Economic Impact of Conscription in Germany and Israel
The debate over the reintroduction of conscription has resurfaced in both Germany and Israel, raising significant economic concerns. In Germany, Defense Minister Boris Pistorius proposes a new form of military service to address the Bundeswehr's personnel issues. However, the Munich-based Ifo Institute warns that this could cost the German economy up to 70 billion euros, depending on the scale of implementation. The Ifo Institute suggests that enhancing the Bundeswehr's attractiveness as an employer might be a more cost-effective solution.
In Israel, the political-security cabinet's decision to extend mandatory service in the IDF to 36 months has sparked warnings from economic experts. Chen Herzog, chief economist at BDO, highlights the significant economic consequences of this move. The extension could lead to long-term income loss for the economy, as it delays the integration of regular soldiers into the labor market. Herzog argues that conscripting the ultra-Orthodox could increase the regular army without extending mandatory service, offering potential economic benefits.
Conscription and Fairness Concerns
The Ifo Institute's study also raises fairness concerns regarding conscription. If only a small proportion of a year group is conscripted, it could lead to an unequal distribution of burdens. In contrast, a market solution with higher salaries would distribute costs more evenly. Pistorius defends his proposal, arguing that defense and security have inherent economic and social implications.
In Israel, the decision to extend mandatory service comes amid ongoing security challenges and public criticism of exemptions for Yeshiva members. Herzog emphasizes that broadening the conscription base could address issues of equality and provide economic benefits by integrating ultra-Orthodox individuals currently outside the workforce.
- In Germany, the Ifo Institute examined three scenarios for conscription's economic impact. If the obligation applies to everyone in a given year, economic output could fall by 1.6 percent or 70 billion euros. A quarter of people being called up, as in the pre-2011 compulsory military service, would result in a 0.4 percent decline or 17 billion euros. If only five percent are conscripted, similar to Sweden, the decline would be 0.1 percent or three billion euros.
- The Ifo Institute's expert, Panu Poutvaara, suggests that improved equipment for the Bundeswehr would cause slightly more than half the overall economic costs compared to conscription scenarios, with similar growth in military capabilities. However, this would burden the state budget due to higher salaries.
- In Israel, the extension of mandatory service aims to bolster military force amid the Iron Swords War. However, Herzog warns that delaying regular soldiers' entry into the labor market incurs significant economic costs. He advocates for expanding the conscription base to include ultra-Orthodox individuals, which could shorten military service for regular soldiers and provide economic benefits.
- Public criticism in Israel continues over the sweeping exemptions for Yeshiva members. Herzog points out that conscripting the ultra-Orthodox could enhance the regular army without extending service duration, thus benefiting the economy and addressing equality issues.
