The number of unemployed Israeli tech workers is surging to a historic peak, standing at approximately 16.3 thousand people as of this past May, compared to about 7.7 thousand people in 2019. This is according to the tech report of the Employment Service published yesterday.
The majority of unemployed tech workers (about 60%) according to the report are relatively new workers in the industry holding a seniority of up to four years of experience, while about half of them (31% of all unemployed) have a seniority of up to two years only (juniors).
The difficulty of entering work in tech among juniors has been known and discussed within the industry for several years, but the report's data show that their proportion actually decreased among job seekers compared to 2023 – when they constituted about 74% and 49%, respectively, according to the years of seniority.
The surprising figure in the report is the one pointing to the more experienced workers, whom the Israeli tech sector is thirsty for – and especially in the fields of deep tech. According to the Employment Service data, unemployment among this group more than doubled itself: Since 2023, the number of unemployed individuals holding a seniority of 5–8 years in tech jumped by about 138%, and among those with a seniority of over eight years, it even jumped by about 181%.
The tide of unemployment in the innovation sector led to a jump in its share among all sectors of the economy to about 11% compared to about 5.78% in 2019. Alongside this, the Employment Service notes that the high growth rate of the sector up to the point examined, which puts the number of workers in the industry at about 404 thousand, compared to about 213 thousand in 2012 and about 396 thousand in 2023, should also be taken into account when examining the number of unemployed in relation to other industries.
However, the Employment Service attributes the tide of unemployment in tech mainly to the emergence of AI and notes: "Although the increase in the number of job seekers in tech began even before the launch of ChatGPT, a high correlation was found between the expansion of the use of artificial intelligence and the continued increase in the number of job seekers in the sector.
"The data show that at the beginning of 2022 and until the launch of ChatGPT (in November 2022), the rate of job seekers in tech stood at only about 4% of all job seekers registered with the Employment Service; since then their proportion has nearly tripled – throughout the period following the launch of ChatGPT, their rate stands at about 9%, and today it already reaches about 11% of all job seekers."
Technology companies are indeed exploiting the AI buzz to streamline ranks, among other things by laying off workers, but there are those who see the linking of the current rising wave of layoffs to the correlation of the ChatGPT launch or to the emergence and beginning of AI implementation as statistical simplism, since correlation does not imply causation.
Dr. Tal Aspir, partner and manager of the AI lab of the BDO consulting and accounting firm, told Walla Money: "When coming to examine the innovation industry in general and the wave of worker layoffs in particular, one must examine each sector operating within it on its own merits and check whether the downsizings in that sector stem from other processes that occurred during those years, such as the trend of rising interest rates that affected capital raising, the weakening of the dollar against the shekel that reduced the financial oxygen of companies, and a variety of problems that companies have encountered in recent years.
"A look at the fields of defense tech and cyber, for example, presents exactly an opposite trend – high demand for workers and recruitment. So in the macro you might see a decrease, but in the micro you see a movement of manpower from one area to another."
So why did AI specifically become the focus of the industry's arrows? Asfpir: "It is most convenient to turn the spotlight to AI. But studies show that the amount of organizations implementing AI for innovation production lines stands at around 20%. Meaning everyone is playing with it but only a few are truly using it.
"In addition, most organizations are still learning how to use AI tools for the benefit of development, and this I say as an organization that accompanies companies and corporations in introducing these tools. The use of these tools today is still not at its peak but at its beginning, and organizations still have a problem trusting the tools. Therefore, AI tools are mainly supporting tools and not replacements, and the human element is still required for the process.
"The AI, however, is a good target to direct the workers' anger toward. After all, until recent years the market was a workers' market, and companies chased workers, among other things to show they are in growth ahead of capital raising or an IPO.
"This process led companies to accumulate surpluses of manpower, which under the weakening of the dollar, the trend of rising interest rates, geopolitical risks, and more – now they are forced to get rid of them. But what will the company say? That it is laying off because it is streamlining? This is after all not something any company aspires to say, because it indicates a problem. So it is easiest to point a finger at AI, and it is a good excuse because it is already a trend, and well-publicized, and experience also shows that no worker argues with the claim because it is not true.
"But this might become a double-edged sword. Since already now, a very sharp drop is felt in academia in enrollment for computer science and information systems. The reason found for this is the effect of the trend and the publications that there will be no work for developers in the future. But after all, it is not that there will be no work, but that the type of work will change.
"Academia is already making the adjustment and teaching how to develop with the help of AI, meaning how developers can empower themselves in cooperation with AI, alongside it. This is a process that does not happen in one day, and against this, the giant companies with corporate products also continue and will continue to develop, but they also add additional capabilities to increase productivity.
"Therefore, it is important to note that AI today is not a replacement, but an empowerment tool for workers. And this is what is indeed changing with its entry – there is a transition of programmers from the low production stage of development to the high production stage and to control. This is also the reason for the high demand for workers with knowledge in AI. Because this is what employers need today – workers who will work with and alongside AI, and not AI that will replace workers."