Israeli hi-tech industry faces shortage of 18,500 employees - study

As of the end of 2019, approximately 321,000 Israelis were employed in hi-tech firms across the country, increasing by 8% during the past year and accounting for 9.2% of all employees.

Employees of the D-ID startup company work at the company's office in Tel Aviv (photo credit: AMIR COHEN/REUTERS)
Employees of the D-ID startup company work at the company's office in Tel Aviv
(photo credit: AMIR COHEN/REUTERS)
Demand for employees in the hi-tech sector continues to outpace supply, leaving thousands of positions unfilled across the rapidly expanding industry, according to a new study on human capital in hi-tech.
As of the end of 2019, approximately 321,000 Israelis were employed in hi-tech firms across the country, increasing by 8% during the past year and accounting for 9.2% of all employees, according to the annual study published Wednesday by Start-Up Nation Central and the Israel Innovation Authority.
Demand has risen in tandem, with an estimated 18,500 open hi-tech positions recorded as of July 2019 – also climbing 8% during the previous 12 months. The findings once again turn the spotlight on the need for greater diversity in the hi-tech workforce, including improved integration of women and the Arab and haredi (ultra-Orthodox) populations.
Some 40% of unfilled positions were in the fields of software and product infrastructure. While cyber and algorithm/data scientist roles accounted for 7% and 4% of the employment gap, respectively, they led the way in the share of open positions per existing employees, 33% and 15%, respectively. The figures indicate high demand for their skills across the industry.
“One positive trend is that the demand for Israeli products and know-how continues to grow at a relatively high pace,” Prof. Eugene Kandel, CEO of nonprofit Start-Up Nation Central and former head of the National Economic Council, told The Jerusalem Post. “The less good news is that demand is still outpacing supply. The open positions are an indication of both the shortage and the growing demand.”
The average salary in the hi-tech industry in 2018, including both hi-tech and non-tech roles, was NIS 22,479 per month, compared with an average of NIS 9,345 in the remainder of the economy. Indicating high demand, an analysis conducted by consulting firm Zviran of the most sought-after hi-tech professions demonstrated a positive premium, ranging from 1.5% to 8.6%, between the wages of newly recruited employees and existing employees in identical positions.
The shortage of employees has turned hi-tech into an “employees’ market,” reflected by more than 10% of employees leaving their positions voluntarily in 2018. The high figure indicates that employees are confident of finding work that is similar or better than their current roles.
Faced with a lack of available employees, companies are increasingly looking offshore as a recruitment solution, especially for R&D. Some 27% of almost 250 companies participating in the study reported offshore centers, compared with 22% last year. Ukraine (41%) is the most popular offshore destination, followed by the United States (12%), Bulgaria and India (both 11%).
With non-Orthodox Jewish men constituting approximately two-thirds of hi-tech employees, solutions to the shortage in human capital often focus on including underrepresented populations. Despite positive employment trends, Arab and haredi employees represented only 5% of employees in 2018.
“Inclusion is definitely where we see a lot of potential in longer-term solutions,” said Naomi Krieger Carmy, vice president of societal challenges at the Israel Innovation Authority. “We really have worked a lot to create the right pathway for Arabs and the ultra-Orthodox, both in education and companies.”
Arab employees constituted 9% of the increase in hi-tech employees between 2017 and 2018, the study said, crossing the 2% share of all employees for the first time. Further room for optimism is derived from data provided by the Council for Higher Education, showing that the number of Arab undergraduate students engaged in hi-tech studies at academic institutions more than doubled between 2012 and 2018. Efficient integration of recent graduates into the industry will be critical in the coming years, the study said.
Despite increases in recent years, representation of the haredi population remains at just 3%, with women counting for the majority of employees. According to a 2014 study, “Route to the High-Tech Industry,” only one-third of haredi employees are in development positions, associated with higher salaries.
“Within the ultra-Orthodox sector, we are starting to see the change – particularly around women,” Krieger Carmy said. “We have a big gap because they often study at associate-degree level after high school. There is still a gap in their ability to get into the core of the hi-tech industry.”
While the overall number of women employed in hi-tech increased in tandem with the growth of the industry, their share, approximately one-third, has not risen in recent years. When hi-tech roles are considered, just 22% of technology positions and only 18% of technology management positions are filled by women.
According to the report, the higher the age group, the smaller the share of women in hi-tech positions. While the numbers of men and women are equal in their 20s, the dominance of men starts to increase in the 25-34 and 35-44 age brackets, the time when many women become mothers.
The key to solving the employee shortage is by increasing the supply of employees, first and foremost by training more technology workers, the study said. Hurdles to employment still remain as many companies refrain from hiring inexperienced graduates.
One of the most promising avenues for integration is for students to start working while still at university. According to the study, 58% of students employed in hi-tech are hired by the same company upon graduation. Government-supervised coding boot camps, operated by the Israel Innovation Authority, and programs developed by Start-Up Nation Central’s Scale Up Velocity organization, in collaboration with leading hi-tech companies, are cited by the study as alternative entry channels into the industry.
“The multinational corporations are at the forefront of hiring juniors, women, Arabs and the ultra-Orthodox,” Kandel said. “They can do much more still, and the Israeli companies, even the medium-sized ones, should understand that the friend-bring-friend type of hiring is no longer sufficient.
“We need to widen hi-tech up to a wider population. We are trying to work together, to see how we can coordinate with all the parties, a more collaborative effort, which of course the Israel Innovation Authority should be lead. But I don’t think it’s able to do it alone.”
In May 2018, the Innovation Authority launched an experimental procedure to expedite the recruitment of foreign experts to the Israeli hi-tech industry. A total of 275 experts arrived between May 2018 and April 2019, according to the Population and Immigration Authority. While the procedure has mainly been used by large companies to bring in personnel from international sites, the solution can provide an accessible option for companies requiring experts quickly and for short periods of time, the study said.