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Tuesday, June 21, 2011

It costs more to live here

This should not surprise most of the Israelis. In light of a near revolt over the price of cottage cheese (which costs double what it costs in other countries), JPost reports that the cost of living here is much higher than it is in other western countries.
“The situation is not black and white,” according to the report. “In many countries they pay more than us for gasoline, higher education and other things. Electricity prices in Israel are continually found to be reasonable compared to the rest of the world.”

“But when one takes into account the income of the average Israeli compared to their counterparts overseas, the picture is depressing,” it continued. “The average wage in the United States stands at around NIS 13,000 per month, and in the big cities at around NIS 17,000 per month (according to the federal government’s website); in Britain it stands at around NIS 15,000 per month, and in France at around NIS 16,000 per month. In Israel it is getting close to NIS 9,000 per month only (and that’s without mentioning the dramatic gaps in income distribution).”

One of the primary examples given of the difference in prices was gasoline, for which Israelis pay double that of Americans, and more than in most European countries, according to Globes.

In May, Israelis paid NIS 7.59 for a liter of self-service gasoline, less than in Germany (NIS 8.06), Italy (NIS 7.81) and the United Kingdom (NIS 7.71), the report said. But they paid more than in other European countries where wages are higher, such as Austria (NIS 7.00) – and far more than in Canada (NIS 4.17) and the US (NIS 3.52).

With respect to higher education, the average yearly cost of NIS 10,000 paid by Israelis was found to be more than in almost every European country, with the exception of Spain, where it costs NIS 16,740. In Germany, it costs NIS 5,600, while in many places – such as the Czech Republic, Slovak Republic and Sweden – higher education is free. The US is an obvious exception, the report said, citing an average yearly fee of NIS 51,600.

The cost of a new vehicle was also found to be double that of the United States.

Even in the field of cellular phones Israel was found to be more expensive than the US. Cellcom and Pelaphon charge NIS 175 and NIS 180, respectively, for 400-minute monthly packages; and Orange charges NIS 170 for 200 minutes, while stateside consumers pay as low as NIS 154 for allinclusive packages.
It's much worse than that. Those income figures are pre-tax. While our marginal tax rates are no higher than they are in other countries, the level at which you reach them is quite low. Here's a chart with our 2011 income tax rates. Note that the figures are annual (divide by 12 for monthly) and are given in Shekels (current exchange rate about NIS 3.45 to the US dollar). So you hit a 33% tax bracket at about NIS 21,000 per month, which is about $6,000. And that's without considering National Insurance Institute payments (like social security in the US - about 8.5% flat each for employer and employee - if you're self-employed you pay both), health tax payments (about 5% flat), and VAT of 16% (flat) which applies to just about everything you purchase.

Most people I know take home less than half of what they make - unless they're cheating on the government. By contrast, when I left the US I was taking home about 70% of what I made and my income was much higher.

Of course, the US could become more like Europe and us during a second Obama term. But until we moved to Israel, we never considered the share our food takes in our monthly budget. Here, it's close to one third of our budget.

Read the whole thing.



At 8:33 AM, Anonymous Anonymous said...

Europeans are in the same boat when it comes to taking home less than half of their income in taxes. America has a much more lenient tax system but also a much more serious debt problem. Furthermore, Americans who are not earning six figures ($) will often spend a lot of money on healthcare even with insurance. For Americans without insurance...too bad. Also, our education system blows and college costs $50,000 per year if you want to go to the best ones. Lastly, low prices in America come with a downside...the absence of tariffs in most cases has led to the shipping of jobs out of America much more quickly than in Israel. The seemingly high prosperity lifestyle enjoyed by many Americans today will not exist except for the top 1%. Either America becomes like Europe and Israel in tax structure and tariffs imported goods and taxes American companies who outsource jobs or the economy collapse and most people end up worse off.

At 12:22 AM, Blogger Jason H. Elbaum said...

It's not clear what methodology they used in comparing the "average wage" across countries: per capita? per wage earner? per household? It makes a big difference, especially considering that Israelis have significantly larger families than their counterparts in other Western countries. Comparing per-capita figures yields misleadingly low results for Israel.


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