Gov't cuts programs to promote inclusivity in Israel's tech industry

Haredim in high-tech credit: Yossi Zamir
Haredim in high-tech credit: Yossi Zamir

Two programs cut by the Ministry of Economy and Industry include subsidizing the cost of wages for haredi, Arab and Druze employees in businesses in Israel amounting to NIS 43 million.

As the war continues and the fiscal deficit widens, among the hundreds of cuts in Israel's state budget are programs to increase the employment of the Arab, Druze and haredi communities in the tech industry.

Two programs cut by the Ministry of Economy and Industry include subsidizing the cost of wages for haredi, Arab and Druze employees in businesses in Israel amounting to NIS 43 million. The first program subsidizes 25-35% of the salary in the first year and 15-25% in the second year, for businesses that hire haredim, Arabs, and Druze, people with disabilities and young unemployed people. The order was canceled a few weeks ago, so no new applications can be submitted.

The second program subsidizes salaries for junior employees in high-tech from the Arab society and creates an incentive for the tech companies to hire them. In the program, the state participates with a subsidy of up to 30% of the salary cost for a period of up to 18 months, with employers taking in more juniors receiving special supplements. "Globes" has learned that this program has been cut by 60% from an already low annual budget of NIS 15 million, to NIS 6 million. In addition, the subsidy period has been reduced to only one year, which makes it less attractive to employers since in the first year of work, the employee does not reach full productivity.

Jobs will go abroad

Rami Schwartz managing director of Portland Trust Israel, which promotes peace between Israelis and Palestinians, tells "Globes," "Instead of the state realizing that this is an economic tool that produces a high return on investment, increases the number of jobs in Israel and prevents their spillover abroad, the state is trying to eradicate our way of operating." He even sent a harsh letter to the Ministry of Economy and Industry asking that the cut be reconsidered.

The curt response was that the cuts were due to budgetary restraints. The letter concluded, "We make it a priority to continue working to formulate additional ways to strengthen the industry."

Schwartz adds, "80% of jobs opened last year by Israeli companies were designated for overseas due to cost considerations, and to this were also added the political environment and security considerations. We managed to convince companies to open more jobs here through the incentives. Now, the state is taking this money, which is not particularly large, which is intended contribute to the growth engine of the Israeli economy and provides an extremely high return, and transfers it to places that are anti-growth."

According to the Israel Innovation Authority tech report for 2024, the under-representation of the Arab and haredi communities in the tech industry continues. Haredi men make up about 1% of tech employees, haredi women 1.7%, Arab men 1.5%, and Arab women just 0.5%.

According to the Portland Trust, over the past five years the Ministry of Economy has placed 250 juniors in tech jobs from the Arab, Druze and haredi communities with such companies as Amdocs, Wix, Monday.com, Vayar and Pagaya. The Trust explains that every tech job successfully filled, creates between two and six additional peripheral jobs, so as a result at least 800 more jobs were created. The Trust's program reflects an extremely high placement percentage, 92%, with 70% of the participants in training being women. Another figure cited by the Trust relates to the ability to retain employees who graduated from the placement program. After four years 94% of employees are retained.

The investments pays off

A report in 2021 by Deloitte examined the return on investment in the various employment programs, including the two programs currently being cut. The report concluded that these programs, "Presents economic viability for the state's investment." Among other things, it was found that the return on investment rate is 40%, "and together with the fiscal benefit from indirect employment, it is 95%." On the subsidy program for high-tech inclusivity, the report found, "The program produces a direct fiscal benefit of NIS 2.5 for every shekel invested," meaning a return of about 150%." It also states, "The increase in the income channel of the program's participants allowed (upward) social mobility of 1-2 deciles."

The Ministry of Economy and Industry said, "The Ministry of Finance budget division demanded the cancelation of these programs due to budgetary constraints. The Ministry of Economy through the Investment Authority would be delighted at any time to resume operating these and other programs, which were also cut by the Ministry of Finance budget division."

Published by Globes, Israel business news - en.globes.co.il - on July 10, 2024.

© Copyright of Globes Publisher Itonut (1983) Ltd., 2024.

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