This week, the Central Bureau of Statistics released average gross pay figures for March in which one item particularly stands out: the average monthly salary in high-tech reached a record NIS 31,685. The NIS 30,000 level was broken through in February this year, and the rise in the year to March was 6%.
The figures look surprising, given the struggles of the technology industry worldwide. Because of high inflation in the past year, in real terms the average salary in high-tech is a little below the peak reached in February 2022, but pay still seems to be holding up better than might be expected.
A closer look at the figures reveals a less rosy picture. In fact, to a large degree they bring home what has been happening in the industry recently.
Many technology companies have carried out extensive layoffs, with most of those laid off being in junior positions with low salaries. The layoffs have also largely affected ancillary departments such as human resources and marketing, where again, relative to research and development jobs, salaries are low.
Start-Up Nation Policy Institute (SNPI) CEO Uri Gabai told "Globes": "When the make-up of the high-tech population changes, the average necessarily rises." In other words, low-paying jobs have been cut, skewing the numbers upwards.
Another factor that Gabai says may be leading to rising salaries is workers’ bargaining power. "When inflation is as high as it is, people with bargaining power demand pay rises. True, the bargaining position is a little less good than it was a year or two ago, but these people too have mortgages and feel the rise in the cost of living.
"You have to look at real pay," Gabai adds. "The nominal pay figure is interesting, but we look at purchasing power. Prices have risen, and created a situation in which there is erosion of pay."
Rate of increase slowing
SNPI recently published its Human Capital Report for 2022-2023, which reveals another worrying trend: the industry slowed substantially in Israel in 2022. The global economic slowdown led to a fall in the rate of growth of human capital, with 0.2% negative growth in the final quarter of 2022. There were signs of the negative trend continuing into the first quarter of this year.
The report also shows that the rate of layoffs in the high-tech workforce rose from 2.2% in the second half of 2021 to 4.4% in the second half of 2022. The first victims of this wave of layoffs were small companies and people in non-technological jobs.
According to Amit Rapaport, CEO of Compete, which has developed a platform for comparison of salaries and benefits for technology workers, pay rises within the companies themselves are also slowing. "In the past, the average annual salary rise in high-tech companies was 2-4%. In 2021, it jumped to 8-10%, and this applied to almost all of a company’s employees who were entitled to a rise.
"In 2023, two things have changed: pay rises are given only, if at all, to outstanding employees, those with the biggest impact on the company; and the percentage has reverted to the 2-4% average and fallen from the 8-10% that people had become accustomed to in the high-tech companies."
Nevertheless, according to the SNPI Human Capital Report, there are signs of recovery in the global technology industry, among them a rise in the Nasdaq index in the past few months, indicating positive trends in the broader industry.
Published by Globes, Israel business news - en.globes.co.il - on June 8, 2023.
© Copyright of Globes Publisher Itonut (1983) Ltd., 2023.