In a welfare state, being cut off from the welfare state puts you in a very bad way. It means that in a hospital, you pay the rate charged to rich American tourists. Most housing in Israel is in someway subsidized – so it means you can only buy housing in the “tourist” apartments. The major tax benefit yeshiovos receive is to be able to avoid taxes on foreign contributions (which otherwise would be taxable income). And they are still banning hareidim who want to work “on the books” from doing so unless they serve in the army (as opposed to Arabs, who can get jobs).
By avoiding arrests, they avoid an immediate confrontation, unless they (as their press suggests) see these only as first steps, with stricter measures to be applied if they don’t work at lowering the yeshiva population. By establishing a system in which 15% of the people have restricted civil rights, you guarantee instability. Since this is religion based, it will violate most human rights principles.
At the very least, it will end cooperation in other areas between hareidim and dati leumi. The Hareidim will offer to ally with Labor based on common support for the welfare state, and an agreement to end conscription and equal rights. Imagine the situation at a school in America where some students are raising money for hareidim who are being denied basic medical care and housing since they learn Torah and the Dati Leumi are responsible, while their classmates are raising money for settlers who are left homeless by policies to reduce settlements which they will blame on the hareidim who will be supporting such policies.