Wage growth slows in Israel in June; real wages continue to decline

ISRAEL - In Brief 04 Aug 2025 by Sani Ziv

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The average nominal wage for all workers increased by 2.1% over the past year (based on original data through June), and by 2.5% among Israeli workers only. When seasonally adjusted, wages likely rose at a rate of about 3%, which is still considered relatively low (below the increase of inflation of 3.3%). Up to May, a rapid wage increase was observed in the hospitality and food services sector (6%, trend data, influenced by the minimum wage update), in the financial sector (7.1%), and in industry (4.7%). In the public sector, a moderate wage increase is evident due to the wage freeze in most departments. Overall, there is a clear trend of moderation in wage growth, which supports a softening of inflationary pressures. However, the shortage of workers in the construction sector—due to the damages from the war with Iran—is expected to lead to wage pressures in that sector.At the same time, real wages have continued to decline in recent months. In June 2025, real wages fell by 1.8% year-over-year, and the trend has remained negative through the spring and early summer. The ongoing decline in real wages is reducing household purchasing power and is expected to weigh on the expansion of private consumption in the coming months.The chart below presents the year-over-year percentage change in nominal (orange line) and real (blue line) wages in Israel from mid-2021 through June 2025. While nominal wage growth peaked in late 2023, it has since slowed significantly. Real wage growth has been negative since the last quarter of 2024 and into 2025, highlighting the erosion of household purchasing power and the weakening of domestic demand. Real vs. nominal wage growth (YoY % Chang...