Putting the Lid on Israel's Brain Drain

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The wait in the line for the security check at Barcelona airport took close to an hour. The Israeli high-tech personnel who were about to check in for the flight home after attending the Mobile World Congress in the city exchanged impressions − but not about the event. The subject of their conversation was the difficulties facing non-Jewish businesspeople who want to come to Israel for professional meetings.

“They [the security personnel that check every passenger for every flight headed to Israel] didn’t care that he has a personal fortune of more than a billion dollars and that he was coming to do business with Israeli companies,” a startup entrepreneur in the field of online commerce said about a high-tech executive of his acquaintance. “His name was Ahmed, they [said they] couldn’t determine if it was really him, so they refused to let him on the flight. It made no difference that we sent in all the company’s official documents in advance and coordinated the visit with the embassy.”

Added another Israeli entrepreneur: “Anyone who is delayed for three hours because of security procedures isn’t willing to come back to Israel − you don’t forget an experience like that.” “After that, people don’t want to do business with us. Israel comes off like a Third World country. We now either hold our meetings in Cyprus or go to meet the client in his country.”

In the meantime, the security personnel by the ticketing counter in Barcelona made another traveler, a European, unpack her suitcase. Dozens of people waiting in line witnessed her distress as her underwear was taken out, her high heels were dumped and she was asked to turn on her computer and open documents for her interrogators.

The directors of the handful of major R&D centers operating in Israel, which often constitute the spearhead of the country’s technology firms, also share a sense of frustration over the airport inspections on the Israeli end of the journey.

“Engineers who come to us from India and China go through a series of security checks at Ben-Gurion airport before we can receive them, whether or not they have a previously arranged visa, and that’s a major problem,” Mickey Steiner, managing director of SAP Labs in Israel, related several months ago, in a panel discussion organized by TheMarker.

“People are impressed by the story of the ‘startup nation,’ but if the experience of entering and leaving the country is not good, damage is done. We hear about too many cases like that,” added Dr. Yossi Matias, managing director of Google Israel’s R&D center.

Though Israeli authorities often give businesspeople, and visitors in general, a hard time when they enter the country, in the rest of the world, they are well aware of the importance of high-tech migrants. There was a time when Israel, too, knew how to benefit from immigrants who entered the local high-tech industry. Indeed, the large wave of immigration from the former Soviet Union in the early 1990s played a crucial role in allowing the field to take off here. And the Israeli economy in general profited from large numbers of skilled, highly educated personnel, in whose training the state did not need to invest.

These days, Silicon Valley, in California, is the promised land for high-tech workers. All those shaping the world of technology have become concentrated there, in quite a small area − which is home to the major firms, the hot startups, the investors and the decision-makers who will determine what our future digital life will look like. Silicon Valley is happy to welcome these migrants.

In October, the Kansas City-based Kauffman Foundation, which promotes innovation and entrepreneurship, published the results of a study it conducted jointly with researchers from Duke University, Stanford and the University of California, Berkeley. The study sheds light on the crucial role of foreign entrepreneurs vis-a-vis the American economy, and in particular offers a glimpse into the extensive involvement of Israelis in the United States. According to the data, among 23.4 percent of the nearly 108,000 engineering and technology companies established in the U.S. between 2006 and 2012, at least one of the founders of was foreign-born. The companies in question employed some 560,000 people, and generated approximately $63 billion in sales in the six-year period.

Specifically, researchers found that Israelis constituted 3.5 percent of the foreign-born founders of the above-mentioned firms established in the U.S. from 2006 to 2012. As expected, India was the leading country of origin of immigrant founders of such companies: They were involved in 33.2 percent of the companies whose founders included at least one non-American. Next on the list came China ‏(8.1 percent of the firms‏), Britain ‏(6.3 percent‏), Canada ‏(4.2 percent‏) and Germany ‏(3.9 percent‏) − all countries with far larger populations than Israel.

However, one of the intriguing findings here was that the rate of what researchers called immigrant entrepreneurship in the U.S., and particularly in Silicon Valley, is declining. For the first time in decades, the rate of growth of immigrant-founded companies was halted, if not reversed in the latter part of the last decade. In Silicon Valley, between 2005 and 2012, the percentage of immigrant-founded startups declined by 8.5 percent − from 52.4 percent to 43.9 percent.

The framers of the report attribute this phenomenon to a “reverse brain drain”: the return to their home country by entrepreneurs who acquired experience and knowledge abroad. For Israel, this is a welcome development. One of the key reasons cited by the researchers for this phenomenon is the long wait required to obtain a U.S. work permit ‏(green card‏), which the would-be immigrants find frustrating.

Obama’s reform

In late January, U.S. President Barack Obama presented a plan for the overhaul of the American immigration system, one goal of which would help to end the reverse brain drain. Among other changes, the plan proposes creation of a new visa category for people employed in technology and science. Economists estimate that implementation of the reform, which would encourage people to immigrate and would regularize the status of new immigrants already in the United States, could add $1.5 trillion to the American economy in the coming decade − an annual contribution of 0.8 percent to the growth of the GDP.

