Two Economies - One Society: New Survey

A survey of 200 senior executives at high-tech companies an in other professional industries conducted by the Israel Democracy Institute (IDI) reveals that companies in the business sector evaluate the state of Israel’s economy as “fair” to “fairly good” (the average grade was 3.7 on a scale of 1 to 5).

Most of the companies polled (61 percent) believe Israel’s economy is fairly good to very good. An even higher percentage of companies in the hi-tech industries (approximately 72 percent) believe that the state of Israel’s economy is fairly good to very good.

On the other hand, companies believe their own situation is better than that of the state of Israel’s economy. They gave Israel’s economy an average grade of 4, which translates to fairly good, on a scale of 1 to 5. Seventy-five percent of respondents believe that the state of their own company is fairly good to very good (there is no difference between hi-tech and other industries).

Surprisingly, surveyed companies gave the state of the labor market a relatively poor grade — 3.5 on a scale of 1 to 5, or slightly above fair — despite the low unemployment rate. Only half of the respondents gave the labor market a grade of fairly good to very good.

But when companies were asked to evaluate the way government is handling the economy’s challenges, the grades they gave it were dramatically lower.

When it came to improving the Israeli market’s competitiveness, high-ranking officials of the business sector gave the government a grade of 2.4 (reflecting an evaluation ranging between “unsatisfactory” to “fair”) for its work in preparing for the challenge. Prominent figures in Israel's business sector gave the government even lower grades in the following areas, meaning that in their opinion, the government’s preparations are unsatisfactory:

• Training the younger generation (via the school system) for the challenges of the future labor market: 2.1 (73 percent said that the government was not doing enough in that sphere)
• Improving regulation and reducing the burdens involved in compliance: 1.9 (70 percent said that the government was not doing enough in that sphere)
• Training adults for the challenges of the future labor market (professional training): 1.8 (84 percent said that the government was not doing enough in that sphere)

Similarly, when high-ranking officials in the business sector were asked to grade the policies of the various ministries, the Ministry of Finance received the highest grade (2.9, or “fair”), while the Ministry of Labor, Welfare and Social Services received the lowest grade of all (2.2, with 2 meaning “fairly bad”).

We should also note that the Ministry of Education and Ministry of Economy and Industry received unflattering grades. The former received 2.5, while the latter received 2.6 - reflecting a range from “fairly bad” to “fair.”

It addition, representatives of hi-tech industries expressed a higher level of satisfaction as compared with other industries, specifically with regards to the policies of the Ministries of Finance and Economy, as well as the Ministry of Labor, Welfare and Social Services.

The survey’s findings clearly demonstrate how important the issues of education and training are to the representatives of companies in the business sector. When these companies’ managers were asked where the state should use the revenues from the taxes it collects from the exits of startups, 63 percent answered that these funds should be directed toward education and training (71 percent of high-ranking officials in hi-tech companies and 61 percent of such officials from the other industries hold this view).

Fifty-four percent believe that these budgets should be used to improve the health-care system; 44 percent believe that they should be used to narrow social gaps; 37 percent believe that they should be used to improve transportation infrastructure; 27 percent believe that they should be used to increase old-age and nursing-care allowances; and only 21 percent believe that they should be used to reduce taxation.

When the officials were asked how long it would be until most of the work in their companies was performed by automation, the average response was approximately 10 years or more.

Company officials were also asked to evaluate the extent of their preparations for the anticipated changes, once automation penetrates most areas of life.

They estimated the extent of their preparations regarding technological upgrading as fair to satisfactory (3.6 on a scale of 1 to 5), but gave their preparations regarding employee retraining a relatively low grade (3.1 on the same scale).

While 53 percent said that they had made appropriate preparations as far as technological upgrading, 45 percent said that their preparations in the sphere of product development or new processes were satisfactory to very satisfactory. Regarding changes in work patterns, a relatively low percentage (41 percent) said that they had made satisfactory preparations to absorb workers who have appropriate technological training, retrain workers (37 percent), adopt and/or purchase innovative technologies that had not been developed at their companies (37 percent), and to adopt the IoT (Internet of Things) (33 percent).

While 57 percent of the company officials polled predicted that their companies’ workforce would be reduced due to automation, most of them (47 percent) predicted that the decrease would be no more than slight. Only 44 percent of managers in the hi-tech industry predict a decrease in the size of their companies’ workforce due to automation (33 percent predict a slight reduction), and almost 60 percent of managers in the other industries predict a reduction (50 percent predict a slight decrease).

