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Next week, the monthly minimum wage in Israel will be revised upwards, increasing by 6% to NIS 6,248, a rise NIS 367 compared with the current minimum wage. In April 2024, a similar rise was also recorded.
In welcoming the rise, Minister of Labor, Yoav Ben-Tzur stressed, “The minimum wage increase is good news for hundreds of thousands of workers in the economy.” However, the move also carries dangers. First and foremost, the high correlation between wage increases and price increases and inflation. Companies could pass on the increase in workers’ wages to consumers, making products more expensive for all.
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Bank Leumi head of markets strategy Kobby Levi said that the main impact will be reflected, as expected, in sectors with a high proportion of minimum wage workers, “Retail companies, food services and also healthcare services.” Already, current employment market data indicate an economy in a state of full employment, with 2.7% unemployment. The vacancies rate continues to be high by historical standards, indicating a higher need for employees. The average monthly wage for a salaried position at the end of 2024 was NIS 13,514, up 5.1% from 2023.
Ofer Klein, head of research at Harel Insurance and Finance, sees the wage increase mainly in positive terms. He says, “This is a move aimed at reducing inequality. When the lowest wage in the economy increases, it is a very positive thing. Moreover, the increase in the minimum wage increases the motivation to go to work. The state has a clear interest in this – when more people pay taxes, the pie is bigger. People who were dependent on benefits will be able to provide for their own needs.”
Another advantage will be reflected in private consumption. Employees who earn the minimum wage traditionally tend to spend a more major portion of their income on private consumption, and therefore a relative increase in disposable income will allow additional spending on consumption. But Klein does note that the wage hike may also harm local industry: “Products imported from abroad become more attractive for manufacturing, and thus the competitiveness of locals is damaged.”
Published by Globes, Israel business news – en.globes.co.il – on March 27, 2025.
© Copyright of Globes Publisher Itonut (1983) Ltd., 2025.
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