Israel Ranks Second Highest Globally in Big Mac Price Amid Cost of Living Debate

Israel recently drew international attention when The Economist reported that the price of a Big Mac in the country reached $7.67, making it the second most expensive globally after Switzerland and surpassing the U.S. price of $6.22. This jump from eighth place in January to second in July was driven by a local franchise decision to raise the Big Mac price to 23 shekels and the strengthening of the Israeli shekel against the dollar. The Big Mac Index, created by The Economist in 1986, is a lighthearted tool to illustrate purchasing power parity by comparing the price of a standardized product across countries after currency conversion.

Former Israeli Budget Department head and current politician Shaul Meridor used this index to highlight Israel’s high cost of living, attributing it to government failure rather than fate. However, experts caution that the index measures currency valuation and relative price levels but does not directly reflect how many local salaries are needed to afford goods. The index’s limitation lies in its focus on a single product from one fast-food chain, which may not represent the broader consumer basket.

Adjustments for GDP per capita show that wealthier countries tend to have higher prices due to factors like wages, rents, and taxes. Israel’s shekel is estimated to be overvalued by about 23% relative to the dollar based on the Big Mac Index. Other comprehensive measures, such as the World Bank’s price level index and OECD data, also place Israel among the most expensive countries worldwide, confirming a structural cost of living issue.

While the Big Mac Index alone should not be taken as definitive proof of Israel’s costliness, it serves as a useful indicator that aligns with broader economic data. The ongoing debate about Israel’s high living costs continues to be a significant political and economic topic, reflecting deeper challenges in the country’s economy and currency valuation.