In current news, the Knesset Labor and Social Affairs Committee on Tuesday approved the raising of the minimum wage in Israel to 5,300 shekels. What does this mean practically for the average citizen of Israel? Are we to be excited, overwhelmed, elated or still wondering if it’s possible to live on this amount of money? In this post, we’ll be taking a look at how far the minimum wage has come in the past few years and weigh this honestly against the actual cost of living. Thereafter, we leave it up to the “thinking” citizen of Israel to consider the emotions one might have after hearing this news.
History of Minimum Wage Throughout the Years
We’ll be going back in time to explain the history of minimum wage in Israel and its “apparent” progress. We’ll see there’s been a lot of talk about minimum wage throughout the years. We’ll then take a brief look at the actual value of the current amount in terms of living in Israel. We’ll take a brief look at the cost of housing – the most important asset one can ever own. Thereafter we’ll take a brief look at some ordinary day-to-day costs and compare this with the amounts of money the average person working in Israel is earning. Keep in mind, once one elects for a minimum wage job – one will be a working a six day week. It’s full time, every day for some 8-9 hours every day. Lunch breaks are kept to a minimum, and even time-out for visiting the loo can impact one’s chances of getting or losing a job…
It’s a post for the honest of heart and those who are prepared to open their eyes to seeing another side of the actual problems associated with full time jobs for the average person. It is a post which may well highlight the need to consider working for oneself a better option for success in Israel. All amounts below are gross amounts before taxes and other amounts are taken from the salary by the employer (see first point below).
- On 22 December 2002, it was announced that minimum wage was about to increase to ₪3350 per month (or ₪17.93 per hour). (I am not sure what it was before this.) From actually seeing the a salary check of payment from someone personally, it came out to an astounding ₪390 issued after all taxes and payments to pensions and other organisations had been made.
- On 1 December 2005, Ariel Sharon told Amir Peretz that his promise to increase the minimum wage to $1000 (less than ₪4000) per month, was unrealistic! Apparently, the economy would not be able to handle it!
- On 2 April 2006, the minimum wage was raised to ₪3457 for a total of 186 hours of work per month. An hour of work giving ₪18.54.
- On 21 June 2006, then Finance Minister Silvan Shalom made a statement saying that, “We need to develop human assets through education, because closing the gaps in education will reduce economic gaps,” and further, “Economic freedom cannot be achieved at the expense of the weaker sectors.” (If this is true, one can only wonder if the increase implemented actually reflects upon the amount of achievement that can be gained from such a small amount!)
- On 28 March 2007, it was announced that the minimum wage was to increase that Sunday to ₪3710 or ₪19.95 per hour. This, for a 43 hour work week. In December, it would rise to ₪3585.
- It seems by May 2010, the minimum wage had risen to ₪3850.
- On 2 March 2011, the minimum wage rose was said to go up to ₪4300 but practically, only went to ₪4100.
- On 3 September 2012, the minimum wage went up to ₪4300 / ₪23.12 per hour (at that time $5.75).
- On 18 January 2015, the Cabinet met to work out a way to raise minimum wage to ₪5000. This was implemented by January 1 2017.
- On 30 March 2015, plans were in place to raise the minimum wage to ₪5300.
- On 1 May 2015 the minimum wage went up to ₪4650.
- On 24 October 2017, those plans of more than two and half years ago were finally put into place.
Minimum Wage Today
Today, the minimum wage stands at the amount of ₪5300. This has been an increase over 15 years of ₪2000 per month or ₪24000 per year.
Housing in Israel
An article on YNet news in 2015 shows the cost of housing had increased by 50% since 2008. It would take (then) 148 paychecks in order to own an apartment. That’s more than 12 years of constant work without food or water, clothing, transport, communication or sleep. Let’s keep that in mind as we work to understand the value of a ₪5300 pay check.
In just another report in 2016, NPR reports that: “The high cost of housing plagues many countries around the world. But in Israel, it’s become prohibitive, especially for those who want to live in central parts of the country, and has climbed as much as 80 percent in eight years, according to government officials.” (Bold emphasis added by myself).
The Increase in Housing Relative to the Increase in Minimum Wage
Let’s remember that when we speak of an 80% increase in prices, we could be talking about an amount of a 1 million shekel home becoming a 1.8 million shekel home. Whereas in minimum wage salary – even if we say that the salary has increased by 70% odd, in salary, it translates to just ₪24000 per year – compared with an increase of 800 000 shekels (at least) in just a few years. In other words, over just a few years where housing increased by 800 000 shekels, it would take 33 years to catch up to that increase in terms of salary checks (again, no eating, drinking, renting communication, or actually being able to live. One would use one’s wealth only to be able to purchase a home to live in.)
