Israel Innovation Authority publishes report on human capital in tech

Despite global economic slowdown, there was a 250% increase in job openings for non-technological positions in high-tech in Israel, creating opportunity for integration into high-productivity jobs in the industry

• The survey shows that 13% of high-tech workers are graduates with non-academic training, two-thirds of whom have no academic training at all.
• Growth in the past year is characterized by a 30% increase in the number of employees in Israeli growth companies, compared with a steady growth rate of only 5% in the development centers of multinational companies.
• The survey, conducted in March-May 2022 among Israeli companies, reported around 33,000 open jobs in Israeli high-tech.

Dror Bin, Israel Innovation Authority CEO: “No slowdown will lead to the world needing fewer programmers! The Israeli and global shortage of manpower in tech fields is not only a tech-industry problem. It can also be clearly seen in the commerce and the service sectors, as well as adjacent professions that are currently increasing exponentially. The shockwaves going through the Israeli and global economy affect recruitment, but they don’t reduce the need for increased technologically competent manpower in all branches of the economy and the public sector. They also create new employment opportunities for workers in non-technological positions in Israeli growth companies and in general.” 

Uri Gabai, Start-Up Nation Policy Institute (SNPI) CEO: “Even if the peak the tech industry experienced in 2021 is behind us, the long-term trend of increased demand for skilled workers in innovation industries is not likely to change in the foreseeable future. The Israeli economy must make deliberate adjustments to accommodate this increase in demand. On the one hand, the report reflects the main routes into tech positions, which are still primarily academic studies in the relevant disciplines. On the other hand, it exposes the long-term challenges facing the industry. These challenges include the integration of underrepresented populations (in particular women, Arabs and ultra-Orthodox), and the continued growth of Israeli companies who employ workers in a wide variety of professions. It is also important to remember that work in the tech industry is not the end, but rather the means to increasing productivity and Israel's economic success. Political steps to facilitate the integration of skilled workers into innovative companies in non-tech sectors – finance, industry, the service and commerce sectors – will also lead to an increase in productivity, even if it does not translate to an increase in the percentage of tech workers.”

The Report’s Main Findings:

The Israeli tech industry has entered its third year of turmoil. First COVID-19 in 2020, which reached its peak in 2021, and now the start of a global economic crisis. While the rate of employee resignation trended downwards in the first year of the pandemic, 2021 was more turbulent. The largest increase was in the recruitment of workers to Israeli growth companies. 

The present uncertainty in the tech industry is the result of changes in the global economy. Continued monitoring is required in areas that have been impacted in recent years: the recruitment of non-technological workers, entry-level employees, women and changes in Israeli growth companies.

• The report’s data shows that around 80% of workers in primarily technological positions in the tech industry have academic training. Furthermore, over 60% of new tech workers in the industry are university graduates vs36% who studied at colleges. 
• The great flocking to the tech industry: More than half of the new positions within the industry have been filled by workers from outside the sector (academic graduates, entry-level employees and workers who transferred from positions in other sectors). 
• Perhaps unsurprisingly, the majority of jobs in the Israeli tech industry are technological in nature: 69% of employees in the Israeli tech industry are in tech positions, 13% in business development, 12% in operations and 5% in executive positions. Of the tech positions, a third are in programming roles. Around half of the staff in non-tech positions are employed in sales, operations and marketing roles. 
• The number of women in tech remains low: according to a survey of companies led by Ethosia, the percentage of women in R&D positions and R&D management was 17% and 21% respectively. Additional findings regarding women in tech:
  • The data shows that the percentage of women in smaller companies is lower.
  • Life sciences companies have a higher percentage of female employees.
  • International companies have more women in R&D management positions. 
  • Companies that achieved more than 20% growth in the number of employees also had a higher percentage of female employees. 
  • An inverse correlation was found between percentage of women and rate of resignations: the higher the percentage of women in a company, the lower the turnover. 
• In the second half of 2021, more than 10% of tech workers chose to leave the company where they worked, while in the period surveyed, the 2.6% rate of resignations was the lowest in the last decade.
• In life sciences and cleantech, which are generally considered as part of the tech industry but with completely different characteristics from the other sectors in the industry:
  • Companies reported difficulties in recruiting R&D staff, with significantly lower rates than the other sectors: a 66% recruitment rate compared to more than 90% in other sectors. 
  • The percentage of resignations is lower than in other sectors: 9.2% of workers in these sectors resigned during the second half of 2021, compared to 10.7% in internet and software companies (and this is despite the fact that most companies in the life sciences and cleantech sectors are smaller companies with a high rate of resignations).
  • These companies are more likely than software companies to employ university graduates. 
• Alongside the peak in recruitment and stock issues, most of the increase in the number of workers in 2021 was in Israeli growth companies, which grew at around 30%. However, here too there was volatility in recruitment: in 2020, the rate of recruitment was insignificant and lower than the development centers of international companies, which have maintained a relatively stable rate of recruitment (growth of around 5% per year). 
• The central role that Israeli growth companies are playing as employers in Israel indicates (among other things) the maturation of the homegrown tech industry and the establishment of Israeli companies as significant employers in recent years. Israeli growth companies are also important for having a higher rate of recruitment for non-tech roles (at international companies’ development centers, around 20% of the workers are not tech professionals, compared with 35% of workers in Israeli growth companies). 
• Post-corona departures: there was an increase in turnover among tech workers in 2021 – more than 10% of workers decided to resign. Two groups are characterized by lower turnover: R&D workers and employees working for companies with a higher number of female employees. 
• Recruiting quality and experienced staff continues to be a challenge for companies, despite the warning signs of the crisis (the war in Ukraine, the commodity crisis in China and the start of the decline in the value of tech companies on Wall Street): as of March-May 2022 there were 33,000 vacant positions in the Israeli tech industry. . Most of the increase in vacant positions is in non-tech positions – around 12,000 vacant positions – compared to less than 5,000 in previous annual reports. The number of vacant tech positions has risen slightly compared to July 2019 – i.e., a return to the pre-corona rate. 
• The first entry-level employees to be harmed by the volatility in manpower: during a year marked by an increase in voluntary resignations of tech workers from their places of employment, the relative demand for entry-level employees was lower as there were trained, in-demand workers on the market who were in the process of changing jobs. Only 22% of the new recruitments for R&D roles were entry-level recruits, compared to 32% in 2020. 
• Offshoring and the impact of the war in Ukraine: around half of Israeli tech companies conduct offshoring practices, around 20% of companies do this in Ukraine and as a result have been impacted by the war. 
• More university graduates find jobs in the tech industry than college graduates: in-depth analysis of social media carried out for this report shows that 80% of the staff in primarily technological positions have academic training. In addition, more than 60% of new tech staff in the tech industry are university graduates, compared to only 36% who studied at colleges. 

To read the complete report, click here

This article was first published on 11 July by ISERD.