Israel is a nation replete with contradictions; its economics, politics, and sociology often defy understanding. This Jewish state, located on the periphery of the Moslem world, has few natural resources of its own, while its neighbors to the south and east enjoy the benefits of oil wealth. It is geographically Middle Eastern, yet politically finds itself considered European. Its population is predominantly Asian and African, yet its political institutions and leadership, civilization, and national cultural figures are rooted in the West. Another contradiction, less obvious but no less puzzling, provides the subject of this article. In typical periods of inflation, real wages are eroded and the laboring class suffers from a reduction in its purchasing power. Yet in the inflationary economy characteristic of most of Israel's existence, the wage-earner has managed to escape the harm threatened by the ever-diminishing value of the currency. The ostensible explanation—indexed wage contracts— appear to be inadequate, for such agreements never provided full de jure coverage against inflationary erosion.