A summary of 2017 by the research unit of human resources company Ethosia found that high-tech salaries continued to climb in 2017, particularly for engineers, sometimes regardless of experience and seniority.
Ethosia's figures show that the average monthly salary of a hardware engineer with 0-2 years of experience rose from NIS 14,600 in 2016 to NIS 17,500 in 2017, a 20% increase. Wages of beginning software engineers rose from NIS 14,000 per month to NIS 16,800, also a 20% increase. Salaries for beginning DevOps developers increased from NIS 19,700 a month to NIS 21,900, an 11% rise.
Ethosia CEO Eyal Solomon said that what was dictating the continued increase in salaries was what he called a "price war for engineers." He said that the entry of large companies into Israel and the founding of local development centers would only increase demand for employees and, as a result, salaries. At the same time, Solomon warned that these increases could not continue indefinitely, and could even be described as a bubble.
"Salary surveys, the large mergers, and the exits (such as the $15 billion acquisition of Mobileye by Intel, S.D.) are heating things up in the sector; it is hard to avoid awareness that we are in a bubble situation," Solomon adds.
Solomon told "Globes" that when a certain salary level is reached, "In contrast to startups, the large enterprises will be able to close down their local activity, and simply move their business overseas.
"Cisco, for example, and this is based on an actual case, has no sentiments. If the price of an engineer in Israel is 15% more than in Europe and the US, they will turn out the lights here and move their activity there. Prices today are increasing at such a pace that we will soon reach the point where it will not be worthwhile to have development in Israel."
"Globes": You mentioned the large companies. What about the startups?
Solomon: "They are staggering under this burden. At a certain level, it will not be worthwhile for them to do development here. There are certain costs, plus equity. Startups today are already moving their development, and there is a process of moving to Europe and India.
"Prices have also risen there, but not like in Israel. But an Israeli entrepreneur will talk about the risks he has without development in Israel when projects can fail because of communications problems."
Meanwhile, the people who are benefiting are the employees lacking experience, who are getting both experience and high salaries.
"It's the same thing. The market is pulling upwards. In 2001, everybody went into software testing. Today, also, when engineers are needed, even students, as we saw in the recent study, are generating output, and then competition begins. The prices are rising at the same pace."
At what point will the bubble burst? When will it happen?
"We're at a point at which the price of an engineer is 15% higher than the price in the US. When that gets to be more than 30%, we'll see the bubble burst. The current struggle is still causing increases."
What will happen when the bubble bursts?
"It's a process. It won't happen at once, and in this, I rely on things we've seen in the past. When we reach a 30% gap, we'll see cutbacks and layoffs beginning in the large companies."
What about small companies and startups?
"When we look at this slope, in my opinion we'll reach a point at which investors will be afraid to invest in startups when they see layoffs in the background. Again, I'm talking about what we've already seen - investors won't analyze the substance of the layoffs. They'll prefer to sit on the fence and wait until the storm passes. In a situation like this, some of the startups with no money in the bank are liable to close down. It's a process that I think will be spread out over 12-18 months at least before it ends. We saw it in 2008 and in the first years of the 21st century. It's the same pattern - the price of an engineer climbs until he or she is no longer worthwhile to corporations."
Can anything be done now?
"Certainly, there's a whole set of things to be done. One is to add additional population groups to the industry as quickly as possible. You can take engineers from other fields, like aeronautics and machinery, where there is no shortage, and retrain them."
I have a feeling that it is already happening now. Many engineers in high tech come from these fields.
"True, but there still isn't enough incentive or encouragement to make them move. Let's assume that the government says that from now on, it will pay for the conversion of engineers to software. That can already satisfy the demand. Another way is to hire people in the 40-50 age bracket for this jobs when they are at home or working in wrong and unsuitable places. Still another option is integrating more haredim (ultra-Orthodox Jews) and Arabs, and of course to push more women in the sector, and to train the next generation in general. It's a set of actions aimed at increasing the supply. I'm not even talking about importing workers from India."
Even if it is a temporary bubble, according to the figures, the employees know how to take maximum advantage of the situation. Ethosia's summary of the year highlights another interesting point: the percentage of those leaving their place of work reached a peak of 16% this year. 24% of those who left did so because they were dissatisfied with the salary and social benefits, and you can imagine what salary and benefits are involved.
Published by Globes [online], Israel Business News - www.globes-online.com - on December 26, 2017
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