On August 31 2017, the latest figures were given regarding cost of housing in Israel, and while the article seems to highlight that prices are steadying, it is more of a rather optimistic attitude than a real one that rules the day. Pricing for housing is frightening for those who come to Israel with no wealth, hoping to own their own home one day.
The cheapest locations to purchase a home according to the above article are in the North. Here one can own something for around 1 million shekels. In Jerusalem, it is closer to 2 million shekels. Again, a look at our minimum wage of today gives us the need for 188 checks to own even in the cheapest of areas. It’s close to 16 years of full time work without food, water, sleeping (rent anyway), communication, transport or clothes during this time. One may even forget that other than actual food, maintaining one’s health is equally important. This means regular visits to doctors / dentists for checkups. While many know about Israel’s Kupat Cholim (medical aid) structure, many of the checkups will be billed in full (see below). Even those which are subsidized, there are still additional costs to the patient (including notably – medicine!)
In short, those who come to Israel without any money on their side, will never be able to own their own home without family/friend assistance, an inheritance (a real inheritance of course!) or winning the lottery (and why the lottery is so popular!)
General Costs of Living in Israel
For a brief overview of general costs in Israel see: Cost of Living in Israel
So, what can one get for one’s minimum wage salary in Israel? Our chart indicates something like this:
Rent: ₪3700 (1 bedroom central) [or 3 bedroom for ₪6200 (certainly out of our minimum wage salary range!)]
Rent being what it is – it is a wonder to be able to have children and have them living in another room of the house other than the only room in the house. Incidentally, we do not take into account the cost of children in this example.
Transportation: ₪216 (varies of course on the type / frequency / current prices or choice of ticket and lifestyle) Using a taxi will be cost prohibitive on a minimum wage salary – even when it has increased to ₪5300. Taxis are of course a topic of their own.
Basic utilities: ₪717 (electricity, water, gas)
We have just about ₪700 left for actual food for an entire month.
We have not provided for communication, clothing, medical needs (prescription medication), Arnonah (municipal taxes on the apartment), Vaad Bayit (tax on one’s apartment paid for upkeep of the building – sometimes as high as ₪250 and more!) internet (it may sound like a luxury – but it is often an absolute necessity for work even when at home!)
Let us not forget the many additional needs coming up. One might visit a dentist each year, have one’s teeth cleaned to keep them healthy, require spectacles (let alone if the prescription is a high one.) One might need an emergency ambulance which will not be paid for – costing some ₪1500. One may require updating one’s documents, passports etc. often costing hundreds of shekels – even if it’s just once every five/ten years.
When renting, rental costs are constantly on the rise. Landlords may want you to paint their entire apartment before leaving (a cost not bargained for or taken into account!) If one does move (and one will move many many many times) one must also pay the movers who may charge anywhere from ₪10000-₪15000 for moving the most basic of necessities. What can you do – move your bed, bookshelves, furniture and appliances by yourself?! Moving just once every year will mean an average amount of ₪1000 per month must be set aside to pay the movers when the time comes!
The Fallacy of Living on Minimum Wage in Israel
In fact, it is impossible to live on a minimum wage. It is a wonder anyone has been able to up until this point, when – as can be seen from the articles above – minimum wage has been as low as 3000 odd shekels.
Taxes in Israel are huge. One must also pay Bituach Leumi (national insurance) even if one has no money. This is usually (currently) a minimum of ₪170 per month. One must also hire an accountant to show one’s income each year – costing at the very least some ₪1300 shekels and very often closer to ₪2000 and more.
The government seems to be spending a great deal of time involved in discussing the issues of minimum wage – as can be seen by the many articles posted on this post alone. There’s a lot of talk going on as to how to assist people to actually live. But mostly, it’s about getting people into the work environment – even if they are paid an amount that is impossible to live on. So much time seems to be spent on barely minimal increases, one can only wonder what all the talk is all about.
We’re excited by the minimum wage increase and everyone feels great! The question is – why? How is the additional income actually helping us? It is more about the media sharing the positive growth of Israel – without telling over the dreadful side of being unable to live by getting oneself into the working environment. Can one do better on one’s own? Can one at least reach a “minimum wage” by oneself and at least stand the chance of earning more?
For more about the issues with minimum wage and living in Israel, see our other posts:
Minimum Wage in Israel – You Can Make it – But How?!
5 Dangers Of Minimum Wage Mentality
Jobs in Israel and What you Really Get Paid
Radio Interview – The Costs of Renting in Israel – From the View of the Minister of the Knesset
Are There Options For Type of Work?
Renting in Israel – Draconian Conditions – The Wild West!
I leave the reader with a thought. Is it no wonder that one in five Israelis lives below the poverty line – the highest among all OECD countries? We will discuss more about this statistic and its impact on Israelis in future posts…. so stay tuned!
What are your thoughts? Please share.