Olim in firing line of Israeli tech industry layoffs

It was an ordinary morning on 4 January 2023 when South African olah Sarah Cohen* received an email saying that the high-tech Israeli company she worked for was conducting retrenchments. Within the next hour, she and her entire team from all over the world were laid off.

“There had been no inkling that there were to be mass layoffs in the company,” she says. She and her colleagues enjoyed the benefits of a business that showed no signs of struggling. “It was abrupt – a huge shock and very unnerving, followed by sadness to lose the stability and a job that I loved.”

All in all, her company laid off 10% of its workforce – about 8 000 people that day, including about 100 in Israel. It was one of many mass layoffs that Israel’s high-tech sector has experienced over the past 18 months. And, English-speaking olim and job seekers could bear the brunt of the implosion.

“Tech layoffs hitting hard the #startupnation. Thousands of professionals losing their jobs. The picture is certainly not a shiny one. However, expect amazing new ideas and start-ups to rise from this dark moment,” wrote Edoardo Levy, a New York-based expert on innovation and tech investing on LinkedIn at the end of 2022.

“The hi-tech market in Israel, like everywhere else in the world, is going through challenging times, but there’s no reason to panic,” says Udi Wiesner, the chief executive of Israel Tech Challenge (ITC), a non-profit paving the way for olim to join the hi-tech industry in Israel. “The market is going through a correction phase, but this isn’t yet a crisis”.

Wiesner, who has served as a chief executive of start-ups, local, and global tech companies and on boards of directors, was there in the crisis situations in 2000 and 2008. “This time is different,” he says. “There’s a slowdown and about 5 000 to 8 000 employees have been laid off, yet it doesn’t testify to a fundamental problem. The market condition is an outcome of several causes: global inflation, the rise of interest rates, the Russia-Ukraine crisis, China conflicts, and other macroeconomics factors. It’s a pendulum effect on the irrational race to invest in start-ups during and after the COVID-19 pandemic.

“The capital raising and evaluation of companies and money spent irresponsibly by start-ups with no clear business model went way out of line,” he says. “The good news is that not only will start-ups and companies with clear vision, strategy, and good products survive, they’ll be more successful as they’ll have to compete with less irrelevant competitors.

“As for employment, yes it would be more challenging to find a job now. However, there are still about 10 000 to 15 000 vacant jobs for software developers in Israel. Hence, those who have the right skills and experience and more importantly, the networking and introduction to the market, will find a job for sure, it just might take a little longer.

“The strengthening US dollar versus the shekel is good news, as the cost of employment in Israel was expensive for foreign companies, but now it becomes more attractive,” he says. “There’s also some turbulence regarding the planned reforms to the justice system that may affect some investment, but it sounds more frightening than it actually is. If you planned to make aliya and join the start-up nation, it’s still a great option. I’m optimistic that things will get back on track in a relatively short time.”

The Israeli Employment Service says jobless claims among hi-tech workers were up almost 20% in December 2022, with software developers and analysts bearing most of the brunt of job losses with a 19.1% jump in jobless claims. Meanwhile, claims grew by 17.6% among ICT (information and communication technology) technicians and engineers.

According to an article in Globes, “The layoffs that took place in June 2022 aren’t the same as the layoffs taking place in January 2023. If at first the layoffs were in small companies making losses and without a stable business model, the trend has now spread to the entire industry – even to profitable companies that serve huge organisations.”

Cohen had worked at her company for four years as a training developer. “I created courses to teach our internal professional services about our product. It was a valued position but not a business-necessary position, so the business can continue without the training,” she says.

“I underestimated how difficult it would be to find a job in this position at this stage,” Cohen says. There used to be a lot of job openings for this, but now there are far fewer compared even to a year ago.”

Cohen thinks the situation will have an impact on English-speaking olim. “Now that there are so many job seekers flooding the market, companies can insist on a Hebrew speaker. The few that have contacted me wanted Hebrew as well. It’s scarier now that so many of us are competing against each other.”

Local tech industry expert Arthur Goldstuck says, “Sarah experienced a common phenomenon in the tech sector. Companies that are doing well and rewarding investors want to keep doing so as the economy slows down. The easiest way is to cut a large number of non-essential staff. It’s expedient but not strategic, and can highlight where companies may soon find themselves vulnerable due to prioritising short-term gain over long-term strategy.

“We’re seeing some companies increasing their workforce, but it’s a small minority that are willing to be courageous right now and clever about their strategic investments. During lockdown, we saw companies like Amazon hiring tens of thousands of additional staff to cope with the demand. Now, we’re seeing a vast withdrawal of those hires.”

Telfed employment advisor Yael Strasz says, “We definitely have more people contacting us [after being retrenched from the tech industry]. There was a bubble, and the bubble burst.”

She says there’s a difference between olim who have been in Israel for a few years and those who are just arriving. “We’re seeing olim who have been here a while being retrenched, but often they are rehired soon afterwards [at different workplaces], at lower salaries. Because they have Israeli experience and references, Israeli employers are more likely to hire them. South Africans are also known to be hard working employees.”

Those working on the business side of the tech sector, like sales and marketing, “were getting ridiculous salaries” and now these are a more “rational number”. Those with technology backgrounds like engineering, coding, and IT are still being hired if they have experience.

“It may take a bit longer for them to find work, but it’s not impossible. Fresh graduates may have more difficulty finding work. The catch is that they may not be able to get enough experience in South Africa or Israel.” Yet, she emphasises that Telfed is there to help with free employment advice and career counselling.

*Not her real name