As the war continues and the budget deficit widens, hundreds of cuts to Israel’s state budget include programs to increase employment opportunities for Arab, Druze and Haredi communities in the technology industry.
The programs reduced by the Ministry of Economy and Industry include subsidizing the wages of Haredi, Arab and Druze employees in companies in Israel by NIS 43 million. The first program subsidizes 25-35% of the salary in the first year and 15-25% in the second year for companies that employ Haredi, Arab and Druze, people with disabilities and unemployed young people. The order was canceled a few weeks ago, so new applications cannot be submitted.
The second program supports the salaries of entry-level employees in the high-tech sector from the Arab community and creates an incentive for tech companies to hire them. In the program, the state participates in support of up to 30% of the cost of the salary for a period of up to 18 months, with employers who take on more entry-level employees receiving special bonuses. Globes learned that this program has been reduced by 60% from the already low annual budget of NIS 15 million to NIS 6 million. In addition, the support period has been reduced to only one year, making it less attractive to employers since in the first year of work, the employee does not reach full productivity.
Jobs will move abroad.
“Instead of the state realizing that this is an economic tool that produces a high return on investment, increases the number of jobs in Israel and prevents their spread abroad, the state is trying to destroy our way of working,” Rami Schwartz, managing director of the Portland Trust Israel Foundation, which works to promote peace between Israelis and Palestinians, told Globes. He even sent a harsh letter to the Ministry of Economy and Industry demanding that it reconsider the cuts.
The response was unequivocal that the cuts were due to financial constraints. The letter concluded by saying: “We consider it a priority to continue working on additional ways to strengthen the industry.”
“80% of the jobs created last year by Israeli companies were allocated abroad due to cost considerations, and to that I add the political environment and security considerations. We succeeded in convincing companies to open more jobs here through incentives. Now the state is taking this money, which is not particularly large, and which is supposed to contribute to the growth engine of the Israeli economy and provide a very high return, and transferring it to places that are hostile to growth,” Schwartz adds.
According to the Israel Innovation Authority’s 2024 report, the underrepresentation of Arab and Haredi communities in the tech industry persists. Haredi men make up about 1% of tech employees, Haredi women 1.7%, Arab men 1.5%, and Arab women just 0.5%.
According to the Portland Trust, over the past five years the Ministry of Economy has placed 250 young, entry-level tech workers from Arab, Druze and Haredi communities in tech jobs at companies such as Amdocs, Weeks, Monday.com, Fire, and Bagaya. The trust explains that each tech job successfully filled creates between two and six additional marginal jobs, resulting in the creation of at least 800 additional jobs. The trust’s program shows an extremely high employment rate, 92%, with 70% of the training participants being women. Another figure cited by the trust indicates the ability to retain employees who graduate from the training program. After four years, 94% of employees are retained.
Investments pay off
In a 2021 report by Deloitte, the return on investment in various employment programs, including the two currently being curtailed, was examined. The report concluded that these programs “provide economic feasibility for the state’s investment.” Among other things, it found that the rate of return on investment is 40%, “and with the financial benefit from indirect employment, it is 95%.” Regarding the support program for high-tech inclusion, the report found that “the program generates a direct financial benefit of NIS 2.5 for every NIS invested,” i.e. a return of about 150%. The report also stated that “increasing the income channel for program participants allowed for (upward) social mobility of 1-2 deciles.”
The Ministry of Economy and Industry said that “the Budget Department of the Ministry of Finance requested the cancellation of these programs due to financial constraints, and that the Ministry of Economy, through the Investment Authority, would be happy at any time to resume the operation of these programs and others that were also reduced by the Budget Department of the Ministry of Finance.”
This article was published in Globes, Israeli Business News – en.globes.co.il – on July 10, 2024.
© Copyright Globes Publisher Itonut (1983) Ltd., 2024.
