Bank of Israel: Periphery Losing Well-educated, Prosperous Residents to Center

Report on internal migration finds fast-growing regional income gap.

Thousands of Israelis have picked up and moved to the center of the country in search of a higher quality of life and better paying work. But in doing so they caused home prices in the center to rise and left behind in the country’s periphery the weakest population.

These are the conclusions of a Bank of Israel report released yesterday that charted internal migration in Israel during the years 1998 through 2011.

It found that an increasingly larger proportion of people belonging to the top 40% of income earners lived in the center and greater Tel Aviv area during those years. At the same time, the periphery – the Galilee and Negev – took a bigger portion of the bottom 40% of income earners.

The result was a widening income gap between the center of the country and the periphery, and often inside individual regions, the central bank said. The bank said household incomes in Tel Aviv and the center are 15% to 20% higher than the national average, up from 5% or 6% higher in 1998. In the Haifa region, incomes were 2% above the national average and in the north 0.6% higher, while in the south they were about average and in Jerusalem 8% below it.

The central bank report attributed the migration to government policy, starting in 2003, to reduce the tax benefits that many population centers in the periphery had enjoyed.

“In the north the benefits were pared back and for hundreds of places in the Negev they were cancelled outright,” the Bank of Israel explained. “This eroded the ability of the periphery to retain the strongest populations and to attract them from the center of the country.”

All regions lost residents — except center

Using Central Bureau of Statistics data, the bank found that all of Israel’s regions has suffered net internal emigration (more people moving out than moving in) for many years - except one. The only region that had net internal immigration was the center – the area stretching from the Sharon down to Rishon Letzion.

The city of Jerusalem saw more than 19,000 people leave in 2012 while 10,500 moved in, for a net loss of 8,700. The northern district lost 33,000 residents while 31,500 moved in, for a loss of 1.200. In the south, net emigration was 1,900 and in the Tel Aviv district 4,800.

By comparison, the center in 2012 drew in 73,600 people from elsewhere in the country, while 63,200 left. All told, in the decade to 2012, the center attracted 131,000 net new residents from other parts of the country while the south lost 27,000, the Bank of Israel said.

The report found that inequality between regions narrowed somewhat in 2011 but not enough for researchers to say it reflected a change in trend.

Dan Ben-David, who teaches at Tel Aviv University and heads the Taub Center for Social Policy Studies, warned against drawing too many conclusions from the report.

“If the young and educated are leaving the periphery, then that has very serious implications for the future of the periphery. But these kind of data don’t exist in the report,” he said, adding that the most recent figures suggest that the migration to the center has slacked off and that income levels in areas outside of Tel Aviv and the center are rising.

Apart from pointing a figure at tax policy, the Bank of Israel suggested another factor behind the population movement was the economic strength of the country’s center.

The population movements may explain the growing regional income inequality by concentrating the strongest populations in some areas and the weaker ones in others, the central bank said.

Olivier Fitoussi