Start-Up Nation?

The sector needs to keep growing in order to remain relevant and attract investors and clients around the world.

NAZARETH STARTUP (photo credit: Courtesy Nazareth Startup Weekend)
(photo credit: Courtesy Nazareth Startup Weekend)
Is the Start-Up Nation at risk of becoming the “Slow-Down Nation”? This question needs to be asked in the wake of a disturbing report published jointly on Sunday by the Israel Innovation Authority (IIA) and Start-Up Nation Central, a nonprofit organization that monitors Israel’s tech industry.
As reported by The Jerusalem Post’s Eytan Halon, the 2018 Israeli Innovation Industry Human Capital Report shows that 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 available positions.
The balance of supply and demand is precarious, with demand for tech talent rapidly increasing, while the supply of programmers, scientists and engineers is lagging behind. Some 15% of positions in the Israeli tech sector are currently unfilled, according to the study.
The largest numbers of open positions are in software and product infrastructure roles (31%), the study showed, with shortages also of potential employees with the relevant expertise in data science, machine learning and artificial intelligence.
“Looking at the overall picture, the industry has been growing, while the percentage of the population working in the tech sector has remained steady,” Start-Up Nation Central CEO Prof. Eugene Kandel told the press.
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%, which is not keeping up with the tech sector’s relative growth.
The implications go beyond the purely economic. As Prime Minister Benjamin Netanyahu likes to point out, Israel’s strength lies in technology and counter-terrorism. These are two huge and interrelated fields, especially when it comes to cybersecurity, in which the country contributes greatly worldwide.
But, as Kandel noted, the sector needs to keep growing in order to remain relevant and attract investors and clients around the world.
The report highlights three possible solutions to counter the growing shortage in staff: 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 workforce outside of the country.
Offshoring is a good way to address the short-term problem, according to Kandel. “But in the long term, we would prefer that more of these jobs will be filled locally.”
The government is taking steps to counter the problem. This year, for example, it established an expedited process to attract foreign experts to work in Israel through a special tech visa.
Some 120 experts have come to Israel since the establishment of the program, but it is relevant mostly for high-end specialists with unique expertise.
The IIA also launched a pilot program this year. Called “Back to Tech,” it aims to reverse the brain drain and assist Israelis with tech expertise currently living abroad to return and find employment in Israel.
Another obvious solution highlighted is to help and encourage more women, haredim and Arabs to become part of the hi-tech boom. A coalition led by Start-Up Nation Central launched a program three months ago to enhance Arab and haredi human capital in the Jerusalem hi-tech workforce.
A recent controversial decision by Hebrew University to gradually move the language of instruction for its masters and doctorate programs in the sciences from Hebrew to English also reflects part of the hi-tech sector’s problem: There are not enough local students in these subjects, and the university is hoping to attract more students – and staff – from abroad.
But importing students and employees to keep Israel’s hi-tech sector going – like offshoring – is not a healthy longterm solution. It is in Israel’s best interest to keep the Start-Up Nation local and viable, using the most valuable assets the country possesses: its human capital.