We have known for many years that Israel is not a cheap place to live, but despite the many price increases and checks, it was difficult to imagine that we would reach the summit of the world cost of living. The British economic magazine “The Economist” published yesterday (Tuesday) the ranking of the most expensive cities in the world in 2021 – in which Tel Aviv was ranked first and unflattering.
How, in fact, is this manifested? Does this mean that everything in Tel Aviv is more expensive than anywhere else in the world? not exactly. Yes, a lot of things cost a lot here, but there are still categories, for example vegetables, where prices in the White City are low, and even significantly, from other cities, especially in East Asia.
What to do? With the help of Numbeo, the largest socio-economic database on the web, we examined the differences between the six leading cities in the ranking: Tel Aviv, Paris, Singapore, Zurich, Hong Kong and New York. The categories are samples from the field of restaurants, vegetables and fruits, textiles, housing, vehicles and average wages. Since there is no external control over the Numbeo database, the data are not necessarily accurate at the shekel level, but statisticians confirm that they paint a very close picture of reality.
As can be learned from the data, Tel Aviv is not the expensive city among the six in very many parameters. Rents are significantly lower than Singapore, Zurich, Hong Kong and New York and high only from Paris (we also checked apartment prices, Tel Aviv is lower than New York, Singapore and Hong Kong and high but slightly above Paris and Zurich). The price of apples and other fruits and vegetables is also reasonable. On the other hand, the cost of a new average car is outrageously higher than prices in Europe and the US (note Singapore in this category).
So where does the difference lie? In the power of purchase. Elsewhere you pay more, but you also earn more. In fact, among the top ten countries on the list, the average wage in Tel Aviv is only higher than Osaka in tenth place. Prices in Zurich may be skyrocketing, but weighing wages against the cost of living, the purchasing power of Swiss city residents is almost 50 percent higher. In New York, rents are appallingly high, but their purchasing power is 30 percent higher than Ron Huldai’s city. You got the idea.
“Tel Aviv’s peak ranking in the global cost of living index reflects the failure to address the underlying problems of the Israeli economy – chief among them housing prices and the strengthening of the shekel,” says Chen Herzog, chief economist at BDO, “Tel Aviv’s high real estate prices This also applies to the prices of food, restaurants, hotels and all the other services provided in the city that embody the costs of their rent in their prices. “The global ranking of Tel Aviv shows that the problem of real estate prices in Israel is no longer just a housing problem, but a horizontal problem that is linked to the cost of living and the prices of local services.”
“This is a phenomenon we are all well aware of: Tel Aviv is a super expensive, economic hell,” continues Dr. Alex Komen, an economist and value creation expert at Tel Aviv-Yafo Academic College. Whose standard of living is about 50% higher than in Israel, which can be measured by the purchasing power of wages. One of the key parameters is the cost of rent, which is very high. “Other parameters are ‘grocery’, the cost of the basket of products in the supermarket – alcohol, household products, toiletries, entertainment, clothing, communications, fuel – which in Israel is among the most expensive in the world, and more.”
One of the significant culprits, according to Komen, in the cost of living is the Israeli consumer: “When we talk about prices – it’s a matter of supply and demand. The supply in the country is inflexible, many products have only one importer, for example This is not the case in most countries of the world – there are several franchisees and there is competition between them, however, the suppliers in the country give monopoly prices.
“On the other hand, the demand in the country is smug. In the United States, for example, people are willing to travel for hours by car because they know there is a sale in a certain mall. We are all familiar with these images of Americans storming stores on shopping days and specials. It’s part of their culture, they collect coupons to get discounts. An Israeli, on the other hand, says, I work so hard (the number of hours worked in Israel is one of the highest in the world), to cut this coupon is not in my honor. To all this must be added the fact that the shekel is terribly strong – something that amplifies the high prices here. “
In other words, Israelis are willing to pay more and suppliers and retailers are taking advantage of this, “except in times of crisis,” says Komen, recalling the Milky Way protest that was here a decade ago. “So it became a bon ton not to pay more. The Israeli realized that he was not an idiot.”
Komen commented on what has been happening recently in the Food Networks and Investigation Authority industry. “One of the things about capitalism is that prices are not coordinated, people have gone to jail for setting up cartels and coordinating prices. So the way is to come out with a message that says supply prices are going up and we are raising prices. “Why do it in public? Because that’s how I wink at my competitors – we’ll raise the prices. The competition authority, which has been completely impotent until now, has woken up and shaken them up a bit.”
And what about the strengthening of the shekel against the dollar? “The effect of the strengthening of the shekel on the ranking is relevant only for tourists for whom the relevant index of cost of living is measured in dollar terms,” Herzog adds. “Double – firstly because of the Korona’s limitations, and secondly because of the strengthening of the shekel, which greatly increases the cost of staying in Israel for tourists.
For this reason, Herzog is a bit skeptical of the Economist’s rating: “This index indicates the cost of living for tourists, who examine the costs in Israel in dollar terms. The relevant index for local residents is the cost of living index relative to the average wage. Less, because in parallel with the increase in the cost of living, there was also an increase in the average wage. “
Source: Maariv.co.il – כלכלה בארץ by www.maariv.co.il.
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