Israel's technology industry relies on 20,000 talented people who are responsible for the sector's technological, economic and competitive value on the international market, according to a study by Sparks Consulting Group, commissioned by Israel's Business Roundtable for the conference of the 100 most senior CEOs in the Israeli economy.
The study found that, in 2020, Israeli tech had 335,000 employees, of whom 50% were tech staff and the other half support staff in marketing, finance, human resources etc. According to Sparks, the success of the sector depended on a small group of about 6% of total employees, or just over 20,000 people.
Sparks CEO Ron Tzur explained that this number was reached following in-depth interviews with 25 senior executives in different areas of Israeli high-tech. "I think we have made a cautious assessment and in practice this group, creative people who are in the forefront, could be even smaller. We call high-tech the engine of the economy and these people are the motor of the engine."
Tzur thinks that concerns about a brain drain of this elite group of talented people are well founded. Brain drains can be expressed in more talented people moving to multinational giants like Google, Facebook, Amazon and Apple who offer fantastic conditions and salaries. These corporations may work in Israel but their IP is transferred abroad. The other option is physical migration of these talents to other tech centers like Silicon Valley.
"One of the interviews that I conducted for the study was with the manager of a large Israeli venture capital fund. He told me that one of the multinational corporations had in recent months contacted almost all the talented employees at his 30 startups and offered three times their salaries. In order to keep these talented employees in Israel and with Israeli companies, the state has to build a program that creates a connection and a commitment for them to this place, for the sake of the prosperity of Israel and the Israeli economy in the coming decades. These people can't be kept here by money alone, because eventually they'll always be somebody who'll pay them more," Tzur said.
Four scenarios for Israel's future
The study by Sparks analyzes long-term scenarios for Israel's future according to two macro trends. The first trend is the demographic changes in the Israeli population with the major growth in the haredi (ultra-Orthodox Jewish) population at the heart. Participation of the haredi population in the tech sector is low, with only 3% of employees in the industry coming from ultra-orthodox Jewish society.
According to forecasts, haredi society made up 11% of Israel's population in 2015 and is expected to grow to 32% by 2065. The Arab population is expected to maintain its relative size and its participation in the tech sector is also low - only 2% of tech employees are Arabs.
The second macro trend that the report relates to is the growing competition for talent worldwide because of the intensifying struggle between the US and China for global supremacy. As part of this struggle, the two super-powers are significantly increasing their investment in technology research and are striving to attract talent from around the world. In this situation, the study postulates, "Israel and Israeli companies must ensure the commitment of their most valuable people."
The intersection of these two macro trends can create four different scenarios. The first and the most positive is that the State of Israel maintains its technological advantage, which is reflected in those 20,000 talented employees, and in addition is successful in integrating the haredi and Arab populations into society and the economy. A less positive scenario is that the country maintains its technological advantage, but does not succeed in integrating the haredi and Arab populations, which creates a society with large economic gaps. Two other scenarios are that the country loses its technological advantage with or without integrating the haredi and Arab populations.
According to Tzur, the challenges boil down to the ability to keep and enlarge this group of talented employees who drive the technology industry forward, among other things by bringing other populations into the circle. "High-tech today is not realizing the potential that exists in the haredi, and Arab populations and amongst women because of cultural and occupational obstacles. In these populations, there are enough people to enlarge this reservoir of talents by 20,000. We interviewed a female entrepreneur who employs haredi women and she told me that there are certainly superstars, but many companies miss out on them."
Published by Globes, Israel business news - en.globes.co.il - on September 9, 2021
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