Israel's standard of living is significantly higher than all of the other countries in the region and equal to Western-European countries, and is comparable to that of other highly developed countries. Israel was ranked 19th out of 189 countries in the 2019 Human Development Index, indicating "very high" development. It is considered a high-income country by the World Bank. Israel also has a very high life expectancy at birth. It is ranked 8th in the World Happiness Report (2026) and second in happiness in young people.
History Following Israel's establishment in 1948 and the 1948 war that began immediately afterward, the country was impoverished and lacking in foreign currency reserves. Living standards saw some increase in the first year after independence. Israel had to recover from the effects of the war, and saw a wave of mass Jewish immigration from Europe after World War II and Middle Eastern countries, doubling the Jewish population in three years. The country was financially overwhelmed and faced a deep economic crisis. As a result, a strict regime of austerity was put in place. Food, furniture, and footwear were heavily rationed. Rationing allowed for a meager 1,600 calories a day, with additional calories for children, the elderly, and pregnant women. Throughout the austerity period, living standards were preserved at tolerable levels, and the regime of strict rationing enabled the Israeli government to ensure that the entire population was adequately fed, clothed, and sheltered.
In 1952, Israel and West Germany signed a reparations agreement. West Germany agreed to pay Israel financial reparations for the Holocaust, ultimately paying over 3 billion marks over a period of 14 years. The agreement went to force in 1953, when the first reparations payments arrived. As a result, most austerity restrictions were lifted that year; some remained in place, and were gradually lifted throughout the following years. The families receiving the reparations payments saw a considerable increase in their standard of living; on average, they doubled their incomes.
Throughout the 1950s, Israel was heavily reliant on reparations payments from West Germany, and on financial donations from Jews around the world, especially American Jews. Israel used these sources to invest in its infrastructure and in industrial and agricultural development projects, which allowed the country to become economically self-sufficient. Due to this commitment to development in its first two decades of existence, Israel experienced economic growth rates that exceeded 10% annually. Average living standards rose steadily; between 1950 and 1963, the expenditure of an average wage-earner's family rose 97% in real terms.The Challenge Of Israel by Misha Louvish Between 1955 and 1966, per capita consumption in Israel rose by 221% and in 1963, 93% of the population had electricity and 97% had running water.Israel: A History by Anita Shapira
Israeli historian Tom Segev described the improvement in living conditions during the 1950s due to the rapid development of the country:Segev, Tom: The Seventh Million: The Israelis and the Holocaust. (2000, )
The new industrial and agricultural equipment created better conditions for the worker and the farmer. Soon, display windows began showing merchandise long absent; fruits, vegetables, and various food products. People were able to enjoy apples again and spread their bread with butter instead of margarine. Now it was possible to choose from a variety of clothes, shoes, furniture, paper goods, and electrical equipment. The supply did not equal what was available in developed countries, but it was enough to give the impression that the country was finally emerging from austerity... New power stations arrived, and there were fewer electrical outages. People could now have their own telephone lines and travel on railroad cars offering almost European comfort and luxury.
From 1950 to 1976, Israel managed to raise its standard of living threefold. For instance, consumption of animal protein per capita rose from per day, while during that same period, the percentage of families owning an electric refrigerator increased from 2.4% to 99.0%. Family ownership of other durables also showed increases. From 1970 to 1976, the percentage of families owning a gas/electric range and oven rose from 5% to 51.8%, and a television set from 49.7% to 89.5%. From 1957 to 1976, the percentage of families owning an electric washing machine rose from 6.9% to 74.6%, and from 1955 to 1976, the percentage of families owning a radio rose from 54.7% to 84.2%. The percentage of families owning a car also increased, from 4.1% in 1962 to 31.2% in 1976.
One aspect of daily life in Israel that set it apart from much of the world for many years was the absence of television, and then of color television. Television was only introduced in 1966, in schools as an educational tool, and regular public transmissions began in 1968. Even then, all television broadcasts were in black and white, at a time when American and European stations were switching to full-scale color transmissions. Color transmissions were initially banned due to fears of social inequality, although ordinary citizens found ways around this ban, and were only gradually introduced around 1980.
In the 1970s, Israeli living standards were comparable with those of some Western European countries. However, the years following the Yom Kippur War saw stalled economic growth and increased inflation. Economic growth was on average 0.4% annually, and living standards saw minimal growth, and eventually became completely stagnant. This continued into the 1980s; the Israeli economy was in a dire situation following a financial crisis in 1983, and was saved by the 1985 economic stabilization plan which saw market-oriented reforms to Israel's economy, which had previously been heavily regulated. Despite these reforms, there was no immediate growth in quality of life; by 1989, living standards in Israel had not increased in more than a decade.
