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How high-tech can enhance social mobility

By nearly every topline metric, Israel’s high-tech sector is an unequivocal success story.

Israel continues to punch above its weight on Wall Street, where the accumulated market capital of Israeli companies tops $300 billion. In fact, Israel places third in the number of companies listed on the NASDAQ, while it boasts 79 Unicorns (companies valued at over $1 billion). In 2021 alone, Israeli tech firms raised over $22 billion in capital and over $80 billion in mergers, acquisitions and initial public offerings. Staggering numbers by any measure.

Yet while Israel’s high-tech firms have a proven track record of excellence, the industry’s success has presented a new set of challenges. As the tech sector has grown, Israel faces the challenge of ensuring that its benefits are felt by society as a whole. In particular, we must ensure that high-tech acts as an integrated engine of the overall Israeli economy, lifting up the quality of life of all citizens.

This has not always been the case. Instead, in the minds of many Israelis, high-tech is an engine of deepening societal gaps, not one of economic mobility. This viewpoint was recently articulated through sketches on Israel’s popular comedy show “Eretz Nehederet”, which took aim at the rising prestige of service in the military’s tech units at the expense of combat units. The sketches went viral because they struck a nerve.

In fact, despite the discussion about Israel as the “Start Up Nation”, only ten percent of its workforce is employed in the high-tech sector, while the economy is experiencing a serious shortage of highly skilled high-tech workers.

Tackling this shortage must be a goal for both the public and private sectors, who must work together to ensure the necessary investments in human capital are being made. Energies should be focused on improving our K-12 education system, so as to ensure that our young people are given the necessary skills to thrive in the modern economy. Critically, these skills should be taught to students in every high school, across all communities, representing an important step in overcoming current societal divides.

High tech companies also have a role to play in reimagining education as a lifelong endeavor. In today’s rapidly changing technological landscape, firms must provide their workforce with the necessary skills and training to ensure they continue to develop and progress throughout their career.

While it is imperative to expand our high-tech labor force, it is critical to keep in mind that the vast majority of Israeli workers are not employed by high-tech companies.

Policymakers must think strategically and creatively about ways to integrate high-tech with other sectors, leveraging high-tech to increase the overall productivity of our workforce. This can only take place if technology would be implemented in our daily life, something Israel has too often discounted. Ironically, most cutting-edge technologies that Israeli firms develop, are actually sold abroad, without being assimilated into Israel. For example, we excel at fintech, but domestic financial services available to Israeli consumers are lagging behind.

We need to reimagine Israel’s economy as a laboratory for integrating high-tech into daily life. How can it be that Israel leads the work in developing advanced vehicle technology, and yet our workers sit for hours each day in traffic?

The high-tech sector thus needs to partner with factories in traditional ‘low tech’ industries and assist them in their efforts to become better technologically integrated. This would allow them to improve their production processes, supply chains and eventually expand capacities.

Too often, high-tech CEOs do not even think about implementing their technology within Israel, and instead prioritize looking for markets abroad. Much can be done to make Israel the “sandbox” to test innovative solutions, which will improve the quality of life and productivity of the 90 percent of our population not employed in the high-tech sector. In this regard, the Israel Innovation Authority has worked at eliminating red-tape to ensure companies don’t skip Israel as they fine-tune their high-tech solutions.

An additional challenge is convincing start-ups to stay and scale up in Israel. While Israel has demonstrated its ability to incubate world-class start-ups, we still have a long way to go to ensure they stay here once they have shown promise. Far too often, once Israeli startups demonstrate their success, they are quick to leave Israel and open operations in lower-cost markets. This represents a significant opportunity cost for the Israeli economy.

If we can convince successful companies to keep Israel as their base of operations and the hub for their business, sales, customer-support and development teams, there will be a significant multiplier effect for the economy as a whole, and for the ability of the tech sector to enhance social mobility. With so much untapped potential beyond Israel’s big cities, and the new work-from-home reality, companies can open local branches or distance work centers which enable their workforce to be spread out all over the country.

Israel’s high-tech sector is rightly a source of national pride. But as we press into a new decade, we cannot rest on our laurels. Israel’s public and private sectors must work together to press home our advantage and make strategic long-term investments to ensure Israel remains at the forefront of global high tech. These investments will be crucial in ensuring that our tech-driven economy is one that lifts up our citizens and reduces the gaps in our society.

About the Author
Dror Bin is CEO of the Israel Innovation Authority, an independent public entity that operates for the benefit of the Israeli innovation ecosystem and Israeli economy as a whole.
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