High-tech hopes - Addressing Israel’s engineering shortage

According to figures from the Israel Innovation Authority, as of July 2019, there were some 18,500 open tech positions in the industry – an increase of 8% from the same period the year before.

That led to a situation, whereby a country renowned for its high-tech expertise was forced to outsource development to teams in Eastern Europe, Asia and even the US.

Without a dramatic increase in the number of employees in high-tech, the IIA warned, “Israel’s economy will reach a dead end and get stuck.”

Then COVID-19 came along and upended Israel’s shortage-by-success paradox.

A survey carried out by the IIA and Israel Advanced Technology Industries from the start of the pandemic in March until mid-May found that, of the 400 companies that responded, 10% had laid off up to 10% of their workforce, 14% had laid off more than 15%, and a full quarter of companies expect to lay off that many workers if the situation does not change in the next six months.

Not surprisingly, 71% of the start-up companies covered in the survey said they have stopped recruiting new employees. Only 10% of companies that were in the middle of raising money reported that they have been able to continue. In part as a result, some 65% of small companies – those with 10 employees or fewer – expressed concern they could not continue in business for more than six months without additional financing.

While Israel’s economy – as with most in the world – has been forced to hit the pause button, that likely won’t continue indefinitely. Indeed, by the first week of June, once restrictions began to be lifted, the number of people returning to work has been 10 times the number registering for unemployment.

And while the unemployment rate in Israel hit a record-breaking 27.5% in mid-April, projections are that it will be less than half that amount – 10% to 11% - by the beginning of 2021. That’s still far beyond Israel’s pre-pandemic rate of 3.4% to 4.2%, but the high-tech community may be the first to return.

Which means, barring a barrage of bankruptcies or a complete cessation of venture capital: a return of the job shortage.

Before the coronavirus crisis began, some of the most out-of-the-box thinking about how to solve the tech hiring crisis was around ways to draft underrepresented populations into the tech economy.

In Israel’s case, this includes three main sub-groups: the ultra-Orthodox, Arab-Israelis and women. If current projections hold, by 2040 some 78% of Israel’s elementary school students will be in the first two of these demographics.

What projects was Israel working on before the pandemic? And where do they stand today? The Jerusalem Report takes a look.

Some background first: According to Start-Up Nation Central, the Israeli nonprofit established to capitalize on Saul Singer and Dan Senor’s book of the same name, Israel has more than 6,000 start-ups with their own R&D or product.

Put another way, Israel has around one start-up per 1,400 people, while in Europe the number is one start-up per 20,000 people.

There are also more than 300 multinationals in Israel, according to the IIA’s latest figures, with most of them operating high-tech R&D centers. The number increased by 143% from 2010 to 2018. Even the pandemic is not likely to blunt multinational interest in Israel.

All told, Israeli tech firms employed 321,000 employees before the advent of COVID-19, accounting for 9.2% of all Israeli employees, the IIA reports. The high-tech sector is responsible for 43% of the country’s exports and 13% of its GDP.

That growth has put upward pressure on salaries, and between 2005 and 2015, wages for engineers rose by 38%. (The increase in the last six years alone was 27%, compared with 15% for jobs outside the tech space.)

The average monthly salary in the sector now stands at NIS 22,749 (over $6,000), more than double the average wage of NIS 9,345 ($2,600) in the rest of the economy. Employees working for multinationals in Israel received compensation around 40% higher than their peers at domestic firms.

Founders of start-ups such as Gil Dotan, who heads Guardian Optical Technologies, feel they cannot compete within this reality. “They pay 20-80% more than what a start-up like us can afford,” he told the Report.

In 1948, on the eve of Israel’s war of independence, the country’s first prime minister, David Ben-Gurion, needed to put together a broad government coalition. One small political faction he wanted “in” was the ultra-Orthodox community, whose rabbinic leaders demanded that, in return, a small number of students learning in yeshiva – a Jewish educational institute – for whom “Torah study is their profession” be exempted from Israel’s mandatory military conscription. Ben-Gurion agreed.

What Ben-Gurion could not have foreseen was that the 400 student exemptions granted at the time would swell to more than 60,000 yeshiva students who do not participate in the labor force today. Those who do seek employment are at a disadvantage due to their relative lack of academic schooling. The percentage of ultra-Orthodox men aged 35 to 54 with no more than a primary school education in secular subjects was 47% in 2012.

