In recent years, the popularity of non-academic programs seeking to train employees with no suitable background for working in the high-tech industry has grown. Evidence of the flourishing of these programs can be found in the announcement in May by the Israeli company Masterschool, which trains students online in subjects such as software development and data analysis, for a large fundraising of $ 100 million.
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However, according to data from the High-Tech Human Capital Report for 2021-2022 of the Innovation Authority and the Start-up Nation Policy Institute (SNPI) published today, a relatively low rate of only about 13% of high-tech technologists has been accepted for their first job in the industry in recent years. The vast majority of employees in their first technological position in high-tech, close to 80%, entered it the traditional highway – after academic studies.
According to the report, while employees in software, hardware and algorithm positions clearly tend to have academic training, more employees in IT and QA (testing) positions come through extracurricular training. Employees in product, project management and data positions usually hold academic degrees, but only about a third of them have studied degrees in high-tech professions and the rest have studied other fields.
The report by the Innovation Authority and SNPI, which is based in part on a large sample of profiles on the social networks of high-tech workers, also reveals that not all graduates of academic studies are equal when it comes to entering technological high-tech positions. Although the number of high-tech graduates in universities and colleges in Israel is similar, there is still a significant gap in the rate of admission to high-tech technological positions from these two types of institutions. Of the graduates who entered the high-tech technology professions, over 60% came from universities, compared to only 36% from colleges.
“This figure indicates the difficulty of college graduates to enter a technological position in high-tech and apparently a high proportion of these graduates are integrated into non-high-tech technological positions or non-high-tech positions,” the authors of the report write.
The research and development centers of multinational companies as well as large Israeli companies with over 500 employees are particularly likely to prefer university graduates over college graduates. On the other hand, the chances of college graduates being accepted for a technological position increase in medium-sized Israeli high-tech companies (201-500 employees).
The report reviews the bubble days
The current human capital report refers to the year 2021 and the beginning of 2022, the peak period of Israeli high-tech and some would say the days of the big bubble. In the last two months, since the report closed, the direction of the market has changed significantly, as the volume of fundraising of start-ups has decreased and the IPO market that flourished in 2021 has closed. Therefore, some of the findings presented in the report represent a reality that has already passed from the world or at least is undergoing rapid change.
For example, in the second half of 2021, the layoff rate of workers in the high-tech industry was 2.6%, the lowest in the last decade. In contrast, the proportion of employees who resigned from their positions in high-tech was relatively high, standing at 10.1% at the time. These workers probably left because they received offers to improve conditions at other companies. According to the report, as of April 2022, there were 32.9 thousand open jobs in Israeli high-tech, a record for recent years.
These data indicate how in the high-tech industry a “labor market” has existed in recent years, when the demand for manpower exceeded the supply. However, this reality is in the process of changing, as in recent months more companies have reduced recruitment and laid off employees in light of the decline in investments in start-ups and the fear of entering a global recession. It is still too early to know how profound the change taking place these days will be.
The danger based on growth companies
The peak year in high-tech in 2021 led to a significant increase in the number of industrial workers, which increased by 12% last year, an increase of about 30,000 workers. Most of the growth came from Israeli companies, which increased by about 14% in the number of employed persons, compared with a 5% increase in the number of employees in foreign development centers in Israel. Of the local companies, the fastest growing sector in manpower was that of growth companies, which grew by 30% last year. Growth companies include private unicorns with a value of over $ 1 billion and companies issued in the last decade.
The strengthening of local growth companies has had significant benefits, as these companies employ not only technology workers like foreign development centers, but also a relatively high proportion of non-technological workers (like sales and marketing people and lawyers, for example). However, as the authors of the report point out, these relatively young growth companies are also more sensitive to market volatility and therefore the reliance of Israeli high-tech on them embodies a certain risk. This risk has been realized in the last two months, with many of the companies announcing the dismissal of dozens and hundreds of employees being the same growth companies.