The Impact of Technology on Wage Gaps in Israel

The full policy paper is currently available only in Hebrew.

As generative artificial intelligence tools continue to develop, their adoption within the Israeli economy is accelerating, accompanied by far-reaching projections regarding their potential impact on employment, productivity, and growth.

Taub Center researchers Michael Debowy, Prof. Gil Epstein, and Prof. Avi Weiss examined the expected impact of this technology on wage gaps in Israel. While the model used by the researchers suggests a relatively moderate increase in the overall wage level, the expansion of AI usage may have significant implications for wage gaps between different groups of workers. The greater the overall wage effect of the technology, the more pronounced the accompanying changes in wage disparities—some widening and others narrowing.

Overall Wage Growth Alongside Complex Effects on Wage Gaps Between Worker Groups

The study employs a model developed by Acemoglu, one of the leading scholars in the field, which examined the impact of technology on wage inequality in the United States in 2025. Based on data from Israel’s Central Bureau of Statistics, the researchers estimate that Israel’s overall wage level is expected to increase cumulatively by approximately 1.55% over a decade due to the adoption of generative AI. This represents a relatively modest rise compared to the period 2014–2024, during which real wages of salaried employees increased by an average of 2.7% per year.

However, despite the projected rise in average wages, the distribution of wages across worker groups is expected to change. The gender wage gap is projected to widen by approximately 0.5–1 percentage points, while sectoral wage gaps are expected to narrow by about 1–2.5 percentage points. In addition, the average wage of roughly 29%–30% of the total workforce is expected to decline, including among women and individuals with medium-to-high levels of education (high school graduates and those holding a bachelor’s degree).

Studies examining scenarios in which most human tasks are automated find that the impact of AI on wages depends on whether the economy succeeds in expanding and investing in capital at a pace similar to that of automation. When investment and economic activity grow sufficiently quickly, wages may rise. Conversely, if automation advances more rapidly than economic expansion, wages may be adversely affected.

The impact on wage gaps also depends on labor market responses on both the demand side (employers) and the supply side (workers) across industries and occupations. If overall trends persist, these demand and supply adjustments are expected to moderate some of the direct effects on wage disparities.

Thus, similarly to trends identified in U.S.-based research, Israel is expected to experience a modest rise in overall wage levels alongside a complex impact on wage gaps: narrowing sectoral wage gaps, widening gender wage gaps, and polarization in wage gaps across education groups. These trends underscore the need to promote high-quality training and learning opportunities, invest in vocational training systems, and improve academic study tracks in order to enable Israeli workers to compete successfully in the AI-driven labor market.