Employee Skills in Israel: Overview and Gap Analysis

Technological advancements, rapid globalization, and structural changes in the Israeli economy over the past few decades have led to significant shifts in the demand for workers and in the tasks required of them, as well as in the characteristics of their skills and qualifications. This study offers insights on these questions using a variety of data sources and by employing two distinct empirical approaches.

Photo by Gili Yaari/Flash90

Technological advancements, rapid globalization, and structural changes in the Israeli economy over the past few decades have led to significant shifts in the demand for workers and in the tasks required of them, as well as in the characteristics of their skills and qualifications. Yet while the tasks required of workers change frequently, the systems responsible for training the workers have struggled to keep pace. As a result, the labor market is characterized by significant disparities between the skill sets employers demand and those supplied by workers.

To tackle this issue, several questions need to be addressed: what skills are most crucial in the labor market, and which ones are less necessary? Where do the largest gaps exist between employees' skills and actual workplace requirements? And, how do skill sets vary across different population groups, such as those characterized by age, gender, educational background, or sector of employment?

This study offers insights on these questions using a variety of data sources and by employing two distinct empirical approaches: (1) we examined the importance of skill in an economy-wide perspective using occupation-specific data, alongside detailed employment statistics; (2) we carried out a bespoke employee survey, which we designed to capture workers' perspectives on skill requirements and gaps. The results from these two analyses point to several key findings:

1. The most in-demand skills in the Israeli economy are "soft" interpersonal and analytical skills such as verbal communication, customer service knowledge, and teamwork. These skills are relevant for performing the jobs of a very high percentage of employees in the Israeli economy. The least required skills, on the other hand, are the physical ones, such as manual skill or strength. These findings reflect deep and long-term changes manifested in labor markets in other advanced economies as well.
2. According to workers' reports, the main gaps between the level of skills they possess and those required for performing their job relate to English language skills (oral and written expression), computer and electronics skills, and mathematical skills. While these skills are only required by some occupations, among the workers who do require these skills, there is a high proportion of inadequate competence: about one-fifth of the workers report lacking skills in mathematics compared to what is required of them on the job; one-third report gaps in computer and electronics skills; and about a quarter of the workers report proficiency lower than required in English language skills.
3. Employees' education is clearly related to the types of skills required of them in their work. Workers with basic education report fewer skills necessary for their job performance, but more frequently identify gaps between their skill level and the required level. However, skill gaps are also evident among workers with an academic education, especially in oral English proficiency and computer and electronics skills.
4. The data show a strong correlation between the level of religiosity and English language proficiency. On the one hand, among the more religious workers, fewer report English language skills (comprehension, oral, and written) as necessary for their job performance. On the other hand, among workers who do require English skills for their job, it is evident that the more religious they are, the higher the percentage reporting a lower competence level than required. This finding remains consistent and clear even when ultra-Orthodox (Haredi) workers are excluded from the analysis. It is also consistent with the notion that religious schools place less emphasis on the study of English.
5. The rate of those reporting competence lower than required among the ultra-Orthodox is the highest compared to all other employee groups in the labor market. The findings suggest that even among the ultra-Orthodox workers most integrated into the labor market, significant gaps exist between the skills they possess and those required for their job.
6. The types of skills reported as necessary for work show only slight variation among workers of different age groups. However, employee surveys reveal a disparity in the skill gaps between the current and required skills among different age groups: about a quarter of older workers report a gap in computer and electronics skills required for their work, and about a fifth of older workers report a gap in English language skills required for theirs. The gaps are less prominent among young workers.
7. Our study places special focus on high-tech skills. Our results confirm previous findings regarding the necessity of what are known as "PISA skills" for many of the industry's workers, such as cognitive skills (like problem-solving ability), analytical skills, social skills (like interpersonal communication and teamwork), or personal skills (like creative thinking and self-learning ability). Yet the data also show that these skills are required for many workers in other sectors of the economy as well, especially those with academic education. The differences in job requirements between high-tech workers and those in other sectors lie elsewhere, mainly in the importance of proficiency in English, mathematics, computers, and electronics.

The findings indicate that systemic investment in developing "PISA skills" for workers in Israel would yield high returns. This investment would not only expand the potential workforce for the high-tech sector but also benefit individuals who may ultimately work in other sectors. However, it is evident that focusing policy on improving the most common skills is insufficient: the significant gaps between existing and necessary skills lie specifically in more practical skills, a pattern particularly prominent among specific population groups (such as those with basic education, women, and older individuals). Therefore, expanding the circle of high-tech workers to new populations requires effort in imparting core skills that go beyond the PISA skill set.

International PISA exams that assess students' skills at school ages consistently show that Israeli students rank very low compared to OECD countries in areas such as mathematics and science, and to a lesser extent in reading (OECD, 2023). Part of the concern raised by these data is that the Israeli economy will struggle to remain competitive internationally if its workers do not have the necessary skills to perform the assignments and tasks required in the developing global economy.

This concern fits into the discussion on the anticipated impacts of Artificial Intelligence (AI) on disappearing professions and changing job roles. The findings in this study indicate that even now, before AI becomes a central tool in the labor market, Israeli workers already suffer from low competencies in a variety of important skills. These deficiencies are particularly prominent among distinct population groups such as those with elementary education, older individuals, and members of the religious sector.   Therefore, it is important that the discussion regarding the requested reforms in the training of Israeli workers remains grounded and does not become a theoretical “futuristic” debate about new technologies. Rather, the Israeli education, higher education, and vocational training systems face a massive challenge of closing large skill gaps in core competencies among workers that are present already in the here and now.