In worrying trend, Israel’s tech workforce is shrinking after decade of growth

Investment in the Israeli tech industry hit a three-year high amid the country’s multi-front wars, attesting to its resiliency. But one of the country’s most important sources of tax income, Israeli tech employment, faces a slowdown after a decade of continuous growth in the number of workers, according to a new workforce report published Wednesday.

The worrying trend, if it persists, could have far-reaching ramifications for the growth prospects of Israel’s war-battered economy and the transformation of the future employment market around AI, RISE Israel Institute, and research center IVC warned in a joint report.

“After years of rapid employment growth, the last two years have seen an abrupt standstill — driven by global economic headwinds, domestic political uncertainty, and the effects of a protracted war,” said RISE Israel chief economist Assaf Patir. “The most prominent impact of these contrasting trends has been on human capital in high-tech: a sharp increase of 75,000 employees between 2021 and 2022 was followed by an almost complete halt in employment growth over the past two years.”

“With the highest share of high-tech employment in total national employment worldwide, its performance is critically important to the broader economic landscape,” Patir said.

Over the past 22 months, Israeli startups have been grappling with the ongoing callup of employees to perform reserve duty, and staff shortages, given the continued uncertainty about the duration and extent of the war. The war broke out after Hamas terrorists invaded Israeli southern communities near the Gaza border on October 7, 2023, massacring some 1,200 people and kidnapping 251.

The economy’s dependence on the tech sector has significantly grown in the past decade, driven by rapid growth in tax revenues from the sector, led by an increase in the number of employees and rising salaries. Tech employees pay more than a third of all tax income collected, which underpins the vital importance of the sector as a key driver for Israel’s war-hit economy.

Over the past two years, job growth slowed and essentially flatlined, breaking a decade-long pattern of consistent expansion. Between 2014 and 2020, the number of tech jobs grew at an average annual rate of about 3.3 percent, according to the study. After a brief pause during the COVID‑19 pandemic, hiring rebounded, with jobs expanding by about 10% per year in 2021 and 2022.

Patir found that workers in the tech sector most exposed to the slowdown and job cuts are individuals in non-core tech roles, those without academic degrees, and women.

Between 2023 and 2024, employment in business roles, including marketing, sales, and customer service, fell by 6.6%. The number of jobs in administrative and operational roles, including finance and legal consulting, declined by 4.1% over the same period. Human resources jobs dropped by 8%, in a sign that many companies do not have plans to expand their workforce, Patir cautioned.

Meanwhile, the number of employees in technological roles, led by cybersecurity and algorithm fields, rose moderately by 0.4% in 2023, before plateauing in 2024.

“While the overall size of the high-tech sector remained stable — a disappointing outcome, in and of itself, for an industry accustomed to rapid expansion — it now offers markedly fewer opportunities for workers in non-technological roles,” Patir said.

In 2024, the proportion of women employed in the tech industry slipped by 0.15%, marking the first decline in over a decade, as the share of female workers leaving tech was higher than that of those joining.

Driven by increased demand for highly skilled tech workers with academic degrees, the number of computer science graduates at universities has nearly doubled in recent years. However, job placement rates in tech firms have declined by 10% over the past two years in light of the recent downturn in tech hiring.

“While core technological positions have shown greater resilience, the accelerating AI revolution is poised to fundamentally reshape demand even within these roles,” Patir remarked. “It is possible that AI systems are streamlining tasks in marketing, sales, and customer relations, and thus allowing for workforce reductions in those areas, but right now, we do not see a parallel reduction among programmers and other technology workers.”

“This picture is more consistent with companies cutting back on non-essential activities, rather than technological replacement,” he added.