Shallow labour pool threatens Israel high-tech boom

In the high tech hub of Tel Aviv, where companies have been responsible for ground-breaking advances like the USB stick, Or Offer never thought it would be hard to find workers for his fast-growing Internet data firm SimilarWeb.

But an alarming lack of engineers, technicians and even doctors, which is jeopardizing Israel's place among the world's technological elite, sent him looking abroad. "There's a brutal fight over skilled employees," said Offer, whose company has quadrupled in size in the past two years, hiring over 200 new people. To boost the technical side of the business that analyzes website data, he set up a development center in Ukraine.Without the huge populations of emerging markets like India or the vast network of foreigners who call Silicon Valley home, Israel's high tech enterprise seems to have dried out the well.

Over the next decade it will face a shortage of about 10,000 engineers and programmers in a market that currently employs 140,000, according to the country's chief scientist, Avi Hasson, who is the government's point man on sustaining innovation. "The issue of skilled and available manpower is the main barrier to growth and competitiveness in the field of high tech," Hasson said.

The industry, which sprouted from an advanced military and flourished with state backing, became a major growth engine and investment magnet for Israel.

Multinationals like Apple, Intel and Google have been eager to snap up local start-ups and set up research centers. High-tech goods and services now account for 12.5 percent of Israel's gross domestic product and half its industrial exports.

Younger firms are noticing the skills problem as they compete for workers with the global giants operating in Israel. "There are a lot of international players around, coming in with deep pockets. Facebook, Google and others can make offers 50 percent above market and equity packages that are very lucrative," said Nir Zohar, president of website-designer Wix.com, which is known for its big-budget Super Bowl ads. "It's becoming harder and harder with the amount of effort you need to put in to recruit." Since taking office in 2013, Bank of Israel Governor Karnit Flug has been sounding the alarm over the threat to Israel's pool of "human capital". An aging population, lagging education and poor integration of Israel's Arab and ultra-Orthodox Jewish minorities in the labor market is making the workforce less effective, she said in a May speech. Combined, Israeli Arabs and ultra-Orthodox Jews make up about 30 percent of the population.