Israel’s High-tech So-called Labor Shortage May Not Really Exist

Study by two Technion professors finds Israel is turning out enough graduates to meet industry demand

File photo: Hi-tech workers.
Bloomberg

Israel’s high-tech industry has complained for years that it faces a chronic shortage of engineers and other professionals. In fact, the griping was so persistent that the government plans a five-year, 750 million shekel ($206 million) program to increase the number of engineering graduates by 40% and reduce a shortfall of an estimated 1,000 jobs the country’s high-tech companies can’t fill every year.

“The gap between what companies need and the number of engineers is growing every year and today we’re seeing a gap amounting to thousands of engineers,” said Avi Hasson, the outgoing chairman of the Israel Innovation Authority, the government’s high-tech arm.

Industry leaders blame the supply-demand crunch for rising wages that threaten Israel’s competitiveness in the global industry.

But the fact of the matter is that no one has ever conducted a formal survey of the high-tech labor market. Now Profs. Benjamin Bental and Dan Peled, two economists at the Samuel Neaman Institute in the Technion, have done the work and found that the shortage isn’t real.

In their study “Is there a Shortage of Academic Degree Holders in Science and Technology?” they found that while there may be spot shortages in certain sectors of the Israeli high-tech industry, overall Israel’s institutes of higher education are turning out enough graduates to meet the market.

Looking at figures for graduates, they found that some 10,000 Israelis receive a bachelor’s degree in science and technology fields annually, in addition to some 4,000 who receive graduate degrees. That adds up to about 10% of all the jobs in science and technology professions in the Israeli workforce, they said.

The study said close to 5,100 Israelis graduate in engineering. There is a demand of about 4,900 net new jobs, of which about 1,100 are in high-tech. That’s about equal to 5% of the total engineering labor force.

In mathematics and physics, Israel produces about 2,500 graduates annually, far in excess of the 1,400 needed and equal to 10% of the total relevant labor force. In biology and natural science, graduates number 1,500 a year, whereas the demand is 410. Graduates comprise 15% of the relevant workforce in Israel.

“The Innovation Authority published a report that put the shortage at 1,000 engineers and programmers, but they admitted it was based on estimates and not on any data,” said Peled.

He said the authority had based its estimates on figures for job openings published by the Central Bureau of Statistics, but it’s not clear those represent the number of unfilled jobs. “If a company says it needs to fill an opening that doesn’t means there is an excess supply [of jobs],” Peled said. “There could be all kinds of reasons why a job is available.”

The two researchers give three plausible explanations for why Israel’s tech industry chronically feels as if it is short of skilled labor.

One is that there are certainly spot shortages in certain fields, which they said is inevitable in the fast-changing world of technology. The second is that many employers discriminate against graduates of Israel’s academic colleges, which produce an increasing number of the country’s engineering graduates. They prefer to hire from the country’s seven universities.

Finally, Bental and Peled said, there is a shortage of engineering technicians, which forces full-fledged engineers to do many of the jobs that could be done by people with less than a bachelor’s degree.

Aharon Aharon, the new CEO of the Innovation Authority and a former executive at Apple Israel, said he was still convinced that the shortage is real, especially since 2012. He cited a survey the authority had taken that found that a third of companies reported of lack of qualified job applicants.

“The Innovation Authority is in regular contact with all the innovative industries in Israel For several years we’ve been hearing from many scores of companies about increasingly severe shortages in trained manpower,” he told The Marker.