Ultra-Orthodox women are a different story. According to statistics compiled by the Israel Democracy Institute, 73% of them work, although 78% of that employment is part-time; 42% work in education, compared with 17% of non-Orthodox Jewish women.

The number of ultra-Orthodox who work in high-tech, however, is just 3%. Moreover, only 8% of ultra-Orthodox students who do make it to university study engineering, compared with 18% of the general population.

According to Prof. Dan Ben-David, an economist at Tel Aviv University’s Department of Public Policy, this has resulted in the existence of two different states: “A First World state that is considered a pioneer, alongside a state whose citizens do not get the tools and conditions to contend with the modern-day economy.” Currently comprising some 12% of Israel’s population, the ultra-Orthodox community will be more than 26% of the country by 2059, and by 2065, 40% of Jewish Israelis will be ultra-Orthodox.

Arab-Israelis constitute around 20% of Israel’s population and 17.4% of the country’s total workforce. Yet they account for just 2% of employees in the tech sector (a threshold the community passed only in 2019).

According to the Israel Democracy Institute, part of the problem is access and the “acute shortage of industrial zones in Arab towns and villages.”

In addition, the entrepreneurial impetus seen so vividly in Tel Aviv is lacking in the Arab sector. Yazeed Ghandour, who founded JEST (Jerusalem Entrepreneurs for Society and Technology), says that young people in east Jerusalem are more intent on settling down at a young age, so they finish high school, go to university and get a job because they want to get married. Those jobs tend to be “safe” positions in the public sector, preferably “a protected government job with tenure,” adds Karim Fanadka, who bucked societal pressure to trade perceived security for a job at the Israeli branch of Micro Focus, where he now manages 50 software engineers – both Israeli Jews and Arabs.

“The high-tech industry is not considered safe financially or professionally, and in the eyes of many in the Arab community, it’s considered to be an unstable career choice,” Fanadka wrote in Forbes. “Failure is also not accepted in the Arab population the same way it is by Israeli Jews.” Arab-Israeli role models – such as Johny Srouji, Apple’s senior vice president of hardware technologies in Israel, and Imad and Reem Younis, two entrepreneurs who established Alpha Omega, a medical device company located in Nazareth – are helping to change that perception.

A particular challenge is experienced by youth of the Bedouin Arab community, many of whom do not get out of their villages until late in life. According to Jamal Alkirnawi, who heads A New Dawn in the Negev, which provides educational and employment opportunities to this group, Bedouin young people “usually live with their families in their communities until the age of 18 and often have never seen Westerners or Jews and have never used the Hebrew language.” Experience also plays a role. “In Arab society, high-tech jobs are relatively new, so the complex profiles of applicants with 15 years working experience are almost non-existent,” says Ifat Baron, CEO of itworks, an Israeli nonprofit that works to promote diversity in the high-tech industry.

Overall, just 28% of Arab-Israeli men and 10% of Arab-Israeli women with high test scores on Israel’s psychometric exams make it into tech today, the Finance Ministry’s chief economist pointed out in 2017, compared with 50% of Jewish men scoring at the top and 30% of Jewish women who are now working in tech.

Although in high school the gender breakdown for STEM (science, technology, engineering and mathematics) studies is just about equal, with women comprising 47% of students, only 22% of Israeli tech workers are women. The number of women holding management positions is even lower at 18%, according to the latest IIA report.

“The problem begins in the army, where only 27% of the programmers are women,” says Maty Zwaig, the former human capital programs director for Start-Up Nation Central who now heads Scale Up Velocity, a nonprofit that works closely with Start-Up Nation Central. “In the cyber units, only 12% are women and in the very top cyber units, it’s just about 3%.” Yasmin Dunsky, who founded the nonprofit organization QueenB to teach STEM studies and entrepreneurship to women, and who now heads-up Frizzl, which does much the same but as a for-profit company, explains that “if you serve as a programmer in the army and build a start-up, you’ll pick your friends and you’ll know more men than women.” For ultra-Orthodox women who work in tech, there are additional cultural barriers that define at which kinds of companies these women are allowed to work, adds Zwaig. “For example, they can’t sit in a room with both men and women. It has to be only women.” This tends to direct ultra-Orthodox women to lower-level tech positions in quality assurance or to look for firms specializing in outsourcing.

