Finance Ministry expects trouble for hi-tech revolution

According to the report, Israel’s hi-tech sector grew at a rate of 9 percent a year.

February 15, 2016 21:21
2 minute read.

money. (photo credit: REUTERS)


Dear Reader,
As you can imagine, more people are reading The Jerusalem Post than ever before. Nevertheless, traditional business models are no longer sustainable and high-quality publications, like ours, are being forced to look for new ways to keep going. Unlike many other news organizations, we have not put up a paywall. We want to keep our journalism open and accessible and be able to keep providing you with news and analyses from the frontlines of Israel, the Middle East and the Jewish World.

As one of our loyal readers, we ask you to be our partner.

For $5 a month you will receive access to the following:

  • A user experience almost completely free of ads
  • Access to our Premium Section
  • Content from the award-winning Jerusalem Report and our monthly magazine to learn Hebrew - Ivrit
  • A brand new ePaper featuring the daily newspaper as it appears in print in Israel

Help us grow and continue telling Israel’s story to the world.

Thank you,

Ronit Hasin-Hochman, CEO, Jerusalem Post Group
Yaakov Katz, Editor-in-Chief


Israel’s hi-tech revolution is in trouble as R&D investment flat-lines and a shortage of highly skilled workers grows, according to a report released Sunday by the Finance Ministry.

According to the report, Israel’s hi-tech sector grew at a rate of 9 percent a year, twice as fast as the economy, from 1998- 2012. But it has only grown half as quickly as overall GDP since 2010. Its share of exports, which grew from 15% in 2001 to more than 35% last year, has leveled off.

Be the first to know - Join our Facebook page.

Investment in research and development, which grew at 6% from 1991 to 2012, has dropped off, with South Korea taking the lead in R&D investment among members of the Organization for Economic Cooperation and Development.

The rise of hi-tech in Israel has made it a crucial part the economy, the report noted. In 2014, the hi-tech sector accounted for 12% of private-sector workers, about 283,000, and 9% of GDP.

Though venture-capital investment has reached its level prior to the dot-com bust (as it has in the United States, though not in Europe), the local hi-tech sector faces a shortage of skilled labor.

“The most significant challenge facing the sectors is the supply of skilled labor,” the report said.

Israel had a massive uptick in skilled hi-tech workers in the 1990s, in part because of the influx of educated immigrants from the former Soviet Union.


But no such influx is headed toward Israel today, and the country is not grooming its own highly skilled workers quickly enough.

The share of students studying science has fallen from a peak of 13% in 2005 to 9% in 2014. Israel used to be several percentage points ahead of the OECD average on that measure, but the gap has completely closed as fewer Israelis study science.

The shortage of highly skilled workers helps explain the consistent rise in hi-tech salaries, which have inched closer and closer to US hi-tech wages, the report said. (The gap is still significant. Israeli hi-tech salaries remained 65% to 80% of those in the US in various fields in 2014.) The report issued a siren of sorts to Israel’s political leaders, who it said do not have a robust plan for addressing the issue.

“The shortage in labor trained for the hi-tech sector is not expected to be resolved in the absence of comprehensive policy,” it said.

Join Jerusalem Post Premium Plus now for just $5 and upgrade your experience with an ads-free website and exclusive content. Click here>>

Related Content

Workers strike outside of the Teva building in Jerusalem, December 2017
December 18, 2017
Workers make explosive threats as massive Teva layoff strikes continue