Prime Minister Benjamin Netanyahu’s campaign several months ago addressed the high cost of living for Israelis, especially the rising cost of food. At a campaign stop in a Jerusalem supermarket, Netanyahu criticized the government, then led by centrist Yair Lapid, for allowing the high costs.
“Milk, fruits and vegetables, meat—all the prices are going up. We will come back to power, and we will lower the prices,” he promised a cheering crowd.
Less than six months later, with Netanyahu back in charge, prices in Israel have only continued to rise. Despite promises to address the high cost of living, most of Netanyahu’s focus since returning to the premiership has been on passing sweeping judicial reforms, something not alluded to during the campaign.
All the while, regular Israelis struggle to make ends meet.
Sharona Bat Haim is a cleaner and single mother of two girls, one with special needs who eats mainly dairy products.
“I have no money and prices keep going up,” she said. “I don’t know how I will cope. I will probably have to stop buying meat for my other daughter, but I don’t want to discriminate.”
Prices of dairy products, which are regulated by the state, are set to rise by as much as 16% on Monday unless Finance Minister Bezalel Smotrich comes to an agreement with Israel’s dairy farmers. The Agriculture Ministry reported that the price of raw milk has risen significantly due to rising costs of imported livestock feed following the Russian invasion of Ukraine.
“The ones most hit by such price hikes are the weaker segments of society,” said Moran Ofir, an associate professor at the Harry Radzyner Law School at Reichman University and a visiting fellow at the London School of Economics. “The public is already stressed because it is so expensive in all aspects. Every price hike is another blow.”
“The scope of poor people is only increasing since the end of the pandemic,” said Professor John Gal, chair of the Social Welfare Policy Program at the Taub Center for Social Policy Studies in Israel and a lecturer in social work and social welfare at the Hebrew University of Jerusalem. “We only expect this to rise, as will the inequality.”
All sorts of products have increased in price over the past months, despite campaign promises to address the rising cost of living.
“The government was elected on this ticket,” said Dina Dayan, a social activist and member of the Labor party. “They promised to lower the price and nothing in the upcoming budget points to that direction. They weren’t elected to promote the judicial reforms. Their campaign slogans were about a commitment to lower the cost of living.”
The current inflation rate in Israel is 5%, substantially lower than most of the European Union countries. Such a comparison can be misleading, though. Israel had a very high cost of living to begin with compared to many countries, resulting in less wiggle room for Israelis to handle rising costs.
According to Ofir, recent data show a slight moderation in inflation and lower price increases than were projected at the beginning of the year. Despite that, the common perception among the public is that prices are soaring and that the average salary is not enough to get by.
“The government could raise taxes, increase welfare payments, and help people with low incomes, but it doesn’t seem to be their priority,” Gal said. “They are busy with the judiciary coup, and the promises to deal with the high cost of living—that were going to be difficult to deliver, to begin with—have been neglected.”
Shortly after being sworn in in late December last year, Netanyahu and Smotrich convened a press conference promising a series of economic measures that would help mitigate inflation. Many experts criticized the proposed measures as minor cosmetic solutions to a problem that demanded a more thorough approach.
“If one really wants to fight the high cost of living, there needs to be massive government intervention,” Ofir said.
Since Smotrich and Netanyahu’s joint press conference, most of the legislative focus has shifted to the proposed judicial reforms. Although the reform legislation was put on hold last month in response to public outcry and a brief general strike, government attention has not returned to the cost-of-living issue.
“All they do is talk,” Bat Haim, the single mother of two children, including one with a disability, said. “There is no action. I am angry and frustrated. I expected them to act.”
According to Israel’s Central Bureau of Statistics, the consumer price index (CPI) in Israel has risen consistently over the past months. The rising CPI, which measures the change in the prices consumers pay for goods and services, was attributed mostly to rising real estate costs. As Israelis spend an increasingly large portion of their income on housing, any rise in the prices of other goods and services hits especially hard.
The Organization for Economic Cooperation and Development (OECD) reported that Israel had the second-highest CPI among the 38 OECD countries in 2021.
5 View gallery
Prime Minister Benjamin Netanyahu and Finance Minister Bezalel Smotrich
(Photo: Shalev Shalom)
Even within Netanyahu’s own right-wing Likud party, some have begun to criticize the government for failing to address the rising cost of living. In an interview with Israel’s Channel 12 news on Saturday, lawmaker David Bitan from the Likud called on the government to focus on rising prices and their effect on the Israeli consumer.
“We need to start taking care of things that we promised to do,” Bitan said. “The public is mainly concerned with the cost of living, not with other things.”
Bitan is the chair of the Economic Affairs Committee in the Knesset, Israel’s parliament, and has led heated debates about the rise in prices.
Activist Dayan echoed Bitan’s sense that average Israelis care most about the cost-of-living crisis.
“In the peripheral regions, people don’t care about the judicial reforms. All they talk about is their financial struggles and how their reality hasn’t changed,” she said.
Recent polls, too, suggest that the government’s focus on judicial reforms has failed to win over the public. A recent poll published by the Maariv newspaper found that more Israelis would vote for the centrist National Unity party than for Likud if elections were held today.
Most Israelis also agree that the judicial reform legislation should stay frozen, according to a poll from Channel 12, suggesting that public priorities are elsewhere.
The government will turn its attention to the economy in the current Knesset session since it must pass a state budget by the end of the month or risk triggering the dissolution of the government.
“The upcoming budget does not have any response to the high cost of living,” Ofir said. “There is also a series of spending commitments and it is not even clear how the government will pay for them. Lack of such sources means an increase in taxes.”
Ofir attributed Israel’s economic problems to several core factors, including monopolies, unnecessary regulations, and unchecked bureaucracy.
“In order to combat this, the government needs to reduce taxes, tariffs and cut regulations and bureaucracy in import and trade, thus increasing competition in the market,” she said.
Dayan also said that monopolies are causing problems for Israeli consumers.
“The market is a very concentrated one and the feeling is we live in one big monopoly with no ability to escape. From the banks to the big supermarket chains, everyone is coordinating prices at the expense of the consumer,” she said.
High income tax rates and rising interest rates also result in increased strain on the Israeli pocketbook.
The proposed judicial reforms are not only a distraction from Israel’s financial problems but may further damage the economic situation. Many of Israel’s economists have warned that the passage of the reforms will preclude foreign investment, significantly harming the economy.