Israel's Cost of Living Rises Despite Government Promises
Translated & summarized from Zman Yisrael by baba
Prices in Israel have risen approximately 11% since late 2022, contradicting the government's promise to lower the cost of living. Key initiatives, including daycare subsidies and transportation reforms, have faced criticism for limited effectiveness and unequal distribution. Despite government claims that the war is the primary cause of rising prices, economic data shows minimal growth in GDP per capita during the period. The government has also increased indirect taxes, impacting average families, while offering tax breaks primarily to higher earners.
The story in 6 lines · by baba
- Consumer prices in Israel have increased by approximately 11% since the current government took office in late 2022.
- Government initiatives like daycare subsidies and transportation reforms have been criticized for ineffectiveness and unequal benefits.
- Food prices have risen by 15% since the government's formation, contributing to Israel's high cost of living ranking.
- The government has increased indirect taxes, costing average families an estimated 5,661 shekels annually.
- While the government cites the war as the cause of price hikes, economic growth per capita has been minimal.
- Tax breaks have been expanded for high earners, while lower and middle-income families face increased taxes.
Despite a central campaign promise by Prime Minister Benjamin Netanyahu to lower the cost of living, prices in Israel have increased significantly since the current government took office in late 2022. Consumer prices have risen approximately 11% overall since December 2022, with food prices alone increasing by 15% according to Knesset research. Israel ranks second globally, after Switzerland, in the "Big Mac Index" for cost of living.
The government's initiatives have been criticized as ineffective. Promises of free education for ages zero to three have not materialized; instead, partial subsidies for daycare centers have been implemented, with a significant portion benefiting the ultra-Orthodox community. Only 41% of supervised daycare centers are recognized for subsidies, and accessibility remains an issue.
A "Transportation Justice" reform led by the Minister of Transportation, Miri Regev, offered discounts on public transport but primarily benefited specific groups, particularly the ultra-Orthodox, based on geographic location rather than income. The single-ride fare is set to increase by 33% from 6 to 8 shekels in 2025, while eligibility for free travel has been lowered from age 75 to 67.
Initiatives like "Israel's Basket" by the Ministry of Economy aimed to lower grocery prices by offering a subsidized basket of goods through Carrefour. While Carrefour reported a 35% price reduction on these specific items, prices increased in many other categories, and the overall impact on the cost of living in the food sector was deemed limited. Import reforms intended to increase competition and lower prices have also faced criticism, with the State Comptroller finding they caused more confusion than price reductions.
Furthermore, the government has increased indirect taxes, contributing an estimated 35 billion shekels since the war began. A calculation by the Knesset Research and Information Center estimates that some tax measures and social benefit adjustments will cost an average family approximately 5,661 shekels annually. While tax brackets for higher earners were expanded, offering potential annual savings of up to 10,000 shekels for some, this benefit does not extend to the majority of the population with lower to middle incomes.
In response to criticism, the government, particularly Finance Minister Bezalel Smotrich, points to strong macroeconomic data and attributes rising costs to the ongoing war. However, GDP per capita has seen minimal growth, and even a slight decrease in real terms, between 2023 and 2025. While the war has impacted the economy, the article suggests that increased coalition spending and other factors also contribute to the financial pressures, making the direct link between the war and all price increases unclear.