In Israel, the standard of living as per capita is in the middle range. Israelis are better off when compared to poor countries of the OECD, but our levels of poverty are worse than most other Western countries.
Restrictions on housing prices and the food market drive up the cost of living. The work class is hit the hardest, as wages are often undercut by foreign workers. The middle class is affected, too, with many struggling to find affordable housing on their own. Those who get by often receive help from loved ones when it comes to finding a home.
Rent is high, and the down payment to purchase an apartment is about 40%. In Jerusalem, where apartments can easily cost half-a-million U.S. dollars, buying a home is often out of reach. In Haifa, a two-bedroom apartment can cost upwards of USD$280,000.
Economist Daniel Doron said in a post on The Wall Street Journal that just a “small apartment can cost the average Israeli worker 12 years in annual salary.”
Finding an affordable home is just one piece of the puzzle. Transportation is also an issue. Israel does have public transportation, but it can be unreliable. Purchasing a car is an option, but prices are drastically higher in Israel and the cost of gas quite high. There’s a 78% tax rate on new cars.
On top of all of this, Israelis pay more to eat. The average person spends about $540 per month on grocery items. Europeans only spend about $427 per month. Israelis also pay more for water, electricity, hotels and restaurants.
The high cost of food, particularly cottage cheese, led to the 2011 protest, where more than 500,000 Israelis squatted in urban tent camps to fight against the high prices.
Some people are at an advantage. Jewish Americans may come here with remote, high-paying jobs, or their Social Security benefits may follow them and provide income. But far too many Israelis are just getting by. Most Israelis make less than $3,000 per month.
Israelis are fortunate to have good medical care, mostly paid for by taxes, and affordable education. The high cost of living, however, makes it difficult for the youth to stick around.
There are many reasons why we have reached this point. Security concerns often outweigh economic concerns at the voting booth, so we forgo changes that may better our quality of life. Some argue that the government is always distracted with other issues, so it never focuses on the standard of living.
In its defense, Israel has taken a few steps forward in recent years. VAT dropped by 1%. The government also scaled back on the cost of insurance, public transportation and excise taxes on water. As a result of these savings, consumer prices have fallen by 1.77%.
These changes in Israel move the economy in the right direction, but these measures aren’t drastic enough to make a significant change. Israel is still one of the most expensive places to live.
More needs to be done, particularly with home prices, to make Israel a more affordable country. Wages may be rising, but the standard of living is barely budging.