In addition to the 1985 stabilization plan, mass Jewish immigration from the former Soviet Union in the 1990s brought many highly educated and skilled immigrants to Israel, and the Israeli government implemented effective macroeconomic policies. As a result, Israel experienced an economic boom, and living standards rose. In 2002, Israeli living standards began climbing rapidly, and the gap between Israel and many other Western nations in quality of life began to narrow.
In the early 2000s, Israeli living standards were comparable with those of Western Europe.Mort, Jo-Ann and Brenner, Gary:Our Hearts Invented a Place: Can Kibbutzim Survive in Today's Israel? (2003), Preface In 2006, Israel was rated as having the 23rd-highest quality of life in the world by the United Nations Human Development Index.UN report: Israel 23rd on quality of life list – Ynetnews In 2010, Israel was ranked 15th in quality of life.Israel ranked 15th in quality of life – Ynetnews In 2011, Bank of Israel Governor Stanley Fischer said that Israel had a standard of living two-thirds as high as that of the United States.
In 2011, social justice protests broke out across the country over the high cost of living. In 2012, a report issued by the Taub Center stated that while living standards in Israel were rising, they were rising more slowly than those of other Western countries.
In late 2013, the Israeli government approved a series of measures to lower the country's high cost of living. A law was passed to break up large conglomerates and end economic concentration, so as to encourage economic competition. A new committee was also formed to remove import barriers and lower prices, making them more comparable to prices abroad.
Demographics
According to census, Israel's population is 75.4% Jewish, and 20.5% Arab. The Arab population comprise Arab Muslims (including Bedouins), Arab Christians, and Druze. About 4,000 Armenians and 4,000 Circassians live in Israel. There are smaller numbers of people of Jewish heritage or spouses of Jews, non-Arab Christians, and non-Arab Muslims. 3.7% of people are not classified by religion.
In numbers Israel was ranked 19th out of 189 nations in the 2019 Human Development Index ranking.
In the 2026 World Happiness Report, Israel ranked 8th globally, maintaining its position among the top ten even thought it's affected by continuous wars.
Israel was ranked 4th best performing economy according to the Economist as of 2022 and 2023.
Modern standard of living Wealth and income distribution A 2013 Gallup survey of median household income among countries (though without taking taxes and social contributions into account), based on data collected from 2006 to 2012, found Israel to have the 21st highest median household income in the world.
A 2014 Credit Suisse report found Israelis to be prosperous by world standards. Defining "wealth" as financial resources (cash, stocks, and bonds) and owned property, adjusted to deduct debt, the report found residents of Israel to be the sixth wealthiest people on average in the Middle East and Asia-Pacific region, trailing only Australia, Singapore, Japan, New Zealand, and Taiwan. The report also found that average Israeli wealth slightly exceeds average European wealth. However, the national wealth was found to be distributed slightly more inequitably than in most industrialized countries, although wealth distribution was found to be on par with some industrialized European countries and more equitable than in the United States, with about 67.3% of national assets held by the richest 10% of the population. This is roughly on par with some European countries, including Sweden, Austria, Norway, and Germany, as well as China, Mexico, and Saudi Arabia, while wealth is distributed more equitably across most other European countries.
According to the Gini coefficient, Israel has high income inequality and is one of the most unequal among 34 OECD countries. A 2014 Taub Center report likewise found Israel second only to the United States in terms of disposable income inequality after taxes and government transfers among 22 OECD countries, based on statistics from the mid-2000s. This contradiction may be explained by the presence of the black and grey market economies, which the Gini Coefficient does not take into account. Some estimates suggest up to a quarter of economic activity in Israel goes unreported to tax authorities and statisticians.
A 2015 OECD report found that the Israeli tax burden was slightly lower than average among OECD countries, with Israelis paying an average of 31.4% of their income in taxes, slightly lower than the OECD average of 34.4%, although this is still significantly higher than the tax burden in the United States, Mexico, and Chile. The report also found Israeli salaries to be lower than the OECD average.
Despite high levels of wealth, a major factor affecting purchasing power is the high cost of living in Israel, which is higher than the OECD average. This is seen as having a significant impact on the middle and working classes. However, the cost of living is on the decline.
In January 2021, Bituah Leumi published a report on poverty and inequality in Israel, which showed that 1,980,309 Israelis lived below the poverty line in 2020 - 23% of Israeli citizens and 31.7% of Israeli children. In the Jewish population, the proportion was 17.7%, and in the ultra-Orthodox sector 49%. In the Arab population it was 35.8%. Unemployment benefits alone lifted 23.6% of families out of poverty, compared to 2% in 2019.
Material prosperity The following table contains statistics on the ownership of durable goods among Israeli households in 2015.