by Keren Setton
JERUSALEM, Feb. 16 (Xinhua) -- When the new Israeli government was sworn in June 2021, one of its promises to the public was to lower the cost of living.
However, living cost has continued to climb. Gasoline and power prices have risen in recent weeks. Many major food conglomerates announced price hikes, but backed down after public uproar.
According to the Organization for Economic Cooperation and Development (OECD) Price Level Indices for 2021, Israel is its fourth most expensive member country. The OECD is an intergovernmental economic organization with the majority of its member countries being high-income economies.
To combat rising living costs, Israel's government announced a plan last week to provide tax cuts to working people, particularly families with children aged 6 to 12.
The plan provides compensation to businesses and self-employed individuals who have been affected by the COVID-19 pandemic. The number of people eligible for a negative income tax will increase, and government participation will help to minimize the growth in utility costs. Custom duties and the prices on several consumer goods, such as meat, fish, flour and eggs will be reduced.
When revealing the plan, Israeli Prime Minister Naftali Bennett said it was "not just tactical steps" to slow price increases, but a "fair contract" between the state and its citizens that allows good working citizens who share the burden of the state to keep more of their salaries.
However, Dr. Ran Ben-Malka, a lecturer at the Sapir Academic College's Economics Department, said the government plan was "like paracetamol for a headache, because it relieves the symptom but doesn't cure the headache, and the root cause of the headache has not been eradicated."
The high cost of living in Israel is due to distinguishing characteristics that are not addressed in the plan, analysts say.
Because of the monopolies that exist in many sectors of the Israeli market, lowering the cost of living is a major problem for any Israeli government.
"This is the main problem that causes price distortions in Israel, compared to other countries," said Benjamin Bental, an economics professor at the University of Haifa.
Domestically produced agricultural produce has been protected in Israel for years, with imports barely permitted. So far, a powerful lobby has been able to block any reforms. This is something that the incumbent government administration is attempting to change.
"Israel was founded on socialist principles that aimed to empower local producers and workers when it comes to blocking imports," said Ben-Malka.
"By blocking imports, Israelis do not have access to cheaper products. At the same time, local industry is not motivated to improve efficiency, resulting in high prices," he said.
Moreover, imported commodities are subject to a high level of taxation and customs.
"Food importers in the country are also local producers who control the market through monopolies. They make sure that the imported alternative is not significantly less expensive than locally made goods," said Bental.
Despite opposition from some sectors, the incumbent government administration is trying to modify the status quo.
Some analysts believe that a step like the government's plan announced last week would help to contain rising living costs by boosting income for families with children and encouraging people to enter the workforce.
However, while many Israelis applauded the government's plan, it will not satisfy everyone. Families without children will receive fewer payments, and the unemployed will profit little from the proposal.
Some analysts also fear that the plan will have long-term consequences.
"The money from tax benefits and customs reductions needs to come from some place," said Ben-Malka.
"In the future, either taxes will rise, increasing the cost of living even more, or public spending on things like education and health will have to be deducted," Ben-Malka said, adding "there is no free money."
"The plan hasn't had a direct impact on the high cost of living," said Bental.
According to analysts, high living cost is an issue that needs a comprehensive response with long-term strategies that take time to show benefits. ■
