The percentage of Arabs in the hi-tech industry is much lower than their percentage in the population. However nowadays more young Arabs are studying scientific and technological disciplines and integrating into the industry. We must strengthen this trend to reduce the economic disparities and the shortage of employees in the hi-tech industry

We wish to thank Yael Mazuz Harpaz and Ella Eyal Bar-David from the Employment Regulation division at the Ministry of Economy and Industry, as well as Zohar Gendler, CEO of NGT3, Smadar Nehab, founder and CEO of Tsofen, Dror Gonen, CEO of Galil Software and Itzik Frid CEO of Takwin Labs, for their contributions to this chapter.

The percentage of Arabs employed in hi-tech is 5.7% and the percentage of Arabs employed in the R&D sector is only 2%. These numbers are significantly lower than this demographics’ percentage of the population which is 21%, but they represent an increase from 2008, when these rates were 4.9% and 0.5% respectively[1]. Today, cities like Nazareth are already showing the signs of change: the city is a base to more than twenty hi-tech companies – from large companies, such as Amdocs and Broadcom, to early-stage startups. In addition, the NGT3 technology incubator has been in operation since 2002, and is contributing further to the growth of the local ecosystem, by supporting 34 companies, out of which 15 were established by Arab founders. To complete the vibrant picture there is also the nazTech Accelerator, as well as many conferences and other events held in Nazareth, including MobileMonday™ – an open international platform of mobile industry developers that share ideas and discuss the hottest trends in the field. “When we started in 2008 the hi-tech subject was very foreign to Arabs, almost a curse word,” says Smadar Nehab, the co-founder of Tsofen. “However, a huge change has occurred since then in Nazareth and in Arab society in general. Today, at the end of 2015, there are already about 700 Arabs in Nazareth who work in hi-tech.”

These signs provide hope that the Arab sector is on the path of integration in one of the most dynamic and rewarding sectors of economy. However, the entry level for a young Arab man is usually lower than that of his Jewish counterparts, and young minorities will continue to face complex challenges until they are integrated fully and seamlessly into the Israeli hi-tech labor market.

 

It’s a Bumpy Road

The dry numbers pertaining to the actual supply of skilled personnel, which indicate the potential for employment of Arabs in the hi-tech industry, are evidence of a lower starting point in the Arab sector. The Arab sector has seen a decline in the number of students completing high school with four-to-five study units in mathematics. In 2013, the percentage of graduates with five study units in mathematics in the Arab education system decreased to 7% of all the students in the sector, which is a decrease of two percentage points in three years[2]. These students usually study an additional science subject; they are the potential applicants to higher education in the fields of science and engineering, and ultimately, part of the future R&D workforce. This decline is a worrying trend with an impact that will increase as the Arab population's share in the general population grows. At the same time, it should be noted that the downward trend in mathematics study is also present in the Jewish education system.

Further down the road, we encounter a low number of Arab students in the engineering and computer science fields. Although there is an opposite trend here, and the overall number of students in engineering and computer science has been rising steadily since the early 2000s, there are still just a few hundred Arab students. In 2014, the number of graduates from the minority sectors in the above-mentioned subjects was approximately 430, more than double the number of graduates in 2000, which was about two hundred[3]. In other words, in 2014 they accounted for about 5% of graduates with engineering or computer science degrees. Nevertheless, we can see that the growth trend continues and the number of students, who in 2014 began studying computer science and engineering, rose to 9%[4].

The ones that managed to overcome the academic challenges are looking forward to quickly integrating into their desired profession in a hi-tech company. However, at this point, there are notable differences between candidates from the minority sectors and their Jewish counterparts. In general, we can say that a Jewish candidate is more likely to have been exposed to the hi-tech industry early in his youth, as well as to have personally encountered role models in the field, aiming for the profession from a young age. Many of those who constitute the potential workforce of hi-tech industry will also have been exposed to it during their military service; they will serve in technological units, receive high-quality training and engage in actual customer-oriented technological development under time pressure and high standards of quality. Thus, during military service, they will acquire relevant practical and technological work experience and make invaluable connections, especially in an industry where the recruitment is largely based on the “refer a friend” method.

The described above early benefits are usually not available to a minority candidate. In addition, minority candidates are at a disadvantage due to their relatively young age at the entry into the labor market, as well as their geographical remoteness from the leading hi-tech centers, and the cultural differences in the workplace. When attempting to mobilize minorities onto a hi-tech career path, educational and government bodies encounter an even wider challenge. There is a level of risk-aversion behavior that characterizes low-income populations. It results in the encouragement of children to choose a profession that ensures a steady job for years, whereas working in hi-tech may bring with it employment instability. Changing this approach can be done through the experiences of young Arabs as part of entrepreneurship and leadership programs, such as youth movements, or entrepreneurship centers starting from high school and afterwards. In addition, the success of minority individuals may serve as an example and inspiration for other young people and make a difference.

