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November 28, 2017 1:15 pm

Could Amazon.com’s Arrival in Israel Hurt the Start-Up Nation?

avatar by Adam Abrams / JNS.org

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The Tel Aviv shoreline. Photo: Wikimedia Commons.

JNS.org – When the online retail giant Amazon.com recently entered Israel’s hi-tech ecosystem, it was not business as usual in the “start-up nation.”

As Amazon began attracting top Israeli programmers with aggressive hiring tactics and unusually high salary offerings, industry experts initiated calls for the Jewish state to expand its pool of highly skilled technology talent — a pool that is becoming an increasingly scarce resource, despite the country’s well-known penchant for innovation.

With the opening of Amazon’s new research and development (R&D) center in Tel Aviv in October, the company joined more than 300 other foreign firms — including Facebook, Microsoft, Intel, Google, IBM and Apple — that have set up shop in Israel.

After inking deals in July valued at NIS 37 million ($10.5 million) per year to lease upscale office space in Tel Aviv, Amazon then embarked on a massive local hiring spree.

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In doing so, the company placed unprecedented pressure on Israel’s domestic technology firms to retain their most talented programmers and engineers, highlighting the challenge of sustaining the highly-skilled workforce that is the lifeblood of Israeli innovation.

“This happens wherever there is a large concentration of highly skilled talent, and Israel’s tech talent continues to be outstanding,” said Guy Hilton, general manager of Start-Up Nation Central, an initiative that works to “connect business, NGO and government leaders throughout the world with the people and technologies of Israel that can help them solve their most pressing challenges.”

What’s most important, Hilton told JNS.org, “is whether or not the local talent pool is being replenished in sufficient numbers and with sufficient expertise.”

In its bid to acquire the best and brightest, Amazon has reportedly offered prospective Israeli hires salaries as high as NIS 100,000 ($28,180) per month, and is typically offering salaries of around NIS 60,000 ($16,900) per month with additional bonuses. These offerings are far above Israel’s average wage, even in the Jewish state’s booming high-tech field.

Top programmers in Israel can already earn about NIS 40,000 ($11,370) per month, which is more than four times the average Israeli salary, while the average Israeli hi-tech employee earns around NIS 21,000 ($5,940) monthly, according to the country’s Central Bureau of Statistics.

The pressure created by Amazon’s activity underscores a challenge identified in the recently released annual report of the Israel Innovation Authority. The report notes that while Israel leads the world in R&D and venture capital investments as a percentage of gross domestic product, the country is in danger of losing its status as one of the world’s top high-tech innovators if the shortage of skilled employees in the field is not addressed.

But Hilton said that he sees “good progress” on this front.

“All the stakeholders are moving in the right direction,” he said, “but more needs to be done to include sectors of the population not present in the tech industry in any significant numbers: the haredim, Israeli Arabs, people in peripheral towns and women in general.”

The Innovation Authority reached the same conclusion in its report, and outlined a plan to boost Israel’s current total of 270,000 hi-tech employees to more than half a million by further integrating underrepresented sectors of Israeli society into the field. The report also outlined methods for assisting local start-ups to grow into larger companies.

“Getting this right,” said Hilton, “will benefit the multinationals and Israeli start-ups alike.”

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