The IIA, which was the first to sound the alarm, has set a target to nearly double the number of those employed in the high-tech sector from its level two years ago of 270,000 to 500,000 within a decade. That would boost the number of Israelis working in computer-related professions to 15% of the population by 2027.

A secondary push has been to make it easier for non-citizens to work in Israel through changes in work visa requirements and to promote Jewish “high-tech immigration.”

Ephraim Kribus, an ultra-Orthodox father of seven, gave up his life studying full-time in a yeshiva to attend college after it became impossible for him to feed his family of nine on the $450 in social assistance he received each month.

“This is what it is to be poor: You go to the store for some milk and if it costs one shekel too much, you come back home empty-handed and wait for it to be cheaper the next day,” he told the Toronto Star. “I couldn’t live like that anymore.” Boosting participation of ultra-Orthodox Jews like Kribus in Israel’s high-tech labor force involves both public and private initiatives.

In 2013, Robert Reichmann co-founded KamaTech, which helps ultra-Orthodox Israelis find employment in high-tech companies. Over the past seven years, the company has placed more than 1,000 ultra-Orthodox people in jobs and has facilitated the creation of more than 40 new start-ups. Some 2,000 men and women have taken its technical training courses. KamaTech works with leading tech companies in Israel, including Cisco, Google, Microsoft and Facebook.

“KamaTech has tried to crack the issue of seminary graduates for several years now,” says Sari Roth, an ultra-Orthodox entrepreneur who founded the start-up Bontact and also serves as vice president of KamaTech. “There’s no precedent for a woman graduating and integrating into a multinational tech company. I cannot begin to describe the impact it has had on the community,” Roth said in an interview with the Israeli business publication Calcalist.

In 2015, the IIA launched a program that provides funding for technology enterprises owned at least 33% by ultra-Orthodox entrepreneurs. The funding covers 75% of their R&D expenses for the first year and 70% for a second year. The authority has already given grants of $7 million through the program.

Adva, a two-year vocational computer science program providing hands-on technical training and job placement for both ultra-Orthodox seminary students , and Excellenteam, a tech bootcamp for ultra-Orthodox women (as well as Arab Israelis), were launched in October 2018 by Start-Up Nation Central. The programs are now operated by Scale Up. Adva has enrolled 85 women from three religious seminaries (two in Jerusalem and one in Bnei Brak). The curriculum is equivalent to 70% of a full computer science degree.

Other undertakings include the Jerusalem College of Technology, which was established in 1969 as an entirely religious school granting bachelor’s and master’s degrees in the sciences and engineering, and the Haredi College of Jerusalem, which closed in 2016 due to financial problems.

The coronavirus crisis has hit the ultra-Orthodox harder than others, in part due to the community’s aversion to having computers in the home. To move Scale Up’s programs for ultra-Orthodox women online, Start-Up Nation Central “purchased and distributed laptop computers and ‘kosher’ Internet Netsticks,” says Zwaig. “This was a major change in school policy and that of the rabbinical teams, faculty and parents.” While Zwaig says that “corona definitely slowed us down,” there’s a potential upside, too: a survey by the Israel Democracy Institute in April found that 42% of ultra-Orthodox respondents said they’d enter the workforce or work more following the crisis.

While this covers a broader scope than high-tech, it’s still an encouraging trend. Some 20% of respondents said that they or their spouse planned to start working, while 26% said they or their spouse intended to work longer hours.

In a survey of the ultra-Orthodox conducted by Kantar Media during the lockdown, 25% reported using the Internet for work for the first time, 78% of those with Internet access reported using it more than in the past, and there was a 40% increase in demand for Internet bandwidth from ultra-Orthodox areas.

Telco provider Bezeq reports that 8% of its new customers during the lockdown were ultra-Orthodox – three times the usual figure.

The Arab middle class is expanding dramatically – from 17% of the Arab-Israeli population two decades ago to 27% in 2018, says Prof. Aziz Haidar, a sociologist at the Hebrew University of Jerusalem. High-tech jobs should help foster that growth.

