Talent Crunch Threatens the Continued Growth of Israeli Tech

2017 was a record year for Israeli tech with over $24 billion worth of acquisitions. 2018, is expected to bring similar results. These accomplishments, however, seem to mask the fact that Israel’s main growth engine, its tech industry, is suffering from a severe setback that is slowing it down and putting the entire local market at risk—the talent crunch.

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As early as 2012, an Israeli government committee found that there is a shortage in highly skilled personnel in the fields of computer sciences and in research and development positions in the local market. In its findings, the committee warned that, if the trend continues, it may significantly hinder growth.

This crisis affects not just the tech industry but the country’s entire economy as homegrown businesses need to compete with international conglomerates over employees, causing wages for a selected few to skyrocket and widening already significant socio-economic gaps.

A recent report by Israeli umbrella organization Israel Advanced Technology Industries (IATI) and Start-Up Nation Central (SNC), a Tel Aviv-based non-profit organization managing a database of Israeli tech companies, estimated the shortage in human capital in the local innovation hub at 8,000-13,000 professionals, as of the second quarter of 2017. The report also showed talent supply keeps falling, as the number of skilled workers coming to the market is less than half of the ever increasing demand. The report does not take into account the positions that have already gone overseas due to recruitment difficulties in Israel.

Short term implications of this talent crunch—jobs going overseas—there are also long-term implications. The excess demand for workers combined with the short talent supply, means some tech professionals get more, broadening already existing social gaps. Combined with the underrepresentation of certain population in the local tech industry, these changes may have a dire impact.

75% of tech employees in Israel are Jewish secular or non-Haredi men. Further inclusion of Women, ultra-orthodox (Haredi) Jews, and Arabs can unleash a massive currently untapped potential. Research shows that a position in tech has the highest “social mobility” potential. This means that a person coming from a disadvantaged population has a much better chance to improve his or hers socio-economic in tech, compared to other industries.

The Israeli government is aware of this talent crunch and considers it a strategic threat for the local tech sector and even for Israeli industry as a whole. In early 2017, Israel launched a national program to increase the pool of skilled personnel for the industry. The program includes long-term efforts, namely policies intended to increase the number of undergraduate students at the country’s top universities that major in tech-related fields by 40%, and short-term actions aimed to tap more of the existing talent.

We, at the Israel Innovation Authority (IIA), are leading several major steps in this direction with local training programs for unskilled workers and for people looking for a career change, with programs aimed to locate and recruiting skilled personnel from overseas, and with programs attempting to help companies break existing molds and identify potential wherever it may be.

According to recent Israeli government reports, the number of students accepted to degrees relevant fields is increasing, but these changes will only bear fruit 3-4 years from now. An industry dealing with ever-growing global competition cannot wait that long.

Israel-based tech companies begin to realize there is more than one possible profile for potential hires, making the necessary changes to their recruitment and talent development procedures. Companies no longer rely solely on graduates of advanced academic programs, approaching less advantaged populations instead.

Employers use computerized assigning tests as a way to filter potential workers, using the results as an almost sole measure for the candidate’s capabilities. In reality, this model does not necessarily allow candidates to truly stand out and cannot accurately predict a candidate’s potential success in the position he or she is applying for. Furthermore, this model creates an industry that offers specific training intended to help applicants perform well in aptitude tests, giving an edge to those with the required financial resources.

Our goal is not only to create a highly skilled workforce but also to help Israel maintain its competitive edge. Israeli engineers excel because of their deep technical knowledge, their multidisciplinary approach, and their entrepreneurial spirit. Nurturing these qualities requires combined efforts from academia, government, industry, and private entities.

A look at the curriculum offered by Israeli academic institutions reveals a wide range of new multidisciplinary programs and a wide range of courses nurturing innovation and an entrepreneurship. However, one may argue that this diversity pushes aside quality in-depth learning of core subjects. Evidence to this may be found in the decline of Israeli academic institutions in the Academic Ranking of World Universities (ARWU), also known as Shanghai Ranking, which rates universities and academic institutes according to the quality and quantity of research to emerge from each of them. While n 2013 three Israeli universities were ranked among the world’s 100 leading institutions, in 2017, only the one Israeli university made the top 100—Technion - Israel Institute of Technology, which also dropped 24 spots that year, reaching 93 place.

The academy will most likely continue to train the top 20% of tech workers employed in system engineering positions. Other entities must develop alternative programs for training the other 80%.

Solutions can be found outside of Israel. 25% of tech workers in the U.S. have acquired their training in non-academic institutions. The long time it takes to graduate from a university drives this trend, alongside the increased demand for tech talent and high tuition fees.

In Israel, the phenomena of “skipping” the academy is gaining steam, especially among veterans of elite tech military units, which are being snatched as soon as they leave the service. Autodidacts and graduates of short non-academic training programs also increase available talent. Unlike academic programs, non-academic programs tend to be focused on a specific industry need and on specific practical skills required for specific jobs.

In collaboration with the Innovation Authority, the Israeli government has launched coding boot camps that are expected to bring to the market around 300 trained workers within the next 12 months. Similar private programs are also emerging without government support and the industry is beginning to recognize the difference between in-depth non-academic practical knowledge, and the deeper knowledge acquired in university. By 2027, we expect training programs, both government supported and private initiatives, to produce at least 1,000 trained workers a year in Israel.

Dealing with the talent crunch challenge must be part of a wide collaboration within the local ecosystem. Alternative training programs must be coordinated to answer the actual needs of the industry. The industry must further remove barriers holding certain populations back, and explore on-the-job training options. Israeli academic institutions need to develop new curriculums that are better tailored for students that already have hands-on experience. The Israeli Ministry of Education should integrate digital literacy and software studies, and encourage more high-schoolers to take advanced level computer classes. Government offices need to collaborate in an effort to bring Israeli scholars living abroad back to Israel, to encourage Jewish professional to immigrate to Israel under the country’s Law of Return, to provide non-Jewish experts with working visas quickly, and to bring in more employees from disadvantaged populations into the tech local tech industry. The Israeli government should also explore ways to ease the load off of the local industry, for example, by easing regulations prohibiting work on Saturdays, to encourage companies to remain active in the local ecosystem.

Aharon Aharon is the director of the Israel Innovation Authority, the Israeli government innovation investment arm.