Israel is sometimes referred to as the “high-tech nation” due to its proliferance and success of high tech companies. It leads the global markets in its numbers of high-tech workers, making up around 10% of the country’s workforce, and these workers make some of the highest salaries. However, all is not well in the industry.
The high-tech industry has recorded a wave of layoffs reaching approximately 2,500 workers since April. Last Sunday, tech companies Soloto and ID Genomics simultaneously announced the closure of their operations in Israel and the layoffs of 520 workers across both companies. Meanwhile, headlines have been screaming for months about a crisis in high-tech and massive waves of horizontal layoffs in the industry.
However, according to Yaki Halutzi, Chairman of the Union of Cellular, Internet and Hi-Tech Workers in the Histadrut, as well as a signatory to workers' unions in tech companies such as SAP, Ribbon and more, the crisis is not a real surprise. In an interview with Davar, he points out what workers in the field should watch out for, and explains why workers' unions can be the breakwaters that will stem the tide.
"It was expected that the crisis would come"
"There are approximately 300,000 employees in the high-tech industry, and if we are talking about software engineering, in high-tech then we are talking about tens of thousands of employees,” Halutzi explained.
“The phenomenon of layoffs in this employment market is making headlines, creating great buzz around the industry. But suddenly things start to shift and there is a media outcry and we must ask what happened here. Why did the astronomical absorption of money and workers disappear overnight?
So is there a crisis in high-tech?
"There is a global economic crisis unfolding before our eyes. Inflation, interest and recession. In high-tech it is emerging but it is not yet a crisis, although perhaps we are beginning to feel the chill. It can certainly be estimated that at the height of the industry's rise, we believe that the downward spiral could easily be more painful."
What do you mean?
"The capitalist market, of which high-tech is a part, is an inherently unstable market. It is characterized by ebb and flow cycles, it constantly has ups and downs. This is how a free market works. After an upswing there is a downswing which turns into a crisis.
“There has been no balance in recent years, and especially during the pandemic period. This period saw a huge wave of both bringing in billions of dollars and high recruitment of employees. So now it is changing direction, downwards, to a crisis whose depth is not yet known. To think that such a market will only continue to climb up and inflate is illusory."
Halutzi also points out that alongside the waves of layoffs, there is still high demand and vacancies, which further undermines the true "crisis" of the situation.
"Companies are still recruiting. Not long ago, Microsoft said it was interested in taking on about 2,000 more workers in Israel, which is a lot," he said.
In addition, Halutzi says that it is also a matter of “hype.”
"Many of the companies that made the big capital are laying off now because they see others laying off. These are companies that brought in billions, it's not that they don't have the ability to deal with the recession or the drop in investments, and it's not that they don't need the workers.
“Yes, when there is an economic crisis and inflation, there is a halt in investments, that is also part of the situation, but in my opinion, they also fire workers because they do not want to fall behind what others are doing."
"The increase in salaries in high-tech contributes a lot to inflation and cost of living"
There are those who say that the high-tech layoffs are actually good for the economy. Do you think this is true?
"It can be said that the high-tech job market is saturated at this time. Although there is great demand, by and large, everyone who can work in high-tech works in the industry. It's not for no reason that there is a shortage of math and physics teachers.”
Lapid, who is currently interim prime minister, said he wanted "a million Israelis in high-tech.” That’s more than three times the number of workers there are now.
"This is a beautiful ambition, but not very rational. In Israel, in total, there are a little more than 3 million employees. This is not enough workforce to implement this ambition. You have to be reasonable.
“What's more, the massive wave of recruitment and the high demand in high-tech in recent years have already created strange job proportions within the Israeli market. High-tech has a very high demand that has created salaries that are 4-5 times more than the average salary. Such a thing, as it continues to expand and more and more people receive such sums every month, ultimately creates an anomaly in the market."
"For example, the increase in salaries in high-tech contributed, and still contributes, a lot, to inflation and the cost of living. It's very simple: as soon as there are those who can pay large sums, the prices also go up for the rest who can't, for the apartments, for services, for everything. And because these are amounts that are currently irrelevant to any other industry in today's economy, the salaries that others receive are eroded."
"You can't build a country just from high-tech. People within high-tech also need to live in a society, and accept a certain environment. They need a kindergarten for children and need a health insurance fund, and the people who are supposed to provide them and all of us with these services right now don’t even get close to these salaries. We are starting to see struggles for those workers, but they are still fighting for far less than the salary levels in high-tech."
So what is needed is balance?
"The balance will come in one way or another, a more painful or less painful way. But it is definitely not a sustainable situation. Of course, there is also real balance in the economy, which is a decision of the state. A smart country, during a recession, should inject money into the economy. As long as the government puts a lock on their pockets and continues to play the free market without restraint – the crisis will intensify."
"The workers in the organized high-tech companies are less vulnerable"
Could it be that the layoffs are actually related to global-scale competition? Many of the layoffs happened in startups that were sold to huge companies and formed a sort of development branch of these companies in Israel. Why would Google want to develop in Israel when it can do it for a quarter of the price in Taiwan?
“Israeli high-tech has a lot of advantages in the international market which is a competitive environment. True, in India you can have four developers for the salary of one Israeli developer, but the level is not similar at all. If we talk about Eastern Europe, the competition is already more serious, it is indeed more expensive, but it is still in the area of two developers versus just one Israeli developer. Now, with the war in Ukraine, it may be a little more difficult to hire employees and manage centers even for large companies.
"What's more, in terms of time differences, Israel is in the middle between the workers in the East and the customers and the companies in the United States. It's much more convenient for the giant companies to manage this way. On top of that, it's not just Israel in an economic crisis, it’s the whole world.”
What can the workers do against these waves of layoffs?
"Unionize, of course. There is no other way. There will still be ebb and flow cycles, but only through unionization can they be moderated. The workers in the organized high-tech companies are much less vulnerable to the currents of the market in this industry. Precisely following crises in companies, which bring with them a reduction in high-tech and a spillover to other parts of the world, unionization can guarantee workers more certainty and higher occupational security."
Many companies will be very frightened by what you said.
"They don't need to be. At the end of the day, the hi-tech worker is also a salaried employee who brings home a salary that finances a mortgage, and they also ask themself if they will have a job in a few years from now. They need stability."
"When there is a union, even when companies face a crisis, it is possible to deal with it in a shared way, and people are also more loyal to their workplace when they feel seen. The big companies eventually understand this, both in Israel and in the world. To this day, not a single company in which an union was established then left the country or reduced its activity following the unionization.”
Does this trend also match in other countries?
"Yes. For example, in the United States there is now a large wave of unions in large companies, also in high-tech. It is precisely in the United States, the symbol of the free market, that there too, more and more workers and companies realize that this is the only way to deal with these waves."