The number of Arab-Israeli students studying computer science increased from just over 900 in 2011 to nearly 1,600 students in the 2016-2017 school year, the Council for Higher Education reported.

Informal educational programs are helping, too. A New Dawn in the Negev, for example, sponsored a two-week “Tech2Peace” seminar in August 2018, where 30 young men and women got to sample software development, graphic design and 3-D printing.

“The Bedouin sector is not full of technological hothouses and high-tech initiatives,” explained 20-year-old Kusai al-Amur, one of the program’s participants. “This is an excellent opportunity to integrate into the technological world.” Another nonprofit organization, Tsofen, has placed over 1,300 candidates in high-tech positions and has facilitated the entrance of several major tech companies – including Microsoft, Broadcom and Amdocs – into the Arab-Israeli city of Nazareth. Some 700 students have graduated from one of Tsofen’s 35 high-tech courses.

“Throughout the course I received one-on-one support and guidance from leading professionals in the field, which were not accessible to me as a student in academia,” said Suha Bishara, a 25-year-old Arab-Israeli woman from Nazareth. She received her bachelor of science degree in information systems engineering from the Technion-Israel Institute of Technology and followed that by completing a Tsofen course in Full Stack Development.

Tsofen believes that it can help increase the number of Arab-Israelis employed in high-tech to 10% by 2025. Sami Saadi, Tsofen’s co-CEO, says that the COVID-19 crisis could turn out to be an “opportunity” by incentivizing even more community members to pursue high-tech careers.

“It is clear that there are jobs that will disappear from our world in the next 10 years and it is clear that more people need to be employed in high-tech and innovation at the expense of the social sciences and humanities,” Saadi told Globes at the height of the pandemic’s first wave in May 2020.

Meanwhile, Scale Up’s Excellenteam program is focusing on teaching “soft skills” aimed at helping these new engineers get the job of their dreams. That’s because, says Scale Up’s Zwaig, “we see top Arab students from the Technion, Hebrew University, and Tel Aviv University, failing to pass their interviews because of a lack of soft skills.” Excellenteam just completed its third computer science bootcamp – this time entirely online. “Their final projects, run in partnership with Mobileye and Google, were managed from afar,” Zwaig explains. “Mock interviews and preparing for the placement process were also handled remotely until graduates can go to actual in-person interviews.” When it comes to the Palestinians, contrary to what the world sees on CNN about the divide between Israel and the West Bank, outsourcing has become an increasingly popular option. Twenty outsourcing companies now operate in the West Bank cities of Ramallah, Hebron, Nablus and Rawabi.

“Just one hour’s drive from Tel Aviv, we have a pool of talented, available engineers,” says Murad Tahboub, CEO of ASAL Technologies, one of the West Bank’s leading outsourcing firms. “It’s not a social stigma to work with Israeli companies,” he added in an interview with No Camels. “On the contrary!” Jerusalem-based freight-forwarding technology firm Freightos is a good example: The company has a satellite division with 40 developers in Ramallah. The fact that salaries in Ramallah are half those in Tel Aviv does not hurt.

“For the price of one Israeli engineer, an Israeli company can hire three Palestinians in the West Bank,” Dudu Slama an executive at Israeli tech firm Mellanox Technologies, said at the 2018 Start-up Neighbors conference.

The reduced stigma on remote working as a result of the pandemic should also improve the ability of both Arab-Israelis and Palestinians to telecommute to tech firms in the center.

In 2017, Israel’s Labor and Social Services Ministry launched a collaboration with the “She Codes” community of women in technology. The Labor and Social Services Ministry aims to invest $5.5m. to train a hoped-for 4,400 women through She Codes’ educational framework.

The aim is that “within a few years we will see in the high-tech industry female representation that is at least identical to men’s,” said former labor and social services minister Haim Katz.

She Codes got an additional boost when the Genesis Prize Foundation picked it, along with 36 other Israeli women’s organizations, to share a $1m. prize.

The Rashi Foundation and the Defense Ministry established the Cyber Education Center in 2018 to bring women up to the level of their male peers in high-tech. There are now three options available for high school-aged women: a two-and-a-half-year long CyberGirlz Club program, which runs nine classes in three cities with 110 students, starting in 10th grade with the aim of enabling graduates to pass the entrance exams to the IDF’s elite cyber units; the Mamriot program, with 86 participants in two cities, designed specifically to prepare religious girls for tech positions during their national service and the Shift Community which organizes events aimed at increasing the number of girls choosing computer science as their major in high school.

