Israel: Tech Industry Lacks Qualified Labor, New Report Confirms

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Aug. 17—Despite its thriving international reputation and record rates of mergers, acquisitions and stock offerings, Israel's high-tech industry is in danger, largely due to a shortage of trained personnel, according to the Economy Ministry's Office of the Chief Scientist (OCS).

In his first annual Innovation Report, Chief Scientist Avi Hasson said high-tech accounts for a shrinking share of the Israeli economy, is overly dependent on foreign investment and faces an increasing shortfall of qualified labor, especially engineers and computer scientists.

“The ability of Israeli high-tech to serve as a growth engine for the rest of the economy is now a question mark,” the report warned.

According to OCS, the hi-tech sector is shrinking as a share of the Israeli economy—from a peak of 13 percent in 2007 to 11.5 percent in 2012. Since then, its share of exports has also declined—to 42.7 percent in 2014, the report noted.

The percentage of the workforce employed in hi-tech has been dropping in parallel. In 2013, the latest year for which figures are available, just under 9 percent of the Israeli labor force worked in hi-tech, compared to 10.7 percent in 2008.

“This could be interpreted as the result of increased efficiency and greater labor productivity in the industry, but in 2012, two-thirds of all companies reported a shortage of appropriately trained and skilled workers,” the report noted.

Fewer Students in the Pipeline

Some 7,000 new jobs are created each year in Israeli hi-tech, but the country's colleges and universities are producing only about 4,700 engineering and computer science graduates annually, the report said, despite average starting salaries exceeding 18,000 shekels ($4,500) a month or 2.5 times the average national wage.

Down the track, the view is even dimmer, OCS continued, warning that young Israelis are not pursuing math and science studies in sufficient numbers. Only 10 percent of Israeli high-school students study math and take its matriculation exam at the highest level. Of those, only 5.6 percent score above 85, the cut-off for potential recruits. And of those, many still opt to study professions such as medicine, law and economics, rather than science and technology.

“To continue competing successfully in global markets, Israeli industry needs a large number of outstanding academics, engineering, computer and science graduates,” the OCS wrote, adding that the shortage “could have severe repercussions for the Israeli economy.”

Problem Subject of Repeated Study

The gap is not new and was confirmed in 2012 by a government panel headed by Eugene Kandel, head of the National Economic Council. A steering committee created by the panel submitted its proposed solutions in August 2014, OCS noted, saying it would now establish a steering committee to implement the program.

The recommendations focused on:

• “realizing untapped potential” through targeted placement—especially of women, Arabs and the Ultra-Orthodox,

• retraining experienced engineers to encourage their return to hi-tech,

• bringing Israeli academics back from overseas and

• “encouraging careers in science and engineering” among youth, students and those who served the army in technology units, including incentives for scientific excellence, broader academic admission criteria and better quality of instruction.


“For the Israeli economy, the expression ‘knowledge is power’ should be ‘knowledge is manpower,’” the report said. “In other words, the quality, trained manpower that Israel strived to develop contributes greatly to employment, manufacturing and export. In effect, this is Israel's relative advantage over other countries.”

To contact the reporter on this story: Jenny David in Jerusalem at

To contact the editor responsible for this story: Rick Vollmar at

The chapter of the OCS report on “Human Capital—The Battle for the Next Generation” is available in Hebrew at

For more information on Israeli HR law and regulation, see the Israel primer.

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