The major Silicon Valley firms are promoting the plan – which is intended to constitute a basis for future legislation –  by means of a publicity campaign supporting the issuance of what is called startup visas and the reform of immigration laws to facilitate entry of highly skilled workers. Indeed, a few weeks ago, more than 100 CEOs of high-tech firms and venture capital funds − among them Facebook’s Mark Zuckerberg, Google’s Eric Schmidt, Intel’s Paul Otellini and Yahoo’s Marissa Mayer − sent a letter on the subject to President Obama. “The United States has a long history of welcoming talented, hard-working people to our shores,” the letter stated. And last week, Mark Zuckerberg announced the establishment of a new organization, FWD.us, intended to promote visa reform.

“Immigrant entrepreneurs have gone on to found thousands of companies with household names like eBay, Google, PayPal and Yahoo! to name just a few. These companies provide jobs, drive economic growth and generate tax revenue at all levels of government. Yet because our current immigration system is outdated and inefficient, many high-skilled immigrants who want to stay in America are forced to leave because they are unable to obtain permanent visas. Some do not bother to come in the first place. This is often due to visa shortages, long waits for Green Cards, and lack of mobility.”

The Silicon Valley crowd concluded by urging the president to address their need for more high-skilled workers − whether imported or domestic − and to enact immigration reform this year. Tech firms are planning to invest millions of dollars in lobbying to promote the cause. New York Mayor Michael Bloomberg has also joined the campaign for reform and is helping to organize a “virtual march” to publicize it.

Last June, Obama signed legislation that added Israel to the list of countries whose residents are entitled to an E-2 Investor Visa. This will make it possible for Israeli investors in certain priority fields to live and work in the U.S. However, the final terms of the visa − which need to be reciprocal and apply to citizens of and in both countries − have yet to be finalized.

“If the visa issue is resolved, many Israelis will consider emigrating,” says Oded Hermoni, who owns a consulting firm that works with Israeli startups doing business in Silicon Valley.

“One of the biggest problems of startup entrepreneurs is that they arrive with a six-month tourist visa that does not allow them to work legally. They need to be here, in Silicon Valley. This is their market,” he notes. “In terms of business, you have to be here to raise funds, work with partners, do Facebook in the morning, Google in the afternoon and eBay in the evening. It is also essential for the other side: American angels invest mainly in local companies. The passport a person holds is of no interest; they want him to be nearby. There is no problem with the R&D being in Israel. On the contrary, the Israeli tech industry is held in high regard.”

Hermoni also emphasizes the importance of the Israeli community in Silicon Valley, in terms of its support for high-tech industries back in Israel: “There is an Israeli-American community here, people who have been here for more than 10 years, and it’s important for Israeli high-tech. They open doors for Israelis. These people are making a large and important contribution to Israel, and it’s important that the state not view this as a way of escaping ... Every Israeli here has an interest in helping Israeli firms.”

Tough transitions

The entrepreneurial and technology industry depends on two central elements: financial capital to underwrite activity and enable its continued existence, and human capital, which is responsible for the most advanced developments. As the global village expands, companies no longer confine themselves to recruiting the most brilliant minds in the countries in which they operate, but are extending their head-hunting abroad, to places such as Israel. “From the middle of last year, we are seeing global firms starting to devote efforts to search for brains and not being afraid to look for them overseas,” says Eynat Guez, CEO of Relocation Jobs, an Israeli-based firm that offers “global relocation” and headhunting services. Firms that want the world’s top experts to work for them, she adds, “recruit Israelis who are the best in a particular field. Relocating has come back to life, to the way it was before 2009. Companies are willing to pay a price of incompatibility in language or in organizational culture to acquire technological brains. In this case, the code, as it were, is more important than the personality.”

Among the companies that have been perusing resumes of Israeli engineers lately are Facebook, LinkedIn, Amazon and Sony. According to Guez, the companies usually recruit groups of five to 20 engineers, based on need and available positions. The head-hunting is conducted through the social networks and placement companies. The initial selection is mostly done by phone, then candidates are administered a professional test and in the final stage are flown abroad for 24 hours of intensive interviews before signing a contract.

“The process is very fast, usually a month to six weeks before a contract is signed,” Guez says. “However, the transition itself takes more time, owing to the bureaucracy, plus the workers also usually have families [who have to be moved].”

Obtaining a work permit in the U.S. can be accomplished in one of two ways: By signing up for the green card lottery and by embarking on the usual procedure to get a permit, which takes about half a year.

