Why you should care

Expensive apartment blocks tower over poorer neighborhoods in Tel Aviv, as the income gap widens. 

The crowded central bus station is the hub of down-at-the-heels Tel Aviv, a grid of streets where police cars patrol for petty criminals, warehouses stand abandoned and poor Israelis live in crumbling apartments. Above them, however, a new face of the city is taking form. The Y Box apartment blocks tower over the gritty streets, home to upper-middle-class Israelis who live in $1 million-plus flats, drive expensive cars and buy Indonesian coffee from in-house cafés.

Almost all of the tower residents are enjoying the wealth generated by Israel’s surging tech scene, which employs one-tenth of Tel Aviv’s 4 million residents and has brought billions of dollars of investment into the Mediterranean beach town.

“For young couples working in tech, maybe those with a young child, this is the perfect place to live — it’s edgy and exciting, not dangerous and dodgy,” says Victoria Amrani, a sales manager at the apartment towers. “I mean, there’s a dangerous area close to here, but it does not spill over.”

But Tel Aviv’s quest to rival Silicon Valley has exacerbated the kind of social ills that have become contentious in San Francisco: income inequality and growing discontent over the exclusion of working-class citizens from the economic gains.

Every day in Tel Aviv, you see more and more towers, but if you’re an average person, you don’t know anyone who lives there.

Assaf Harel, city councilor and TV journalist

Assaf Harel, a television journalist who won a seat on Tel Aviv’s City Council last month with the campaign slogan “Not a City of Towers,” says the tech sector is picking at the fabric of society.

“Every day in Tel Aviv, you see more and more towers, but if you’re an average person, you don’t know anyone who lives there,” he says. “You never go there to visit, no one from your daughter’s school lives there. You feel like something was taken from you, from the city, and given to a complete stranger.”

Israel’s tech sector has become an anchor for its steadily growing economy, doubling its share of gross domestic product from about 6 percent in 1995 to about 12 percent today. Half of the country’s exports by value are now classified as high-tech goods and services, according to the Organization for Economic Cooperation and Development data. Last year, Israeli tech companies were acquired in deals worth a total of $23 billion, including the $15 billion sale of Mobileye, a developer of self-driving-vehicle technology, to Intel.

Tech growth has exacerbated existing social inequalities. Some 15 percent of the workforce are below the poverty line, including many ultra-Orthodox Jews and Israeli Arabs. While the average national wage is about $2,800 a month, average earnings in software research are almost $10,000, according to central bank data. In 2017, Amazon reportedly paid some new hires about $25,000 a month.

Some 300 multinational companies, from Facebook to Intel, have taken office space, but the results are less ostentatious than the caricature of the Silicon Valley tech bro taking private jets. In a country built on frugality, most well-educated Israelis are averse to flashy displays of wealth. “There’s no word in Hebrew for a man who’s gotten too rich to hang out with his old friends,” says Hezi Cohen, a former urban planner now working at Waze, the Israeli mapping company bought by Google for $1.1 billion.

But that has not shielded the new tech elite from criticism. Daphni Leef, a city resident who sparked protests about a lack of affordable housing in 2011 when she pitched a tent on a swanky boulevard, says Tel Aviv is becoming “a smart city, a wired, tech-savvy city, not a compassionate, inclusive city.”

Tel Aviv has become one of the most expensive real estate markets in the world, says Asaf Mualem, who runs Olympus Real Estate. “I see Tel Aviv as a mirror to what’s going on in New York — 20 to 30 years ago, someone with a lower income could live in Manhattan,” he says. “Pretty soon, this is going to be a city only for people with high salaries.”

Harel said the “Israeli dream” has changed, a shift he captured by writing a hit TV sitcom about a group of rowdy entrepreneurs who make $200 million by selling a tech company they founded.

“Each era sells its own illusion, and this is the grand illusion of our time,” he says. “The modern story is that everybody can be an entrepreneur — have an idea, take friends along. But even in Israel, the number of people who can make that happen for them is so low. There’s bound to be failure, and that will breed resentment.”

Ariel Grnica’s metalworking shop is at the seam of old and new Tel Aviv. The back of his dilapidated workshop opens onto forlorn furniture stores and cheap bodegas while the front faces gleaming apartment buildings.

Over the past decade, Grnica estimates, several hundred carpenters in the neighborhood have gone out of business, their emptied workshops converted into trendy flats as his own business floundered. He is hoping to cash in the real estate to pay for his sons to study computer engineering.

“For my sons, or my neighbors, who sometimes stumble into my shop, this is like an archaeological site,” Grnica jokes, pointing to the idle machines behind him. “I wonder if there is anywhere in the world that has changed as much as here.”

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By Mehul Srivastava

OZY partners with the U.K.'s Financial Times to bring you premium analysis and features. © The Financial Times Limited 2019.

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