Unpacking Financial Times claim that Tel Aviv’s high-tech boom ‘stokes inequality’

Financial Times article (Israel’s tech expansion stokes glaring inequality in Tel Aviv, Dec. 11)  echoes a common MSM narrative about the putative relationship between wealth and poverty in Israel, one that doesn’t appear to be backed up by the economic data. 

FT reports on “the wealth generated by Israel’s surging tech scene”, which, it notes, “employs one-tenth of Tel Aviv’s 4m residents and has brought billions of dollars of investment into the Mediterranean beach town.”  But, this growth, the reporter argues, serves to “exacerbate” social ills such as “income inequality”, pointing to “some 15 per cent of the workforce” who are “below the poverty line”.

At best, this is misleading. According to the most recent report (in 2016) on “Poverty and Social Gaps” by Israel’s National Insurance Institute (NII), poverty rates in Tel Aviv are among the lowest in the country.

The graph shows that, beginning in the 2000s, when the city’s high-tech sector – which now represents 12% of Israel’s gross domestic product – began its remarkable growth, poverty rates have remained steady, and have even declined in more recent years.  From 2015 to 2016, it dropped from 12.5% to 10.3%. 

As far as “income inequality”, whilst we weren’t able to find data broken down by city, in Israel overall, income inequality is – again, per the NII data – at the lowest rate since 2003, a result, NII asserts, of increased social benefits, higher wages and the fact “Israel’s economy has grown faster…than nearly any other in the OECD for the past 15 years.”  The OECD’s 2018 economic report on Israel confirms the NII’s conclusions, stating clearly that “in recent years both gross and net income inequality have come down”.  

Whilst the OECD report does note that, as a whole, Israel’s rate of income inequality is on the higher end of the OECD average, there appears to be no evidence supporting the Financial Times’ claim that Tel Aviv’s high-tech boom is the cause of, or is exacerbating, poverty and inequality in the city.

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