Approximately half of the respondents (48 percent) believe that workers should be sent for professional training to prepare for the adoption of automation/innovative technology. (The percentage of officials in hi-tech companies that hold this view is relatively low — 37 percent — evidently because workers in hi-tech are already more suited to adopt new technologies).

There is a marked difference between the two groups regarding the shortage of professional workers:

The hi-tech industries report a severe shortage of engineers (54 percent had difficulty recruiting them), programmers (44 percent had difficulty recruiting them), marketing professionals (26 percent), and technicians/practical engineers (19 percent).

By way of comparison, the other industries had difficulty recruiting drivers (24 percent had difficulty recruiting them), machine operators (19 percent), engineers (18 percent), technicians/practical engineers and marketing professionals (17 percent), and welders (14 percent).

In general terms, it appears that in the hi-tech industry, the level of difficulty in recruiting workers (which reflects a personnel shortage) is especially evident when it comes to engineers and programmers.

High-ranking officials in the hi-tech industry are more flexible than officials in other industries regarding the option of working from home.

• Thirty-four percent said that it was acceptable for management to work from home one day or more per week, as compared with 16 percent of respondents from the other industries.
• Other workers in hi-tech, particularly mothers, also have more options when it comes to working from home. (Nineteen percent of high-ranking officials in the hi-tech industry said that mothers could work from home, as compared with four percent of respondents in the other industries.)

Despite all the difficulties, more than half of the respondents (52 percent) said that they would establish another company in Israel, while six percent prefer the United States. Approximately one-quarter are undecided. No significant difference among the industries was found.

“The Israeli economy, high-tech and non-tech industries alike, is suffering from an excess of bureaucracy and regulation that is hindering business in the country,” says IDI President Yohanan Plesner. “No wonder we are ranked 52 out of 190 countries in the World Bank’s Doing Business Index, and in the bottom fifth among OECD member states. The results of this survey highlight the extent to which we need to rethink processes and regulations to make them more fitting for Israel's two economies. Likewise, we must combine forces and create synergy between government ministries, employers and workers' representatives. This is a vital wake-up call for the continued growth of the Israeli economy, which will benefit citizens."

Dafna Aviram Nitzan, Director of IDI’s Center for Governance and the Economy, says far-reaching changes to the structure and defining features of the labor market are expected to result from technological developments, demographic changes, deepening globalization and perceptual changes.

“Well-thought out preparations for the challenges presented by tomorrow's labor market can improve the competitiveness of the Israeli economy, contribute to the expansion of business opportunities and enable greater flexibility – for both employees and employers,” Aviram Nitzan says.

Currently, an IDI-led research team is formulating policy recommendations about the most appropriate ways to prepare for the challenges presented by the future labor market. This team features all the main players in Israel's labor market, including representatives of employers, employees, government ministries and research institutes.

The research was conducted between May 10 and June 8, 2017 among senior executives at high-tech companies that employ 50 or more individuals. The survey included responses from 77 high-tech and 123 executives from other professional industries. The data was weighted according to the industry distribution of companies in the business sector, which employ 50 or more workers, according to CBS data.

For a copy of the full survey (in Hebrew), please contact Maayan Hoffman at jaffemaayan@idi.org.il or 050-718-9742.

About the Eli Hurvitz Conference on Economy and Society
Eli Hurvitz Conference on Economy and Society (formerly known as the Caesarea Forum), Israel’s leading economic conference, is taking place under the banner “Two Economies – One Society." The conference, which is sponsored by the Israel Democracy Institute (IDI), will focus on roadblocks and opportunities in a new economy versus a renewable economy, the future workforce, improving regulation, doing business, and rethinking the Israeli pension system. Now in its 24th year, the conference serves as a juncture for public and professional discourse on society and economy. The goal is to improve the government’s decision-making processes and the quality of Israel’s social and economic policies for the benefit of the entire public.

View complete conference schedule>>
Media wishing to attend the conference must inform Maayan Hoffman at jaffemaayan@idi.org.il or 050-718-9742.
Simultaneous English translation will be available throughout the event. The conference will be live-streamed in Hebrew on www.idi.org.il.