Startup Nation: Playground for the Elite?

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Israeli high-tech workers. Rare is the Ethiopian-Israeli among them.
Israeli high-tech workers. Rare is the Ethiopian-Israeli among them.Credit: Alon Ron

President Reuven Rivlin usually has intelligent and thoughtful things to say about Israeli society, but last week he tripped up when he slammed the high-tech sector as a playground for the rich and pampered. ‘“Entry into Israeli high-tech is still a function of your family background, your socioeconomic situation and your place of residence and not due to your abilities, ambition or hard work. We have to change that,” he told an event at the Peres Center for Peace and Innovation, in Jaffa.

What Rivlin was referring to was a study by the treasury and Labor, Social Affairs and Social Services Ministry showing that a disproportionate number of the best-paying jobs in high-tech are held by people who grew up in well-off families. To be exact, 41% come from families that were in the highest 20% of income earners; only 7.5% came from the bottom 20%.

The statistics may be true, but the president’s conclusions are ridiculous. Israeli high-tech isn’t a coddled monopoly protected from competition by a compliant government. There are a lot of industries in Israel that are, but high-tech isn’t one of them – it does all its business in the global market where there is no one to protect it.

And in that market, it does extraordinarily well. The day after Rivlin made his remarks the German auto maker Daimler led a $60 million investment in the Israeli startup StoreDot. For sure, Daimler wasn’t awed by CEO Doron Myersdorf’s boyhood hometown or his connections but by his company’s innovative battery-charging solution that could be used to power electric cars.

Without going into a lot of detail about the statistics, what the government study found wasn’t that high-tech companies prefer to hire rich kids, but that the educational system fails students coming from lower socio-economic backgrounds. Among those scoring higher than a high 120 points on the psychometric exam, more than half came from families in the top 25% of income earners. Only 7% came from the bottom 25%.

If you come from a less well-off family but score well nevertheless, the odds are even or even better that you will enter an academic program in a high-tech field, like mathematics or computer science. However, the odds of your completing your degree aren’t as good, presumably because poorer students have to work while they study and tech-related majors are academically demanding.

That said, the drop-out rate isn’t significantly different between the socio-economic groups — 30.4% for students in the lowest 25% versus 25.6% in the top 25%. In any case, correcting the difference at this stage of a student’s career wouldn’t really change much: With just 4,600 students every year studying tech-related subjects, the net impact would be to increase the number of lower-income students by 35.

The problem, as the report correctly says, has to be addressed at the elementary and high school level by directing more budgets to schools in poorer communities.

There is a bigger problem than just ensuring equal opportunity for people at the bottom end of the income ladder. Women, Israeli Arabs and Haredim are severely underrepresented in the industry. If in America, high-tech is overwhelmingly white and Asian male, in Israel it is overwhelmingly male, secular and Jewish.

The conventional wisdom is that high-tech is like this because an old boys network (or more accurately a young boys network, since anyone over 40 is already past their prime, by industry standards) keeps all the others out. There is probably a little truth to this, but not much.

Although high-tech likes to think of itself as a global industry, meritocratic to the core, open to new ideas and inclusive, it isn’t really a rainbow. It has its values and style and, in the case of startups, demands close teamwork that involves easy communication and mutual understanding. Someone who looks and talks the part, served in the right army units, went to the right school, likes eating at the same restaurants and watching the same TV shows has it all over someone who doesn’t

On the other hand, the industry is much too competitive and dynamic for any firm to hire the next-best guy because he’s one of your own instead of the better girl or better guy who grew up in a development town. Anyhow, we’re not called Startup Nation for no reason — a talented engineer can easily form his or her own company. There’s a big support network of incubators, accelerators and programs to help you if you’re from a marginalized population.

High-tech does have a labor force problem, but it isn’t due to classism, racism or sexism and the government shouldn’t be trying to solve the problem by making the industry’s payroll a mirror image of the population, as studies like the treasury’s imply. It won’t work anyhow, unless the government is going to herd students into academic studies and jobs they don’t want, in order to meet a target.

However, there’s a serious shortage of engineering talent and the available pool has to grow by producing more graduates in relevant fields. This can only be achieved by coaxing groups that are underrepresented into these fields. The government is doing just that via a program approved last January to boost the number of high-tech-relevant graduates by 40% over the next six years, but more money and more resources are only part of the problem: Each of Israel’s three big geek-lite populations presents its own special challenges.

Women: Whether you think you they don’t have the genetic material for math and science (in which case, don’t apply for a job at Google) or are the victims of a cultural bias that discourages them, the fact is women don’t pursue studies relevant to high-tech.

In Israel, for instance, they account for only 29% of all students in computer science – half the rate for all undergraduate studies. And even that figure is misleading: Large numbers of female computer science students are Haredi women who aren’t on their way to a high-powered career in a high-tech company, but looking for a way to support their families.

Israeli women, like their sisters elsewhere in the world, are studying at a university level in greater numbers than men. They’ve conquered what were once nearly all-male professions like law and medicine but not science and engineering. It’s not clear that is going to change no matter how many programs there are to help encourage girls and young women.

Israeli Arabs: This is one population that does suffer from racist attitudes. Arabs make up just 1.4% of Israel’s high-tech workforce – a fraction of their 17.4% share of the total labor force. Arab students scoring close to the 150-point maximum in the math section of the psychometric are unlikely to be working in the industry, even though there is a high correlation between top scores and future tech employment.

Like the rest of Israel, Startup Nation will have to give up its prejudices. But it won’t be an easy process: Giving Arabs a stake in the high-tech sector will put them at the forefront of the economy. That will create jealousies and resentments, especially from the right, who prefer Arabs working in construction and industry and living apart from Jews. No matter, Arabs make up too big a part of the population to be ignored, not just by high-tech but the entire economy. They are ready and willing, and the opportunity shouldn’t be squandered.

Haredim: Alas, the ultra-Orthodox are not quite ready or willing. The economic pressures of a society where men engage in religious studies far into adulthood is becoming intolerable, forcing more and more Haredim into the workforce. But they are taking low-skilled, low-paid jobs because that is all their education prepares them for.

Much is made about Haredi high-tech entrepreneurs, Haredim pursuing college degrees and Haredi high-tech incubators, but the numbers are tiny, what growth there is has stalled and the rabbinical leadership is resisting with all its strength. Unfortunately the Netanyahu government is helping them by easing rules for secular studies at ultra-Orthodox schools, restoring allowances to adult students and exempting them from military service.

The Haredi nut will be a tough one to crack. The Haredim live in tight-knit communities where personal choice, like army service or employment, is severely constricted, and the rabbinical leadership controls the schools and other institutions. The government has little power over how they are educated orin enforcing the draft laws. More courage from the state, especially pressuring the community economically, is the only policy option, but don’t count on it anytime soon.