December 5, 2023

Tricia Oak

Business & Finance Excellency

Middle class unimpressed by a financial plan critics say does too little for too few

Kobi Yusov, a married father of three from the town of Yavne, earns what he calls a “respectable living” and considers himself solidly middle class. Like many other Israelis in his situation, though, each month is a struggle to cover his family’s expenses and make ends meet.

“I can’t complain about the money we are able to bring home, and [even then] it’s still hard,” Yusov said recently. “I’m in the middle class, and being in the middle class has become really hard.”

Of Yusov’s three children, only one – his 6-year-old – falls within the bounds of a cost of living reduction plan announced by the government on Wednesday. The plan offers each working parent a tax credit of NIS 223 ($69) a month for each child aged 6 to 12.

“What am I going to do with that? It’s a joke to give me NIS 223 and to take NIS 1,000,” Yusov said, lamenting that the plan will do little to offset rising prices.

The plan also provides benefits to low-wage workers. And it seeks to lower tariffs on various products and increase competition in the markets, but the tangibles of those declarations remain in question.

In the past weeks, price hikes have been announced in energy, gasoline, food and household products, and municipal taxes. Coupled with the financial hardships brought on by the pandemic, public anger has bubbled up on social media and in sporadic street protests.

Yusov is a local activist who has been involved in cost-of-living protests since 2018, when he and a few other Yavne-based protesters organized a campaign to successfully halt planned increases in food prices.

Yellow vest protesters against the rising cost of living, outside Ikea in Rishon Lezion, February 2, 2022. (Avshalom Sassoni/Flash90)

Now, he and fellow activists are redoubling their efforts in the wake of what they describe as a weak response from the government that does not address their struggles.

On Thursday, Yusov began recruiting people to lead local activist groups, with the goal of creating a network of protests in cities and towns across the country.

“Right now, we are trying to enlist organizers in every city and we’re going to go out to the street,” Yusov said. “We’re talking about every city, we want to get to everyone.”

Not good enough

Since Wednesday night, when Prime Minister Naftali Bennett, Finance Minister Avigdor Liberman, and Economy and Industry Minister Orna Barbivai unveiled their plan to offer relief to families struggling under the financial burden, social networks, radio shows and television programs have lit up with criticism.

Many say the proposal does little to address the majority of money-stressed Israelis’ financial woes.

The proposal, which must still be crafted into legislation that wins Knesset approval, roughly clusters into two parts: income tax-based measures to help working families and low-wage earners; and the removal of import tariffs to make various foreign products cheaper and introduce greater competition into the market.

Liberman touted the measures as targeted, rather than a wasteful catch-all. But critics say it is too narrow and fails to take into account the broad swath of struggling middle-class Israelis.

Finance Minister Avigdor Liberman speaks during a Yisrael Beytenu faction meeting at the Knesset on November 8, 2021. (Olivier Fitoussi/Flash90)

The plan is only set to put money directly into the pockets of the estimated 530,000 working parents of children between 6 and 12, the 300,000 low wage earners who don’t meet the threshold to pay income tax, and the parents of the estimated 60,000 children who are eligible for expanded childcare subsidies.

In 2018, the most recent year that the Central Bureau of Statistics surveyed average monthly income and expenditure by household, the top decile of earners brought in NIS 54,192 ($16,000) a month and spent NIS 26,470 ($8,000), whereas bottom decile earners brought in NIS 5,795 ($1,800), which is insufficient to cover their surveyed expenses of NIS 10,327 ($3,200). In fact, the bottom four deciles of wage earners — families who earned below NIS 13,656 ($4,200) a month — could not cover their projected monthly expenses.

The average monthly wage as of November 2021 is NIS 11,349 ($3,500).

The planned removal of import tariffs on key food, household, and raw material products is the only measure presented that could presumably help middle-class Israelis who are otherwise untouched by the plan. However, there is no announced plan for oversight to ensure that price reductions find their way into consumers’ pockets, and not remain with importers or retailers. Neither the Finance Ministry nor the Economy Ministry has presented an oversight mechanism as of yet.

Opposition to the plan has come from voices across the fractured political spectrum.

From within the coalition, Labor’s MK Naama Lazimi told the state broadcaster on Thursday that she believed the plan was disconnected from the reality faced by many young families.

“Whoever built this plan has not met young families in recent years. And doesn’t know what ‘cost of living’ really is,” she said. “It’s a band-aid plan.”

“I hope that this is a draft and that the rest of the plan will come soon, [taking care of] housing, increased minimum wage, social and public services…and really taking care of monopolies.”

Naama Lazimi attends a meeting of the Labor party in Tel Aviv, March 24, 2021. (Tomer Neuberg/Flash90)

Opposition members who came out against the plan also struck out at the government’s pandemic policies, which they blamed for worsening economic conditions. While the situation has been exacerbated by the two years of pandemic and rolling closures – first initiated under the previous government – rising costs of living predates COVID-19 and are driven in part by housing prices, which have only risen further during the pandemic.

The current government has largely chosen policies that kept the economy as open as possible during infection waves.

MK Moshe Gafni (United Torah Judaism), who for years headed the Knesset Finance Committee, criticized the plan on Wednesday as “too little, too late.”

“You hurt everyone, and now you’re trying to fix some and want to get credit and praise for it,” he said.

Likud MK Keren Ben Barak similarly harped on the plan not doing enough, telling Hebrew-language radio on Thursday that “few people will benefit from this plan… The government was pressured and created a plan that does not solve the problem of the cost of living that [the government] itself created.”