Pre-pandemic, the nonprofit group LeadWith, set up to “empower women in tech,” would hold meet-ups in Tel Aviv and Herzliya that teach “concrete skills that people can use the next day at the office,” explains co-founder Dalit Heldenberg.

LeadWith runs a number of ongoing programs including regular coding hackathons, mentoring (with professionals from Google, Wix, Facebook and Booking.com on board) and “LeadWith Babies,” a series of morning networking meetups and lectures where new mothers can bring their infants. Heldenberg also works as the VP of product for Tel Aviv-based human-resources-meets-artificial-intelligence start-up Gloat.

QueenB began with an even younger target demographic: eighth-grade girls. The group, which was founded in 2016, now has 450 junior high school participants and over 1,500 students total in its after-school programs, offered in all of Israel’s major cities, including Jerusalem, Tel Aviv, Haifa and Beer Sheva. QueenB sponsors its own annual hackathon, the largest in Israel just for women. (The 2020 version was held in May entirely online.) Some 60% of the girls in the QueenB program go on to major in computer science in high school,” explains QueenB CEO Gal Aladgem. “We believe programming is for everyone and is key in opening many opportunities in life, especially for underrepresented social groups.” Most of the courses that have been launched for the three targeted communities – Arab-Israelis, the ultra-Orthodox and women – have shifted to distance learning on Zoom and other video platforms over the past several months. That’s not been without challenges, but the organizations involved are committed to pushing forward.

Aladgem told the Report that not only did all of QueenB’s activities for junior high students move online, the organization actually expanded during this period.

“We worked incredibly hard in order to continue our routine,” Aladgem says. That’s included “transforming all our content to online, fundraising, setting up new partnerships and maintaining a close personal connection with our students.” As restrictions were eased, QueenB participants began meeting up again in person – with masks, of course.

In addition to programs for specific demographic groups, the IIA believes “coding bootcamps” can make a real difference.

“There are a lot of people in the general population who have the relevant skills but are not working in the field,” says Naomi Krieger Carmy, who heads up the IIA’s societal challenges division. “These are people who studied math, physics and biology, but they don’t have the time or ability to go back to university for another degree.” Short-term non-academic bootcamps lasting four to six months have been successful in the US, Krieger Carmy points out. The IIA’s Israeli bootcamps currently have 300 people studying in seven different programs. Private bootcamps outside the IIA’s purview have also caught on, outside the IIA’s purview, with 1,000 people studying in a total of 20 programs, Krieger Carmy adds.

The bootcamps, Krieger Carmy explains, not only transitioned smoothly to online learning, but have turned a tough situation into an opportunity.

“People who live farther away can now enroll,” she says. “It’s expanded our reach.” The bootcamps have also tacked on a couple of extra months of learning, to provide more time for students to solidify their skills. “People completing a course in April were finding it’s not the best time to enter the job market.” Israel’s universities are doing their part to address the engineering shortage, as well. At Hebrew University, the number of incoming students who have declared computer science as a major increased from 200 in 2012 to 500 students for the fall 2018 semester.

“We did it without decreasing the entrance threshold,” says Yair Weiss, dean of the school of computer science and engineering.

Hebrew University’s growth is having a ripple effect outside the school. This can be seen in Jerusalem’s booming high-tech sector, which has nearly doubled from 200 start-ups in 2012 to 356 at the end of 2019, according to figures from the Central Bureau of Statistics.

Perhaps the most famous of Jerusalem’s start-ups – and one of Israel’s biggest “exits” of all time – is Mobileye, which makes software and hardware for autonomous vehicles and was acquired by Intel for $15.3 billion in 2017.

“Mobileye was not only founded by a professor from our department,” Weiss points out, “but all of its chief scientific officers are Hebrew University graduates.”

The number of students nationwide in high-tech majors is on the rise. For the first time ever, in the 2017/18 academic year, there were more students registered to study engineering than social sciences – 18.3% compared with 17.9%. And one out of every four undergraduates in Israel is signed up to study either engineering or computer sciences.

