Despite a recent fall in hiring in the industry, officials and insiders claim that the long-term prospects of Israel’s renowned hi-tech industry have not been harmed by the global economic recession and local political unrest.
According to official statistics, the tech sector accounts for about 18 percent of Israel’s GDP, employs 12 percent of the country’s workers, earns almost a third of its income tax, and accounts for half of its exports.
According to a recently released report, global inflation and rising interest rates have led to a decline in Israeli tech jobs in 2022. In the first quarter of 2023, the number of hirings in the industry fell for the first time since 2008 by 0.2 percent.
However, according to Dror Bin, director of the Israel Innovation Authority (IIA), which created the research in collaboration with the Start-Up Nation Policy Institute (SNPI), the “stagnation” in tech hiring had not yet had a negative effect on Israel’s GDP or exports.
According to him, the future of Israel’s tech industry—for which the nation is sometimes referred to as “Startup Nation”—is “more of a concern.”
According to a research from last month, one in four Israeli technology companies stated they had stopped hiring altogether, and close to a third indicated they were “reducing recruitments” at that time.
Controversial legal amendments that the Israeli government implemented in January, which led to widespread protests, some of which were led by leaders from the tech sector who claimed they harmed the nation’s democracy, served to heighten worries about the adverse effects of the global market on Israel’s economy.
As negotiations between his right-wing coalition and the opposition continue, Prime Minister Benjamin Netanyahu’s government has suspended its attempt to pass the legislation it claims is required to rebalance power between the government and the court.
‘Prepare the talent’
According to Uri Gabai, the executive director of the SNPI, a non-governmental organisation that supports Israeli technology, the political “uncertainty” is “very bad for the Israeli economy, for the hi-tech” sector.
However, he continued, “there are encouraging signs that the world’s roller coaster will stop, and we’ll get back to stability.”
Data, according to IIA’s Bin, showed that the legal situation had little immediate impact on Israel’s economy.
He stated, “I don’t see businesses moving the operations outside of Israel. We definitely observe a trend where more business owners opt to set up their legal company outside of Israel while keeping their operations there.
But he pointed out that hazards still existed due of the political climate. “Investors don’t like uncertainty, especially not when you’re in the middle of a global slowdown,” he said. Therefore, something might be seen in the upcoming quarters.
According to Maisam Jaljuli, CEO of Tsofen, an NGO that aims to develop digital hubs in Arab Israeli communities and integrate Arab engineers into tech companies, the slowdown’s effects were “very much felt” by the minority’s Arab population.
The number of Arabs her organisation assisted in finding tech jobs dropped from 500 in 2021 to 300 in 2022 and less than 60 so far this year due to the firing of hundreds of employees, according to Jaljuli, who spoke to AFP.
When the crisis is over, she continued, “we need to be ready. Look at the jobs that are needed, and get the talent ready.”
Demand and hunger
Even established tech behemoths felt the heat, albeit in different ways.
Check Point Software, an Israeli cyber security business, is still hiring new employees, according to Gil Messing, head of product incubation.
However, he added, “our customers, who are businesses of all sizes from all over the world, determine how quickly we grow.”
You can easily see how businesses are delaying initiatives and switching priorities as a result of the market slump. They are more frugal with their spending, he continued.
Despite the slowdown, the IIA’s Bin was sure that the Israeli IT sector, which has shifted over the years towards innovative technology to address difficulties in areas like agriculture, food, and the environment, will not be badly harmed in the “mid- and long-term”.
“The world needs technology-based solutions for those problems,” he declared.
“This ecosystem of entrepreneurs, investors, or researchers is very capable and can provide the solutions to this hunger and demand, so I’m optimistic.”
Bin highlighted that the sector had recovered “stronger than before” from previous crises and slowdowns.
“I sincerely hope and believe that this will also be the case this time.”