Israel’s Tech Ecosystem Has Halted Inclusion of New Talent Pools Despite Chronic Employee Shortage

A report on Israeli 2020 high-tech employment figures paints a complex picture. While the local ecosystem was not spared by the global coronavirus crisis, it did prove its overall resilience. Further efforts to absorb underrepresented populations into the workforce would offer the potential to overcome the chronic shortage of skilled personnel and ensure the sectors’ continued growth.

Though Israeli high-tech employment numbers did increase during the pandemic, they grew by only 0.6%, a far lower rate than in previous years. Additionally, the number of open tech positions dropped by 40% between July 2019 and December 2020.

Despite the worrying figures, the crisis did prove the sector’s overall durability. The high-tech sector’s growth may have been moderate, but it still grew, compared to the Israeli economy’s general employment figures that saw a drop of more than 10%. Furthermore, despite the significant decline, the number of open tech positions in December 2020 still stood at 13,000, a very high figure for the local sector. The high number of open positions, combined with indications that companies struggled to fill the roles – 60% reported difficulties in recruiting for R&D positions – reaffirmed the assessment that Israeli high-tech faces a chronic shortage in skilled human capital.  

The solution to the shortage in skilled human capital remains the same as it was prior to the crisis – integrating employees from underrepresented populations.

Integrating underrepresented populations is the solution to the shortage in Human Capital

The Israeli high-tech employment landscape is fairly homogenous, with Non-Orthodox Jewish men accounting for nearly 65% of the sector’s employees. Their share of R&D positions, the sector’s primary growth engine, is even higher. The chronic nature of the shortage in human capital, particularly in R&D positions, indicates the talent pool in this demographic is reaching a threshold. To assure its long-term resilience, the Israeli high-tech sector must turn to new “untapped” talent pools – mainly: women, Arabs, and ultra-Orthodox. 

The high-tech sector has indeed seen a steady upward trend in the inclusion of these populations over recent years, however, as shown in the graph below, the report presents concerning data, indicating the economic crisis has halted these positive trends.

We hope it is no more than a small “speedbump” as the general tendency during crises is to turn to the familiar and safe course of action. However this halt could have severe implications, particularly seeing as the participation of these populations in the workforce was disproportionately low to begin with. Arab employees, accounted for less than 3% of total high-tech employment in 2020 (both tech and non-tech positions), despite constituting over 20% of the total population. Women constituted about one-third of the high-tech employment, less than 20% of tech management positions, and only 5% of CTOs.

Positive trends in High-Tech studies provide a reason for optimism

There is, however, a silver lining. The growing number of undergraduate students from these underrepresented populations in academic high-tech studies suggests a great potential for greater inclusion in the years to come. Over the course of a decade, the number of ultra-Orthodox undergraduates has more than doubled. The number of Arab undergraduates not only nearly tripled, over the same period but their share of total student numbers has increased by more than five percentage points – from 7.2% to 12.8%. A positive trend was noted among women students too – who now make up one-third of all undergraduates studying mathematics, statistics, and computer science.

These undergraduates have the potential to play a key role in overcoming the sector’s chronic shortage in human capital. Hopefully, the coronavirus crisis will not only shine a spotlight on the main challenges but will also serve as a wake-up call for cross-industry action to solve them. The potential exists, it is a matter of taking action to realize it.

The transition to partial remote work, which has accelerated significantly following the onset of the pandemic, poses a good opportunity for the increased integration of underrepresented populations. Such models of hybrid employment will make it possible to bridge constraints arising from work-family balance, cultural barriers, and geographical distances.

To learn about more challenges and opportunities of the Israeli high-tech human capital, and the implications of the coronavirus crisis on the sector, download our 2020 High-Tech Human Capital Report.