As the political, religious, and scholarly capital of Israel, Jerusalem's economy is based on service industries, including government, education, religion, and tourism, with manufacturing playing a relatively small role. Preservation of the city's historic character has also prevented the establishment of large-scale industry in the city and the surrounding area.

In 1996 Jerusalem's civilian work force numbered 188,500, of whom two-thirds were employed in service-sector jobs. Jerusalem has a highly educated work force, bolstered by an influx of well-educated immigrants. But due in part to the number of Orthodox Jewish and Muslim families with single-income households, the percentage of Jerusalem's overall population in the labor force is relatively low compared to Israel's other major cities of Tel Aviv and Haifa. In addition to the smaller work force, the economic status of Jerusalem's residents is further lowered by the fact that the public-service jobs held by many residents pay less than jobs in such fields as manufacturing, commerce, and financial services. The average monthly salary for wage-earning

The Shrine of the Book with the Israeli parliament, the Knesset, in the background. ()
families in Jerusalem is significantly lower than that of families in Tel Aviv and Haifa.

Jerusalem also has a higher incidence of poverty than the two other major cities. In 1996 as many as 21 percent of the city's families lived below the poverty line, including 40 percent of the city's children. In the 1990s, the number of families receiving public assistance rose steadily, reaching 32,600 households by 1996.