In the meantime, the difficulty of obtaining permits is prompting companies to seek out alternative solutions. Last month, for example, it was reported that Facebook will open a temporary development center to train 150 programming engineers in Vancouver, Canada. The engineers will stay at the center while they wait for U.S. work permits. Teams of Facebook recruiters also visited Israel recently, looking for high-quality personnel. In January, Canada declared its own startup visa program, which has just begun operating, to facilitate connections between the country’s private sector and foreign entrepreneurs.

Despite the lengthy economic crisis and surging unemployment in Europe, attempts are also underway there to lure high-tech immigrants. “The European Union Blue Card is a salient high-tech visa,” Guez notes, adding that Germany, Holland and Spain are the major countries that have adopted its use. “These countries allow people who are not from the euro bloc to work in them. Despite the high unemployment rate, select immigration is being allowed, because it’s understood that these immigrants do not hold back the country, but help it move forward, and do not take jobs from local workers. We send 50 to 60 engineers a month to interviews in Europe, mainly to Germany. The trend has been growing since the beginning of 2013.” Guez estimates that this year between 100 and 150 Israeli engineers will relocate to Europe.

‘Importing workers’

The issue of emigration touches a nerve in many countries and often sparks heated public debates. Ethy Levy, the Israeli economic attache in Australia, notes that, “Australia is currently on the eve of an election, and we are hearing many populist statements on the migration issue. Lately, the press has been up in arms over an initiative by several MPs to change the immigration policy and set an annual quota of 6,000 immigrants.”

Until now, she explains, “High-tech workers arrived on a 457 visa, which was earmarked for skilled workers according to a list of professions. The Australian government maintains that too many workers are entering the country on this visa and wants to regain control of the process. A number of changes will come into effect at the beginning of July − such as stricter tests in regard to proficiency in English − which should not have an effect on Israelis in high-tech.”

The industry in Australia, she adds, “is furious at the difficulties that will now be imposed on workers who arrive via the 457 visa. The high-tech firms say Australia does not have enough technology graduates to make up the shortfall in the industry. Demand outnumbers supply by 1,200 workers, they say, and young Australians lack motivation to enter high-tech professions, so the industry depends on importing workers.”

Amid the worldwide demand by high-tech companies for brilliant engineers and other workers, a rise is discernible in the willingness and desire of Israelis with such experience to give up the life they have built for themselves, and to leave family and friends for a lengthy period.

“It’s a bit sad, but these days we are seeing greater adventurism than in the past, due mainly to a feeling of despair and pessimism about what is happening in Israel,” Guez says. “In the past, people were less open to innovation and daring, because they believed they had options for getting ahead locally.” According to a survey conducted by her firm, Relocation Jobs, she says, the proportion of educated, high-salaried Israelis who are looking to improve their quality of life has increased significantly. Yet, those who work for a few years in the United States or Europe will not necessarily enjoy a significantly higher salary level.

“A person who gets a job with Facebook at $150,000 a year as head of a team or $120,000 as a programmer will not save more in comparison to what he got in Israel,” Guez says, “though he might enjoy a higher quality of life.” She points out that wages in the U.S. do not include perks that are standard in Israel, such as managers insurance, a leased car, training funds and severance pay, which can add 30 percent to the base salary.

“The differences lie in the quality of life,” she says. “In Tel Aviv, he will live in an apartment of 2.5 rooms, but in Palo Alto he will live in a detached home and have two cars, not one, and if his wife works it will be at a half-time job. The quality of life in relation to salary will be higher. So if the main purpose is to return to Israel and buy a home without a mortgage, it’s better not to go. Most of those who make the move do so for the experience.”

Four years ago, she adds, programmers could earn $200,000 to $250,000 a year in the U.S., and Israelis could save a handsome amount during their stay there. However, salaries have declined since then, which has affected the motivation of some Israelis who are thinking of emigrating.

“Silicon Valley is one of the most expensive places to live in the U.S., especially in terms of housing and education, and it’s not easy to make the move,” Oded Hermoni says. “A family here needs at least $150,000 to $200,000 a year ... and that comes as a shock to many people. The salaries do not entirely compensate, because of the high expenses. Quality of life actually declines: People end up in smaller apartments in areas that are not as good. In many cases, the spouse does not work [owing to visa restrictions]. At the moment, Silicon Valley is tempting mainly for young single men who don’t need a large home and have relatively few expenses.”

In the final analysis, Hermoni says, most of the Israelis in Silicon Valley, who are by now in their early 40s, probably want to return home. They love the country and see their future there. “All they need is a place to return to and something to return to.”

According to him, “The results of the January election were actually encouraging for people. There’s a feeling that something is changing in Israel after a long stretch in which things were stuck. If there were a peace treaty, more people would want to return.”

An office complex in Silicon Valley.Credit: Bloomberg
Security at Ben-Gurion airport.Credit: Nir Keidar
Hermoni. U.S. Israelis "open doors" to others.Credit: Dan Keinan
Zuckerberg, complained about visa issues.Credit: Bloomberg

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