Will Foreign Tech Workers Save Startup Nation, or Ruin It?

The government wants to ease the shortage of software engineers using imported labor, but critics say the solution lies in education at home.

Prime Minister Benjamin Netanyahu speaks at the Cybertech 2016 conference in Tel Aviv on January 26, 2016.
Reuters

For years, Israeli high-tech has been suffering from a shortage of skilled labor, so when Israel Channel 10 News reported this week that Prime Minister Benjamin Netanyahu had given his backing to a plan to import foreign workers, it was greeted with a sigh of relief — at least from employers.

Netanyahu reportedly agreed, at a meeting with Avi Hasson, chief scientist in the Economy Ministry and the government’s point man on high-tech, to the broad outlines of a plan to issue hundreds of visas to qualified foreign nationals.

Relative to the size of Israel’s high-tech sector and the large number of unfilled positions, that’s a drop in the bucket. Huge numbers of Indian and Eastern European geeks will not be inundating startup-heavy areas such as Rothschild Boulevard in Tel Aviv or the Herzilya Pituah industrial zone anytime soon.

Netanyahu was apparently alerted to the problem at last month’s Cybertech 2016 conference, where he was buttonholed by startup CEOs complaining about how difficult it is to get permission to bring in skilled foreign labor.

In a report issued by the Finance Ministry this month, the labor shortage figured as a major factor for the slowing growth of Israeli’s high-tech industry in recent years. High-tech, which by the treasury’s definition includes electronics, software, research and development as well as pharmaceuticals and aviation, has seen its share of the Israeli labor force stuck at about 12% for a decade.

“If we can increase Israeli companies’ access to the global labor force, companies will be able to grow as will the economy and even salaries,” said Ofer Vilenski, a serial entrepreneur who is now CEO of Hola!, whose technology is used for faster, more secure Internet.

A special visa category, in fact, exists for skilled workers in cases where there is no local expertise. At most a few hundred foreigners are admitted under the program, most of them in niche areas that demand very specialized expertise. For ordinary software writers and engineers to get one is a bureaucratic and time-consuming process.

The Prime Minister’s Office is now working to identify the obstacles to wining a visa and shorten the process, though it doesn’t seem to be committed to a fundamental shake-up of the system.

Research conducted by Eugene Kandel, when he chaired the National Economic Council, estimated the shortfall of skilled tech workers amounted to thousands every year. Israeli institutions of higher education don’t produce enough graduates in the engineering and other disciplines relevant to high-tech.

The Office of the Chief Scientist, for instance, found that in 2012, 4,671 Israelis graduated with a degree relevant to the tech industry, versus about 7,000 job openings that year.

“Israeli companies must have the ability to bring experts to Israel and out in order to spread knowledge and share expertise Israeli teams need and to increase collaboration between Israel and global companies,” said Amir Orad, the CEO of Sisense, a data analytics company with offices in New York and Tel Aviv.

The shortage of trained graduates not only prevents tech companies from growing but has caused wages to rise, undermining Israel’s cost advantage versus the United States, especially for the some 250 research and development centers operating in Israel by global companies like Apple, Google and Facebook.

The Finance Ministry report estimated that average salaries at R&D centers in Israel have grown from less than 60% of a U.S. salary in 2009 to close to 80% today.

The government has been seeking to increase the number of graduates with a package of short- and long-term programs.

One that is already in evidence is a campaign in the schools by the Education Ministry with former President Shimon Peres and Education Minster Naftali Bennett — a former tech entrepreneur himself — to stress the importance of science, technology, engineering and math, popular known as STEM, education.

Even if it is successful, it will be years before the fruits of the program percolate through high schools, to the army, engineering schools and into the job market, so as a stopgap industry and government officials are looking for foreigners.

If the tech industry has been looking overseas to solve its labor shortage, politicians, educators, social activists and even tech workers themselves are opposed for various reasons. They contend that the solution to deal with the problem at its root, by bringing in more Israelis into high technology, in particular Arabs and ultra-Orthodox Jews.

Other say it will ease the pressure on policymakers to deal with the shortage of graduates. “Israel is famous for its enormous human capital potential, but instead of realizing that potential and investing in it, the prime minster is considering importing foreign workers,” a group representing Israel’s technology colleges said this week.

Tsiki Naftaly, CEO of Zemingo, an apps startup, argues that importing foreign workers will actually hurt tech companies. “Importing high-tech workers won’t solve the jobs crisis,” he said. “It will worsen it and deter the development of the next generation of engineers and entrepreneurs.”