orthodox men who studied in a yeshiva (and most of whom were deferring military service) and their spouses. Many administrative databases were used, and estimations were conducted for the years 2008–18. These estimations compared the outcome variables of ultra-Orthodox men in ages that were impacted by the changes in legislation with those who were not affected by them as they were younger, before and after they were imposed on ultra-Orthodox men (difference-in-differences method).
It was found that the “emptying the pool” led, by 2015, to a decline of approximately 6 percentage points (about 8 percent) in the probability of ultra-Orthodox men aged 23 to study in a “yeshiva”, compared to the probability for 21-year olds. In parallel, their relative probability of working increased by approximately 4 percentage points (about 10 percent), and the probability of working at minimum monthly wage or higher increased by about 3 percentage points (approximately 23 percent). The gross annual wage of a 23-year old ultra-Orthodox employee increased by about 19 percent (approximately NIS 5,900) compared with the wage of a 21-year old.
Comparing the outcome variables for 24-year olds with those for 22-year olds indicates that the probability of 24-year old ultra-Orthodox men studying in a yeshiva declined by 5.2 percentage points (about 7 percent), their probability of working increased by 3.3 percentage points (about 9 percent), and their probability of working for minimum monthly wage or higher increased by about 3.1 percentage points (about 21 percent). The gross annual wage of a 24-year old male ultra-Orthodox employee increased by about 7 percent (about NIS 2,500), while the spouse’s wage declined slightly, but with the increase in men’s employment, the family gross annual income from labor rose sharply by about 13 percent (about NIS 6,200). No differential effects of the reduction of the exemption age were found according to yeshiva type (Lithuanian, Hasidic, or Sephardic).
The effect on 26-years olds (as well as 25-year olds) compared with 22-year olds was even stronger: a decline of 8.6 percentage points (12 percent) in the probability of learning in a yeshiva, an increase of 5.0 percentage points (about 13 percent) in the probability of working, and an increase of about 24 percent in family annual wage (about NIS 12,800). No effect of reducing the exemption age on the outcome variables was found for 27-year olds compared with 28-year olds, and 34-year olds compared with 35-year olds.
Although it was not studied in the research, it may be that the effects found in the research would have been stronger if the ultra-Orthodox men had more skills that are relevant to the labor market—and accordingly, higher earning potential —and if the military service exemption would have been granted at a younger age, as at older ages their window of opportunity for acquiring education and successfully integrating into the labor market partially closes, because they are already married and raising children. It may be that lowering the exemption age can also lead in the long run to comprehensive structural changes, which by their nature are gradual.