As a result of these and other differences, some of the graduates that have the potential for integration into the hi-tech sector, are unable to find jobs appropriate to their training. Previously, only 20% of minority graduates with degrees in scientific and technological fields were able to find a position in the profession they studied, and about 45% of them worked in teaching and various others occupations[6]. This was a waste of potential for the hi-tech industry, particularly in view of the shortage of skilled manpower needed for this sector. Nowadays, according to the evaluation of Tsofen, which is a non-profit that deals with the integration of Israeli Arab citizens in hi-tech, the hi-tech industry is employing about 2700 Arabs in research and development, which represent approximately two percent of R&D workers in the industry. On the one hand, this is a very small percentage, given that Arabs make up about 21% of the population. On the other hand, this number also represents significant progress, in view of the fact that in 2008 the number of Arab R&D personnel was estimated at only 350 employees, about 0.5% of all R&D employees. This means that within seven years the number of Arab employees in hi-tech jumped by more than seven-fold, and their overall share have increased by a factor of four.

 

Government programs aimed at shattering the “glass ceiling”

The government currently operates a number of programs designed to help Israeli Arabs to integrate into the labor market, under government resolution no. 4193 of 2012, which mandated that improvements must be made to boost the economic growth potential and reduce the inequality level by raising the employment rate amongst minority sectors. In particular, the government operates a variety of programs dedicated to the integration of minorities in the hi-tech industry, based on the recognition of the particular challenges they face, as well as on the desire to reduce the gap between minority sectors and the general Israeli population. In addition, these programs are aimed at the need to expand the pool of potential candidates that the hi-tech industry requires.

The Israel Innovation Authority (formerly Office of Chief Scientist) offers two primary tools designed to support the government’s aim, both targeted at entrepreneurs and operated by the Authority’s Early Stage division. The first tool is the minorities track in the Early Stage Fund, which is designed to help entrepreneurs from minority sectors to overcome the difficulty in raising capital in the private market. This unique track offers young minority-owned companies a variety of preferential terms in the form of financing up to 85% of their projects (compared to 50% financing of companies in the standard track).

The second tool is the technological incubator in Nazareth. NGT is a peripheral area incubator[7] established with the goal of making the hi-tech industry accessible to minorities. The incubator, founded by private investors from the United States, Spain and Israel, is working to foster young companies in the life sciences field under the Technological Incubators program's franchise. The Israel Innovation Authority finances 85% of the cost of incubator companies’ R&D projects, and the incubator invests 15%, as well as providing each company with professional and business support. Since its establishment in 2002, the NGT incubator has supported 34 companies, 15 of which were founded by a minority entrepreneur, and 4 companies have been established based on a partnership of Jewish and Arab entrepreneurs.

The Employment Regulation division at the Ministry of Economy and Industry also operates two major programs to promote employment in the Arab society. The Imtiaz program refers young minorities to academic studies specializing in disciplines in high demand in the Israeli labor market, including engineering and computer science. Since beginning operations a year and a half ago, the program has directed about 1000 young people to high-demand professions. The second program – the program for integrating university graduates from the Arab sector in the hi-tech industry – assists minority practical engineers and graduates with academic degrees in technology. The program aims to integrate 1000 such graduates in quality positions in the hi-tech industry within three years. The program, run by the franchisees Tsofen and IT Works, has been operating all over the country since early 2015, and it includes technology training courses, as well as “soft” training in preparation for the employment world. In addition, the participants are provided with assistance in finding jobs in hi-tech companies such as Intel, Galil Software, Amdocs, Mellanox, Check Point and others. During the first year of operation the program assisted in the placement of over 260 Arab university graduates in quality positions in the hi-tech industry.

The Investment Center at the Ministry of Economy and Industry is working to create high-quality jobs in the areas of national priority. To this end, it operates a number of tracks that provide assistance to companies building new operations or relocating their activities to the above-mentioned areas, and paying their employees more than twice the average wage. Specifically helpful is the Director General directive no. 4.18 for the establishment of cyber companies. These assistance tracks are contributing to the strengthening of employment opportunities in Israel's peripheral areas in general, and within the Arab population of these areas in particular. Moreover, these days the investment center is launching a supporting track in order to expand the potential of minority candidates for employment in the hi-tech industry, by participating in the financing of the employment of Arab students and graduates with scientific and technological degrees, as interns in hi-tech companies (Director General directive no. 4.20).

 

Vigorous activity – not just in the government...

Alongside government programs, there is also intense activity in the private sector. In 2011, the Ma’antech project was launched by former Israeli President Shimon Peres and Cisco, in cooperation with NGOs Kav Mashve, Tsofen and Appleseeds Academy. As part of the project, more than 25 hi-tech companies have committed to diversifying their employee base, and have begun to recruit and hire more minority employees. In addition, as mentioned above, hi-tech companies are starting to arrive to Nazareth and open centers near this city. The geographical accessibility allows the obstacles of distance and lack of adequate transportation to the large hi-tech centers to be overcome. These companies enjoy not only the availability of well-educated and highly-motivated manpower, but also the benefits provided by the state to companies that employ minorities and companies located in the Israel's peripheral areas.

