High cost of living
1. Claim: There is an unreasonable gap between Israelis’ salaries, and the cost of living in Israel, particularly the cost of housing – heard from Israeli protesters across social sectors (supported by mainstream Israeli citizens)
This claim is perhaps the underlying drive of the entire protest. There is a deep socioeconomic gap across all social sectors (with the exception of fewer than 20 extremely wealthy families). Israelis are simply unable to make ends meet. Even the top 10 percentile ofIsrael’s earners report struggling to meet their mortgage payments each month.
- a. Background: Israel’s economic history:
- Israelwas first established as a social democratic welfare state. This, in part, helped enable the youngIsraelto establish itself and realize its goal of absorbing large numbers of immigrants. While nurturing its new society,Israelalso faced constant security threats.
- This welfare state included highly subsidized education, healthcare, welfare, services, and even cultural institutions.
- At the same time, the government and its institutional bodies were highly involved in financial regulation and were characterized as highly bureaucratic, and all the public services (including commercial services such as telephone and gas companies) were deeply intertwined with the government system.
- In the mid-1980s, following a recession, a revolution took place inIsrael’s economy, with rapid increased privatization in the neo-liberal spirit, particularly in the realm of government services.
- This change eventually led to the New Economic Plan of 2003, led by Binyamin Netanyahu (then finance minister), which on the one hand made the country wealthier and financially stable, but on the other hand resulted in decreased stipends for the elderly, the handicapped, children, and single mothers.
- Naturally, the first population affected by the shift from welfare to free-market state was the lower class. By 2008, Israelhad managed to become among the leading countries in the developed world on the GINI inequality index (39.2), with one of the widest gaps between rich and poor.
- The second group affected by this was the middle class. While the average salary in Israelhas remained relatively stagnant, there has been a sharp increase in the cost of living of most basic necessities: gas, education, food, and housing (with a 50% increase in housing prices in Tel Aviv and Jerusalem in just 3 years). At the same time, the middle class has borne the burden of taxes. Research has also shown that the lower-middle class pays the highest percentage of indirect taxes from their income (18%).
- Israel exhibited poor strategic and civil planning, particularly following the mass immigration from the former Soviet Union in the 1990s. This immigration increased Israel’s population by about 20%, and yet the relevant planning for population growth (particularly in the area of housing) was neglected.
- It may be noted that due to the unstable political system in Israel which features frequent turnover of governments, political leaders have tended to focus their energies on goals with “low-hanging fruit” in order to display results to the public — at the expense of effective long-term planning
- Israeli politics have traditionally over-emphasized security issues, particularly during elections, at the expense of focusing on economic and social ones.
- Many political parties were set up to serve specific sectarian needs (for example, the National Religious parties, Israeli-Arab parties, Sephardic-Ultra-Orthodox parties, and others). Thus the political discourse remains focused on limited sectarian issues, rather than being open to the broad sorts of changes that the current protests are asking for.
The World Bank estimates that 1/4 of financial activity inIsrael is not reported to the tax authorities, one of the highest percentages in the Western World. This finding would suggest that efforts to alleviate the current situation should focus on taxing those who are currently evading the authorities, rather than increasing the taxes for those who already pay them.
- b. Current: Recent middle-class protests in light of the above:
Mothers’ Protest: Based on the Law of Mandatory Education in Israel, the government pays for education from age 5 to 18, overlooking early childhood education. Mothers who must work to support their households pay nearly their full salaries in early childhood education costs. Parallel protests include the Doctors’ Strike, and Social Workers’ Strike. The frustration expressed in these protests stems from a growing burden of expenses that the government once subsidized but has since retreated from. The middle class fears that they have no financial safety net, and they are simply not making ends meet.
- c. Possible Solutions:
- A dominant faction of the active protesters is made up of socialist youth movements and organizations, using the protest to promote their agenda that Israel should move towards its former welfare state structure, with a more highly government-regulated market.
- On the other end, the capitalist powers claim that the current system is on the right track, but not yet efficient enough. The government should promote more competition, lower bureaucracy, and fight against the monopolization of capital. (See “Jews and Capitalism”)
- A third, middle-ground solution: a mixed economy or social democracy. This approach acknowledges that perhaps the government needs to distinguish between public needs and public wants. Needs might include products such as diapers, bread, dairy products, and shelter, and these prices would be set and controlled by the government. Wants, on the other hand, which might include technological products, arts consumption, travel abroad, and brand-name products, would be left to the free market, which would be truly free from monopoly and corruption.