Israeli Startups Hiring More ultra-Orthodox and Arab Workers, Report Says

Their share of new hires in 2017-18 was triple their share of existing jobs in the industry

Ruti Levy
Ruti Levy
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Intel Corp's logo is seen at the entrance to their ,smart building, in Petah Tikva, Israel December 15, 2019.
Intel Corp's logo is seen at the entrance to their ,smart building, in Petah Tikva, Israel December 15, 2019. Credit: REUTERS/Amir Cohen
Ruti Levy
Ruti Levy

Israel’s startups have been hiring an increasing number of ultra-Orthodox and Arab workers. Meanwhile, switching companies is now the industry’s standard means of getting a raise, as the sector is becoming increasingly focused on technical jobs and providing fewer opportunities for non-tech workers.

These are among the conclusions from a broad report released Wednesday on Israel’s high-tech industry manpower. It was published by the Economy Ministry’s Israel Innovation Authority and the NGO Start-Up Nation Central, and is based on data from the Central Bureau of Statistics and Zviran, a salary survey company, as well as a survey the bodies conducted among 341 high-tech companies employing a total of 90,000 workers, some one-third of the industry.

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The report found five main trends.

The first is the influx of foreign tech giants that are seeking to hire programmers, without necessarily benefitting the national labor market overall.

A tool used to evaluate the contribution of the high-tech industry to the labor market is the value created beyond the employment of engineers and programmers. Positions in production, marketing, sales, support and design create employment opportunities for a wider range of people, under some of the country’s best employment terms. The Innovation Authority calls this the “employment multiplier of the tech worker,” a measure calculated based on the number of non-tech works who are employed on account of every tech worker employed.

The report found that the high-tech sector here is becoming increasingly based on tech workers, and the multiplier has declined over the years. “In the past, each tech worker leveraged another non-tech worker, but now the multiplier is only 0.7 non-tech workers per tech worker.”

One reason for this is the massive entrance of multinational tech companies, and their tendency to employ a larger percentage of tech workers. Some 76% of the workforce at multinationals is tech workers, versus 63% at Israel-based tech companies.

Another trend the report found is that workers have a high tendency to switch jobs.

High-tech is a unique labor market in Israel. Workplace security is relatively low, workers are employed on personal contracts, and there are nearly no unions, which means workers can be laid off with ease. On the other hand, the industry’s average salary is double the salary in Israel as a whole, employment opportunities are varied and the demand for workers is massive, which means people can switch jobs easily.

The percentage of layoffs in the high-tech sector increased slightly last year to 4.1%, from its decade low in 2018, Zviran’s data found. The percentage of workers choosing to depart stood at 10.2%. The report found that switching companies is the accepted means of receiving a raise for high-tech workers. Front-end developers who switched companies in 2019 were earning 8.6% above what more veteran workers were getting in the same position at the same company. Mobile developers earned 6% more from changing jobs.

Workers who switch companies also tend to be younger, the report found. The highest rates of employee departures were at companies in fintech, gaming and cybersecurity, which tend to be characterized by a younger workplace than is seen in companies in fields such as microchips and defense.

The report also surveyed the representation of various population groups and communities in the high-tech workforce, which grew by some 19,200 workers between 2017 and 2018. A disproportionate number of the new jobs went to people whose communities are under-represented in high-tech, and in the workforce as a whole: ultra-Orthodox and Arabs. Their share of the new hires in high-tech was three times larger than their share of existing high-tech jobs. This is a hint that the lack of available workers in high-tech may be solved by better integrating these two communities into the industry.

Non-Haredi Jewish women accounted for 25% of the new hires, which is less than their representation in the industry (31% of all workers), while non-Haredi Jewish men accounted for 61% of all new workers, compared to their 64% share of existing jobs.

The report reveals several insights into female employees, whose presence in the sector hasn’t increased. It found significantly larger numbers of younger women than of older women: Among people in their 20s, the numbers of men and women are similar, but between the ages of 25 and 44, men become a clear majority, apparently because the working conditions don’t suit motherhood. However, the gender gap does not change between the ages of 35 and 55, indicating that women who stayed in the industry until this point remain there, as do men.

In the years before retirement, the proportion of men increased again, apparently because women that age come from an era when women were underrepresented in high-tech. It’s also possible that women are retiring earlier.

High-tech companies in this country have been complaining for years that they suffer from a chronic shortage of workers, but they’ve also shown little willingness to hire inexperienced workers and train them. The Innovation Authority found that only 45% of companies reported hiring workers with two years of experience or less for technological jobs in the first half of 2019. Most of the companies that hired so-called junior programmers were larger workplaces.

The report indicates that this trend is shifting. Academic institutions are no longer the only source of worker training; boot camps, or intensive training programs, are increasingly training new high-tech workers. Boot camps are responsible for 3% of new employee hires, an encouraging figure but one that should be regarded with some caution - because only 617 junior employees agreed to provide information on where they acquired their training, and because the Innovation Authority and SNC invest heavily in running their own boot camps. These programs train some 800 people a year, while colleges and universities graduate 6,000 people a year in the relevant fields.

The high salaries and chronic lack of workers pushes employers to look to hire programmers abroad, primarily in India and East Europe. This model has grown rapidly over the past few years: One in four startups reports working with outsourced employees abroad, even when the company only has a few dozen employees.

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