High tech workforce growing but lacks skilled employees, report says

High tech workforce growing but lacks skilled employees, report says

Israeli firms increasingly looking abroad to fill gaps, but should turn to junior workers and minorities, says annual survey by Start-Up Nation Central and Innovation Authority

Luke Tress is a video journalist and tech reporter for the Times of Israel

Illustrative: Offices of the Jerusalem Venture Partners tech investment firm in Jerusalem, February 18, 2019. (Hadas Parush/Flash90)
Illustrative: Offices of the Jerusalem Venture Partners tech investment firm in Jerusalem, February 18, 2019. (Hadas Parush/Flash90)

Israeli tech companies continue to struggle with a shortage of skilled workers, although the share of high tech employees in the economy grew in 2019 and their wages are well above the national average, according to a Wednesday report.

Companies are increasingly looking abroad to fill the gap, but should be turning to junior workers and under-represented population groups, recommends the annual report by the non-profit Start-Up Nation Central and the Israel Innovation Authority.

There were some 18,500 vacant high tech positions in the Israeli economy as of July 2019.

Some 321,000 Israelis work in the field, accounting for 9.2 percent of all workers, in an 8% increase over 2018. The number of unfilled positions also marked an 8% increase over the previous year.

To address the workers shortage, Israeli companies are increasingly turning to offshoring — transferring jobs to third parties in other countries. Twenty-seven percent of companies reported offshoring, representing a 5% increase over the previous year. Half of those companies said they had started offshoring in the past two years. The most popular country for offshoring, by far, was Ukraine, followed by the US, Bulgaria and India.

Companies, especially smaller ones, are reluctant to hire “junior” employees with less than two years of relevant work experience, regardless of their academic background. The vast majority of these workers come from universities, but a small number come from the military and from training boot camps.

A high level of voluntary departures — 10.2% — suggests that it is an “employees” market and workers are willing to leave their jobs to find better ones.

The Tel Aviv office of Israeli startup Cortica; Feb. 12, 2019 (Shoshanna Solomon/Times of Israel)

The most in-demand tech workers were specialists in cyber algorithms, and data scientists. Seven out of ten workers in the high tech industry were in tech positions, as opposed to non-technical jobs, like human resources.

As of 2018, the average salary in the industry was NIS 22,479 ($6,570) a month before taxes, while the average for other jobs, excluding the tech industry, was NIS 9,345 a month. The average salary in the industry also grows faster, increasing by 27% in six years, compared to 15% for the rest of the economy. The high wages are also a product of the shortfall in qualified employees.

The share of women in the industry remained stagnant in 2019, standing at about one third of all workers, with the number actually dropping for high tech and technology management positions.

In older cohorts, there are fewer women, likely because of children, the report said. The percentage of women in the workforce drops in the 25-44 age range, but appears to stabilize after age 35, suggesting that women who remain in the industry during early parenthood are likely to stay in the field.

The report said minority groups continued to be under-represented, but there are indications that they are becoming more involved in the high tech workforce.

Illustrative: The DLD Tel Aviv Digital Conference, Israel’s largest international tech gathering, September 27, 2016. (Miriam Alster/Flash90)

Two-thirds of all high tech workers are non-Orthodox Jewish men. Some 5% are Arabs or ultra-Orthodox, although these groups saw a 14% increase in the workforce from 2017 to 2018. Most of the ultra-Orthodox in the field are women.

The proportion of Arabs is small, but trending upward, and a growing number are enrolling in high tech studies at universities. The percentage of Arabs jumped 116% between 2012 and 2018.

The shortfall in skilled human capital has drawn public attention in recent years, spurring government and private efforts to address the shortage, especially among underrepresented populations.

“The ‘bring a friend’ referral method was an efficient way to recruit employees in the early decades of Israeli high-tech, but now there is a clear need to break past familiar boundaries and recruit employees from diverse backgrounds as well, beyond 8200 Unit or university graduates,” said Start-Up Nation Central CEO Prof. Eugene Kandel. “Policies encouraging women and other sectors of Israeli society to join the unprecedented success of the high tech industry must be set. Companies that fail to adopt this approach will restrict themselves to a limited supply of employees and miss out on quality talent pools.”

The number of multinational research and development centers in Israel surged by 143% in 2019. Foreign experts account for less than 1% of the workforce.

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