In order to fund Israel’s ballooning war expenses, the Finance Ministry has proposed freezing the minimum wage and state allowances through 2025. That’s according to the draft Arrangements Law, an omnibus bill submitted alongside the budget proposing various reforms.
Israeli minimum wage and state allowances are pegged to the average Israeli wage. At the start of 2024, average wages in Israel were 12,379 shekels ($3,295) per month, and minimum wage was set at 5,880 shekels ($1,565) monthly for full-time work. Under the new bill, minimum wage would stay the same in 2025 even as the average wage increases. State benefits for disabled people, older people, new immigrants, and military orphans and widows are also pegged to average wage, meaning that they rise incrementally each year. This new bill would also freeze those allowances at 2024 levels.
According to the Bank of Israel, an overall price increase of 2.8% is expected over the next year—meaning that real wages will decrease significantly for those whose nominal wages stay the same. This freeze will hit the weakest sectors of Israeli society.
A similar freeze on the minimum wage passed in 2021 following the coronavirus crisis. But that decision was tied to the artificial increase in the average wage caused by so many Israelis not being able to work. This freeze, in contrast, is justified only by budgetary needs and applies to state allowances as well as minimum wage.
The Finance Ministry is also hoping to avoid the situation that took place in 2023 when the minimum wage rose sharply after having been frozen for multiple years. The ministry has proposed a different system for calculating the new minimum wage and state allowances when the average wage is unfrozen in order to avoid such a sharp rise—which in effect means that Israelis will still be making less money than they would have without the freeze even when the freeze expires.
The ministry has also proposed freezing the wages of high-ranking government officials including members of Knesset, ministers, and judges, which are also tied to the average wage.
This article was translated from Hebrew and edited for context by Leah Schwartz.