“If you’re into start-ups, you should come to Tel Aviv. It’s that simple.”

That was the opening of an Internet ad campaign by Tel Aviv auto-tech start-up Nexar, the founding member of an alliance called BETA – “Be in Tel Aviv” – which seeks to recruit tech talent from overseas and now includes a half dozen other Tel Aviv start-ups.

The BETA alliance promises a relocation bonus of up to $20,000, a yearly round-trip flight, free housing for the employee’s first six weeks in Tel Aviv, a paid cell phone, a Hebrew tutor and more.

That was before the pandemic shut down flights from overseas and required visitors to quarantine for two weeks, of course. Moving forward, though, there has been an uptick in interest, particularly among American Jews, in moving to Israel.

Aliyah organization Nefesh B’Nefesh reports that almost 800 people applied to immigrate in May 2020, up from 424 the year before, with an average age of 28. The organization says that interest in aliyah in May was the highest it has recorded in its 18 years of operation.

BETA is addressing the fact that, in contrast to Silicon Valley which employs workers from multiple nationalities, Israel has traditionally relied on home-grown talent or Jewish immigration. BETA aims to sell Tel Aviv as an attractive secular city along the Mediterranean with a thriving arts scene and great restaurants.

BETA is not the only program helping new immigrants find their place in the Israeli tech scene. Originally from Uruguay, Dov Zales credits Gvahim’s TheHive accelerator for providing him with the tools and connections to make it in Israel. Today, Zales is the CEO of Snappers, a live-stream-on-demand service for bloggers and freelance journalists that counts well-known brands such as CNN as clients.

BETA and Gvahim are able to take advantage of new rules launched in 2018 that streamline the process of obtaining a work visa, a process that previously took months. Now, with the Israeli government recognizing the need to tap into the global talent pool, if a company has identified an employee it wants, the company applies for – and receives – the visa in six working days, including a parallel work permit for the spouse of the foreign IT worker.

Nexar CEO Eran Snir estimates that only 1% of the Start-Up Nation is foreigners. “If we could grow that to 5%, it would make a huge impact. That would mean another 10,000 experts coming every year.”

The IIA – while not the only group working to bridge the engineering gap – has set perhaps the clearest goals. Over the next decade, the IIA proposes to:

• Increase the number of college students with technology-oriented majors by 40% (potential gain: 1,500 per year);

• Foster technical expertise through coding bootcamps (potential gain: 1,000 per year);

• Recruit returning Israelis, new immigrants and those with work visas (potential gain: 1,500 per year); and

• Boost the number of ultra-Orthodox and Arab-Israelis in the workforce (potential gain: 1,000 per year).

At the same time, the gap between open tech positions and workers available to fill them may be narrowing because of the corona crisis. “If the demand contracts a bit, that won’t be a catastrophe,” the IIA’s Krieger-Carmy tells the Report. Even with a reduction, “this will remain a market of demand for people with tech abilities.” Maty Zwaig agrees. “We expect the gap to be temporarily reduced, but the need for experienced people will continue.” For certain professions, like cybersecurity, data analysis and AI, “the demand will increase significantly,” Zwaig says, perhaps even “deepening” the tech worker shortage.

Indeed, while some companies may have slowed hiring, it hasn’t stopped entirely, especially for higher level positions.

“With more people moving around [because of the pandemic], it’s now possible to hire people who might not have been available before,” Krieger-Carmy says. “We’re hearing of some companies that are actually stepping up their headhunting efforts and are seeing more applicants for jobs that in the past they had a hard time filling.” When the economic dust from the coronavirus fallout settles, will the programs designed to bring under-represented populations into the tech space still be necessary?

Zwaig says yes – and more than ever.

“We need to be focused on training for those less represented populations,” she told Globes, “so that the gaps we have been able to catch do not catch us at the end of the crisis more severely than before.”

Brian Blum is a Jerusalem-based journalist. His book ‘TOTALED: The Billion-Dollar Crash of the Startup that Took on Big Auto, Big Oil and the World,’ is available on Amazon and other online booksellers. brianblum.com

Dr. Shlomo Ben-Hur is an organizational psychologist and professor of leadership and organizational behavior at the IMD Business School in Switzerland. His most recent book is ‘Leadership OS: The Operating System You Need to Succeed’