The Ministry of Finance in Israel intends to freeze the minimum wage and government pensions, which were scheduled to increase on January 1, as part of efforts to confront the cost of the ongoing war on Gaza and Lebanon.
Freezing the minimum wage alone would save the Ministry of Finance 1.2 billion shekels ($322.1 million), according to what the Israeli economic newspaper Globes reported.
The newspaper reported that the planned measure is unpopular, because it affects the most deprived sectors of society, while the Ministry of Finance remains keen to move forward with the cuts.
The 2025 budget is scheduled to be presented to the Council of Ministers for approval on Thursday, October 31, amid pressure on Prime Minister Benjamin Netanyahu from senior officials in the Ministry of Finance, Director General Yossi Sheli and Avi Simhon, and the Prime Minister’s Economic Advisor, to… Get him to agree to some of the more controversial planned cuts.
Low odds
The newspaper pointed out that raising the minimum wage would increase the net income even for many employees who already earn much more than it, prompting the ministry to cancel the next automatic increase in the minimum wage. However, the decision targeting the public sector would It harms virtually all minimum wage workers in Israel, the newspaper says.
The minimum wage currently stands at 5,880 shekels ($1,578) per month, and its calculation is linked to the average salary in the economy (at a rate of 47.5%), which rose by about 6% last year to a level of about 13,600 shekels ($3,650).
According to the newspaper, if this pace is maintained until the end of the year, freezing the minimum wage will deprive workers of an increase of more than 300 shekels per month ($80.53).
It is noteworthy that the Israeli Labor Union (Histadrut) warned against freezing the minimum wage during the negotiations it is conducting with the Ministry of Finance, and there is opposition from Netanyahu, so the chances of this matter being passed seem relatively low, according to the newspaper.
IMF forecasts
It is noteworthy that the International Monetary Fund reduced its forecast for the growth of Israel’s economy to 0.7% during the current year from 1.6% expected last April, under pressure from military expenditures due to its war on Gaza and Lebanon.
The Fund expects Israel to use higher government spending in the near term to support the economy and cover the military costs of the war, according to the Fund’s World Economic Outlook report.
The Fund stated that its forecasts are subject to an increasing state of uncertainty due to the war, and therefore may be revised. The Fund expected Israel’s economy to grow by 2.7% next year and 3.4% in 2029, according to what was stated in the Global Growth Prospects report issued this month.