One of these companies is Galil Software, which was established in 2008 in Nazareth with the initial support of the Investment Center at the Ministry of Economy and Industry. It is an outsourcing company that provides QA and software development services. The company maximizes the benefits offered by the combination of a high quality and educated workforce with relatively low operating costs, in order to act as an attractive and accessible alternative to outsourcing abroad for Israeli hi-tech companies. Galil Software provides services to leading companies in the hi-tech industry, thus assisting its employees in the acquisition of practical experience and integration into the labor market. As proof, every year, 20-30 of Galil Software employees leave the company and go to work in companies such as Google, Cisco, HP, Intel and Mellanox. The company also benefits from a cultural diversity among its employees – Jews, Druze, and Arabs, Muslims and Christians, villagers and urban residents – which, according to the Galil Software CEO, Dror Gonen, encourages the open-mindedness essential to working in hi-tech.

At the same time, additional private enterprises are accelerating the development of hi-tech in the Arab sector. One of them is Takwin Labs – a technology incubator in Haifa, founded by Chemi Peres, Imad Telhami and MK Erel Margalit, and intended solely for the projects of minority entrepreneurs. According to the CEO of the incubator, Itzik Frid, Takwin Labs aims to identify the best entrepreneurs, provide them with the right tools and empower them so they can reach international success and become a part of the “Startup Nation.”

Civil society is also taking an active part in the integration of minorities in the hi-tech industry. The two most prominent NGOs engaged in this field are Tsofen and IT Works that operate, among other things, a variety of programs for the Ministry of Economy and Industry. These organizations specialize in training and job placement of university graduates from minority sectors in the hi-tech industry. They assist the candidates in acquiring practical experience and confidence in their professional skills, as well as preparing them for job interviews, and bridging cultural gaps. Alongside the training courses provided in different regions of the country, Tsofen holds conferences encouraging employment of Arabs, job fairs for students and other events that present professional networking opportunities. The results are evident – since its establishment Tsofen has found hi-tech jobs for about 600 minority candidates. Moreover, the 8200 Alumni Association has recently launched a new initiative to support novice hi-tech entrepreneurs from the minority sectors, in collaboration with the business incubator in Nazareth.

 

Stimulating the transformation

The main objectives of all the activities described above is to support a trend still in its infancy, to overcome the years of mistrust and despair of the ability to integrate, and to create a critical mass of change. In fact, this is a rare combination of two national goals: solution to the shortage of skilled manpower, based on the unrealized potential of minority sectors whose part in the general population is continuously growing, as well as reduction of socio-economic gaps between different sectors of the population and broadening of opportunities for economic welfare and social mobility for minorities.

It is time to accelerate this trend. There is growing awareness among the minorities that the hi-tech sector offers financially rewarding careers and lucrative entrepreneurial opportunities, and the number of students in science and technology is on the rise, as the demand for qualified employees continues to grow. Therefore, in the last few years the government has provided a number of incentives and specialized tools to support and accelerate these processes. By joining forces, an alliance of government, private capital and civil society can overcome future challenges, creating value that all can share.

 


[1] General employment rate in hi-tech companies is in accordance with the CBS data (not yet published); R&D employment rates are in accordance with Tsofen assessments.

[2] Data of the Ministry of Education. According to the CBS publication “Examinees Entitled to a Matriculation Certificate and Students in Scientific-Technological Subjects in Israel 2009/10 – 2014/15,” the percentage of examinees entitled to a matriculation certificate with five study units in mathematics in the Arab education system is down to 14%. The reason for the discrepancy in the figures lies in the fact that the Ministry of Education calculates the percentage of graduates with five study units in mathematics among all Arab students, while CBS calculates their percentage only among those eligible for matriculation.

[3] CBS data processing by the Innovation Authority, academic degree recipients from 1985 to 2014; the data includes the number of Bachelor's degree recipients in engineering and architecture, mathematics, statistics and computer science.

[4] In the Technion the percentage of Arab students that began their studies at the Faculty of Computer Science in 2014 stood at 25% – a rate higher than their percentage in the Arab population. However, the dropout rate among Arab students is commonly higher than the general dropout rate.

[5] The numbers are rounded. Figure sources: Israel’s population: CBS; Eligible for matriculation: processed data of Education Ministry, eligible for 5 matriculation study units in mathematics in 2013; Student rate: CBS data processed by the Strategy Division of the Innovation Authority, new students in 2012, 40 or younger by study fields, religion and sex; Graduates with academic degrees: CBS data processed by the Strategy Division of the Innovation Authority, graduates with academic degrees in 1985-2014; Rate of R&D employees: assessment of the Tsofen non-profit.

[6] Ministry of Economy and Industry, Research and Economics Administration, the Employment of Arab Academy Graduates in Israel in 2011.

[7] Peripheral area incubator receives preferential terms in the form of participation in the operating budget of the incubator, as well as a larger base budget for individual projects.