Economic incentives matter, and can change behavior. Just ask Benjamin Netanyahu — not Netanyahu the prime minister, but Netanyahu the finance minister.
That question lies at the heart of a bill restoring daycare subsidies to thousands of haredi families, one of the coalition's final legislative priorities before elections in a few months.
Supporters argue the legislation is about helping working mothers. Opponents contend it would remove one of the few pressures that appear to be increasing military enlistment among haredim.
The bill passed its first reading last week and was debated in the Finance Committee on Wednesday.
It would establish new eligibility criteria for daycare subsidies based solely on the mother's employment status, regardless of whether the father is serving in the military, working, or participating in vocational training.
Why has this become a political flashpoint?
Because many of the people opposing the bill believe they have seen this movie before.
How did Israel get haredim to join the workforce in the first place?
Netanyahu was the finance minister in Ariel Sharon's government in 2003, when the economy was a mess. Growth was stagnant, unemployment was high, government spending had ballooned, and the economy was being battered by the Second Intifada.
Netanyahu argued then that the country's generous welfare system acted as a disincentive to work, and he decided to cut one of its main pillars: the child allowance payments.
For decades, child allowances increased dramatically with each additional child. The fourth, fifth, sixth, seventh, and beyond, generated increasingly large payments. Netanyahu instituted a flat payment per child, dramatically reducing payments to large families, which were disproportionately found in the haredi and Arab sectors.
One reason he was able to take such a step was that there were no haredi parties in the government at the time to oppose it.
And these payment cuts made a difference.
Many attribute that step to triggering societal change in haredi society — women entering the workforce in large numbers, and even an increase in haredi men joining it.
The numbers tell the story.
The employment rate of haredi women in 2002-2003 was about 50%. By 2015, it had climbed to 73%, and now, according to the Israel Democracy Institute, it stands at 81%, roughly the same as among non-haredi Jewish women.
Employment among haredi men also increased, though less dramatically, from 43% in 2003 to 53% today.
The child allowance cuts are considered one of the main drivers behind that change, though not the only one. The lesson many policymakers drew was straightforward: economics matters.
People want to eat. If the state cuts back benefits, behavior changes.
That same logic resurfaced nearly two decades later when Avigdor Liberman became finance minister.
In 2021, Liberman changed the eligibility criteria for subsidized childcare. Previously, many haredi families qualified if the mother worked and the father studied in yeshiva. Liberman also required fathers to be employed or enrolled in vocational training, arguing that state subsidies should encourage labor-force participation rather than long-term yeshiva study.
The move was fiercely opposed by the haredi parties, but their ability to alter it was limited because — as was the case when Netanyahu made his cuts as finance minister — they were not in the government.
When they returned to government at the end of 2022, however, the coalition largely reversed those restrictions and restored the subsidies.
That arrangement lasted until June 2024, when the High Court of Justice ruled that the legal basis for blanket draft exemptions for yeshiva students had expired and that no new framework had been enacted to replace them.
Once those exemptions disappeared, the court held that the state could not continue granting benefits tied to a status that no longer legally existed.
The result was that many haredi men who were now legally obligated to serve, but did not serve, became ineligible for a range of benefits they had previously received — first and foremost, daycare subsidies.
Among opponents of the current bill, this is one of the few meaningful sanctions available against haredim who evade the draft. And, they argue, it may be working.
What is the status of Israel's haredi draft?
Last week, the IDF said that 433 haredim enlisted in dedicated haredi tracks in the April-May draft cycle, nearly a 25% increase from the year before.
Earlier this year, the army reported that haredi enlistment had risen from roughly 1,800 in 2024 to 2,800 in 2025, with some 3,300 expected to enlist in 2026.
No one can prove categorically that cuts to daycare subsidies caused that increase. But government economists, military officials, and some researchers believe the sanctions are part of the reason.
In Wednesday's Finance Committee meeting, Ram Bar-Am of the Treasury's Budget Department warned that restoring the subsidies could undermine both military enlistment incentives and haredi participation in the workforce.
"We are seeing a very, very significant increase in the rate of haredi men enlisting in the IDF," he said. "The proposal runs counter to every economic rationale that underlies the daycare-subsidy test. We have a very, very serious concern that restoring these subsidies is liable to damage that incentive structure and turn the clock back."
In other words, according to the Treasury, the measures are having an impact, and rolling them back risks reversing that trend.
Whether the Treasury is right or wrong is almost secondary. The more important point is that both sides in this fight clearly believe the subsidies are affecting enlistment. The haredi parties are expending enormous political capital to restore them, while Treasury officials warn that doing so could reverse gains in enlistment and employment.
At the same time, events outside the Knesset have added a new sense of urgency to the debate. Over the last week, a series of arrests of draft-age haredim who ignored draft orders has sparked demonstrations, road blockages, and confrontations with the police.
This is happening because the haredim are increasingly concluding that enforcement is no longer theoretical, and that the arrest of draft dodgers, however limited, signals that the state may actually begin enforcing conscription.
The demonstrations are less about the handful of arrests made this week than about a growing realization that the old system is eroding — and this is where the protests intersect with the childcare subsidy debate.
Taken together, it creates a sense that what was once a largely theoretical debate over haredi conscription is becoming an operational reality, with draft orders, sanctions, arrests, and growing public pressure all pointing in the same direction.
The haredi parties may garner enough support from Netanyahu and the Likud to pass their childcare subsidy bill. But it may prove a hollow victory.
The reason is that the battle over the legislation may end up shaping the political environment in which the next election is fought.
As reservists shoulder round after round of military service and the army struggles with manpower shortages, the images of haredi politicians fighting to restore benefits for those who do not serve, coupled with demonstrations against the arrest of draft evaders and chants of "We would rather die than serve," may further inflame public frustration.
That frustration could translate into votes for parties promising to change the status quo and form a government less dependent on haredi support.
If that happens, the haredi parties may succeed in passing the daycare subsidy bill today, only to find that they have helped create the political conditions for its repeal tomorrow.