Employment in Israeli High-Tech Past, Present, and Future

Key Findings:

This paper examines the critical role of Israel’s high-tech sector in the economy, the challenges it faces in employment and workforce development, and the potential risks to its future growth due to economic, political, and security-related disruptions. There is urgent need for policy interventions to sustain the sector’s success and ensure continued economic prosperity.

The high-tech industry contributes 19% of Israel’s GDP, double its share from 1995 (9%). In 2022, 48% of Israel’s total exports came from high-tech industries, underscoring the sector’s outsized role in economic stability. Tax contributions: Despite employing only 10% of Israel’s workforce, the high-tech sector accounts for 65% of total corporate tax revenues, making it a major pillar of public finances.

The high-tech sector is struggling to find enough qualified professionals, especially in computing-related fields such as computer science, data science, and electronics engineering. Many jobs remain unfilled due to a lack of well-trained graduates, leading companies to seek talent abroad or consider outsourcing.

While the number of graduates in science and technology fields has increased, concerns remain about their skill levels and practical preparedness. The proportion of Israelis earning advanced degrees (Master’s and PhDs) in science and engineering is lower than in many developed countries and has been declining.

Women, Arab Israelis, and Haredim (ultra-Orthodox Jews) remain underrepresented in high-tech jobs. Efforts to integrate these groups into the high-tech workforce have been slow, limiting the sector’s ability to expand its labor pool.

The psychometric scores (similar to SATs) of students entering science and engineering programs have declined, raising concerns about the quality of incoming students. Many students enter university without adequate math and science skills, making it harder to train them for high-tech careers.

Israel faces a shortage of teachers in key subjects like mathematics, physics, and computer science, leading to inconsistent education quality. Low salaries and poor working conditions deter highly skilled professionals from becoming teachers. Schools lack modern technology, updated curricula, and sufficient laboratory facilities, limiting their ability to prepare students for tech careers.

Government attempts to overhaul the judiciary in early 2023 led to economic uncertainty and a decline in high-tech investments. Many high-tech entrepreneurs relocated abroad, concerned about legal instability and potential risks to business operations.

The Israel-Hamas war (2023-2024) exacerbated economic instability, with further capital flight, reduced foreign investments, and an outflow of talent. Uncertainty surrounding long-term security concerns may further deter high-tech firms from expanding operations in Israel.

Policy Recommendations

(1) Strengthening STEM Education from an Early Age

-Expand and improve science and technology education at the elementary and high school levels to ensure students are prepared for university-level STEM programs.

-Invest in teacher training and salaries to attract more qualified educators in science, math, and computing fields.

-Modernize educational infrastructure to support high-quality STEM learning environments.

(2) Aligning Higher Education with Industry Needs

-Increase university admission slots for high-demand STEM fields such as AI, cybersecurity, and data science.

-Encourage collaboration between universities and the high-tech sector to ensure that curricula reflect the latest industry trends.

-Expand internship and apprenticeship programs to provide students with hands-on experience before graduation.

(3) Diversifying the High-Tech Workforce

-Increase participation of underrepresented groups (women, Arab Israelis, and Haredim) through targeted training programs and scholarships.

-Encourage alternative career paths such as coding boot camps and vocational training for non-traditional candidates.

-Provide tax incentives for companies that hire and train employees from underrepresented communities.

(4) Stabilizing Israel’s Investment and Business Climate

-Ensure political and legal stability to restore investor confidence and prevent further capital flight.

-Develop long-term economic strategies that prioritize innovation and technology investment.

-Encourage foreign direct investment by offering incentives for multinational companies to establish research and development centers in Israel.