Israeli tech sector faces shortage of 15,000 workers

The current lack of talent, according to the report, has led to an employees’ market in the tech sector.

A woman walks near high-rise buildings in the hi-tech business area of Tel Aviv (photo credit: REUTERS/AMIR COHEN)
A woman walks near high-rise buildings in the hi-tech business area of Tel Aviv
(photo credit: REUTERS/AMIR COHEN)
Israel’s tech innovation sector is growing faster than the local supply of talent, leading to a shortage of approximately 15,000 skilled workers needed to fill open positions, a study published Sunday by Start-Up Nation Central and the Israel Innovation Authority (IIA) has revealed.
While demand for tech talent is rapidly increasing, the supply of programmers, scientists and engineers has lagged behind. Today, some 15% of positions in the Israeli tech sector remain unfilled.
The largest numbers of open positions are in software and product infrastructure roles (31%), the study showed, with shortages also apparent in employees possessing data science, machine learning and artificial intelligence expertise.
“Looking at the overall picture, the industry has been growing while the percentage of the population working in the tech sector has remained steady,” said Start-Up Nation Central CEO Prof. Eugene Kandel.
According to data provided by the Central Bureau of Statistics, the number of people employed in the Israeli tech sector over the past five years has grown from 240,000 to 280,000 yet their percentage of the labor force has remained at approximately 8%.
“In 2017, a few years after identifying the shortage, the government decided to implement a national plan with an impact on the overall ecosystem,” said IIA CEO Aharon Aharon.
Under a five-year plan, the Council for Higher Education aims to increase the number of graduates from computer science and engineering programs by some 40%. Early indications show that the country is on course to surpass the target. The IIA’s “coding boot camps” program also seeks to rapidly train workers.
But the current lack of talent, according to the report, has led to an employees’ market in the tech sector. Earnings in the Israeli tech sector today are 2.5 times greater than earnings in the general economy – the largest wage difference ratio in the world.
As tech firms look for solutions to the growing shortage, the report highlights three possible solutions: offshoring by Israeli companies, hiring foreign experts and increased diversity in the innovation workforce.
Some 22% of responding firms in the survey reported having a significant presence abroad, with half establishing that presence in the last two years. Of those firms with an offshore presence, the vast majority (95%) has R&D operations abroad and on average employs 25% of their workers outside of the country. The most popular offshoring destination (45%) is Ukraine.
“As for addressing the short-term problem, offshoring is a good thing,” said Kandel. “If they couldn’t offshore, they would have to move altogether. But in the long term, we would prefer that more of these jobs will be filled locally.”
Earlier this year, the Israeli government established an expedited process for attracting foreign experts to work in Israel through a special tech visa. While 120 foreign experts have already arrived in Israel since the establishment of the program, it is expected to attract high-end specialists with unique expertise rather than fill the larger sector void.
This year, the Israel Innovation Authority also launched a pilot program, “Back to Tech,” to assist the many Israelis with tech expertise currently living abroad to find employment in the Israeli tech sector.
The final possible solution highlights the lack of diversity in the Israeli tech sector. While approximately 30% of employees in responding firms are women, they represent only 23% of tech professionals and just 16% of tech management.
The lack of diversity becomes increasingly apparent in the case of Israel’s Arab population. Two-thirds of companies reported not employing a single Arab tech employee. When they do, only 3% of employees are Arab tech workers. Larger firms tend to employ significantly more (approximately 8%), sometimes due to the implementation of diversity policies.
“We have learned that industry is willing and open-minded in bringing new populations,” said Naomi Krieger Carmy, head of the IIA’s Societal Challenges Division.
“We really believe this will be a joint effort. Data shows the trends have started to shift recently, because industry has started to become part of the process.”
Government statistics show that there has been a major trend reversal in academia in recent years. In 2016 alone, there were a greater number of Arab tech students than all the Arab graduates over the previous three decades. Today, 18% of all computer science students in Israeli universities are Arab – corresponding to their share of the population.
For ultra-Orthodox women, who only started studying software engineering within the last decade, there are nearly 600 graduates every year. Finding employment in the tech sector has, however, proved difficult for them.
Returning to the overall picture, Kandel said that: “We are competing against other ecosystems, and ecosystems compete on size and innovation.” “If we grow both companies and engineers here, and create an environment in which not all companies are sold, the tech sector can easily constitute 20% of GDP.”
Seeking to boost diversity in the Israeli tech sector, a coalition led by Start-Up Nation Central launched a program in October to enhance Arab and ultra-Orthodox human capital in the Jerusalem hi-tech workforce.
The program will train approximately 240 ultra-Orthodox and Arab participants over a three-year period, offering hands-on technical training, experience in problem solving, exposure to the industry, help in developing soft skills and assistance in finding relevant placements in tech companies.
Should the program prove successful in Jerusalem, it will likely be rolled out across the country – especially as demographic trends show that in the coming decades, Israel’s population will increasingly mirror Jerusalem’s current composition.
“This is truly a national issue, with no one silver bullet to solve the shortage in human capital,” said Krieger Carmy. “A joint effort by government and society is what we believe will change the trend and increase supply.”