TEL AVIV — The school year is starting soon, and with it comes another not-so-small burden on families around Israel: pre-school and pre-elementary education can cost up to one-third of a person's gross salary, even in upper-income cities and towns.
Indeed, child care expenses for young families was a central point of contention during the 2011 social protests centered in Tel Aviv — Israel's largely middle-class version of the Indignados movement challenging economic policy around the West. And while that movement has largely faded, an investigation by Calcalist shows that the financial burden of early education on Israeli families has not.
An analysis of child care, nursery school and kindergarten prices in different cities compared to the average gross salary of workers in those cities, shows that the cost of education represents one-quarter to one-third of family income. When compared to net income, the proportion of education costs would be even higher.
The analysis was conducted in 14 cities, based on the average of the most expensive and cheapest nursery and kindergarten prices, and on the average salary of the city. In eight out of the 14 cities, the prices represent 30% or more of gross pay. Furthermore, it seems that there is no major difference between poorer and wealthier: In the cities where school costs less, the salary is lower as well.
In Petah-Tikva for instance, pre-elementary school costs 2,400-3,000 shekels ($670-$840) and the average salary is around 9,000 shekels ($2,525) a month. On the other hand in Ashdod, the school costs 1,800-2,400 shekels ($500- 670), but the average salary is also lower: 7,330 shekels ($2,050). In both cities, despite the considerable difference in the average salary, the early education costs represents exactly 30% of monthly income.
In five other cities, pre-elementary education costs up to one-quarter of the average salary, even when the prices are relatively cheap. Without forgetting that those prices are for one child: Families with twins or two young children weigh doubly on the parents’ income.
In Jerusalem - Photo: David Soto-Karlin
Only in Modi’in is the cost of child care lower (18%): The pre-school and kindergartens are not cheap (around $700), but the salaries are high ($3700)
In Tel Aviv, the cost represents 31% of the average salary. In Haifa 32%, Netanya 33%, Beersheba 28%.
A complicated market
The opening of many public facilities for kids aged three and older (a result of the 2011 social protests) have helped ease up the burden, but for younger children it is still difficult to find subsidized structures like Wizo or Naamat, so families have to turn to private and more expensive nursery schools and kindergartens.
“The main contributor to the cost is labor," says Hanan Dagan, chairman of the union for child-care workers. "For every five or six children, there is a caregiver." Doing the math, this means that if a caregiver or teacher's monthly salary is 5,000 shekels ($1,400), the cost to the facility is 6,500 ($1,800), which means 1,000 shekels ($280) per child.
"And these prices are for the periphery," Dagan adds. "In the city center, the cost of the same caregiver can go up to tens of thousands of shekels.”
To that you have to add the maintenance of the facility, including rent and taxes. Dagan says there is no way to break this market, “because if you break it, you lose. All along this past year we have heard of many schools that reached a situation of near bankruptcy, and I'm talking about good, well-established facilities."
Crunching the numbers of South Korea's personal and household debt offers a glimpse into what drives the win-or-die plot of the Netflix hit produced in the Asian country.
SEOUL — The South Korean series Squid Game has become the most viewed series on Netflix, watched by over 111 million viewers and counting. It has also generated a wave of debate online and off about its provocative message about contemporary life.
The plot follows the story of a desperate man in debt, who receives a mysterious invitation to play a game in which the contestants gamble their lives on six childhood games, with the winner awarded a prize of 45.6 billion won ($38 million)... while the losers face death.
It's a plot that many have noted is not quite as surreal as it sounds, a reflection of the reality of Korean society today mired in personal debt.
Seoul housing prices top London and New York
In the polished streets of downtown Seoul, one sees endless cards and coupons advertising loans scattered on the ground. Since the outbreak of the pandemic, as the demand for loans in South Korea has exploded, lax lending policies have led to a rapid increase in personal debt.
According to the South Korean Central Bank's "Monetary Credit Policy Report," household debt reached 105% of GDP in the first quarter of this year, equivalent to approximately $1.5 trillion at the end of March, with a major share tied up in home mortgages.
Average home loans are equivalent to 270% of annual income.
One reason behind the debts is the soaring housing prices. In Seoul, home to nearly half of the country's population, housing prices are now among the highest in the world. The price to income ratio (PIR), which weighs the average price of a home to the average annual household income, is 12.04 in Seoul, compared to 8.4 in San Francisco, 8.2 in London and 5.4 in New York.
According to the Korea Real Estate Commission, 42.1% of all home purchases in January 2021 were by young Koreans in their 20s and 30s. For those in their 30s, the average amount borrowed is equivalent to 270% of their annual income.
Playing the stock market
At the same time, the South Korean stock market is booming. The increased demand to buy stocks has led to an increase in other loans such as credit. The ratio for Korean shareholders conducting credit financing, i.e. borrowing from securities companies to secure stock holdings, had reached 21.4 trillion won ($17.7 billion), further increasing the indebtedness of households.
A 30-year-old Seoul office worker who bought stocks through various forms of borrowing was interviewed by Reuters this year, and said he was "very foolish not to take advantage of the rebound."
In addition to his 100 million won ($84,000) overdraft account, he also took out a 100 million won loan against his house in Seoul, and a 50 million won stock pledge. All of these demands on the stock market have further exacerbated the problem of household debt.
42.1% of all home purchases in January 2021 were by young Koreans in their 20s and 30s
Game of survival
In response to the accumulating financial risks, the Bank of Korea has restricted the release of loans and has announced its first interest rate hike in three years at the end of August.
But experts believe that even if banks cut loans or raise interest rates, those who need money will look for other ways to borrow, often turning to more costly institutions and mechanisms.
This all risks leading to what one can call a "debt trap," one loan piling on top of another. That brings us back to the plot of Squid Game, "Either you live or I do." South Korean society has turned into a game of survival.
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