As the war continues and the budget deficit widens, among the hundreds of cuts to the Israeli state budget are programs aimed at increasing employment for Arab, Druze and Haredi communities in the technology industry.
Two programs that were canceled by the Ministry of Economy and Industry provide for a subsidy of the salaries of Haredi, Arab and Druze employees in companies in Israel, in the amount of NIS 43 million. The first program subsidizes 25 to 35 percent of the salary in the first year and 15 to 25 percent in the second year, for companies that hire Haredi, Arab and Druze, disabled people and unemployed youth. This measure was canceled a few weeks ago, so no new applications can be filed.
The second program subsidizes the salaries of young employees in the high-tech sector in Arab society and provides incentives for technology companies to hire them. The state participates in the program by subsidizing up to 30% of the salary cost for a period of up to 18 months, with employers who hire more young employees receiving special supplements. « Globes » learned that this program has been cut by 60%, from an already low annual budget of NIS 15 million to NIS 6 million. In addition, the subsidy period has been reduced to just one year, making it less attractive to employers because during the first year of work, the employee does not reach full productivity.
Jobs will go abroad
Rami Schwartz, executive director of Portland Trust Israel, an organization that promotes peace between Israelis and Palestinians, told Globes: “Instead of understanding that this is an economic tool that produces a high return on investment, increases the number of jobs in Israel and prevents their spread abroad, the state is trying to eradicate our way of doing business.” He even sent a stern letter to the Ministry of Economy and Industry demanding that the cut be reconsidered.
The answer was brief: the budget cuts were the result of budgetary restrictions. The letter concluded: « Our priority is to continue working on formulating new solutions to strengthen the sector. »
Schwartz adds: « 80% of the jobs created last year by Israeli companies went abroad for cost reasons, plus political and security environment considerations. We were able to convince companies to create more jobs here with these incentives. Now the state is taking this money, which is not particularly large, which is intended to contribute to the growth engine of the Israeli economy and which offers an extremely high return, and transferring it to places that are anti-growth. »
According to the Israel Innovation Authority’s 2024 Tech Report, the underrepresentation of Arab and Haredi communities in the tech sector continues. Haredi men make up about 1% of tech employees, Haredi women 1.7%, Arab men 1.5%, and Arab women just 0.5%.
According to the Portland Trust, over the past five years, the Ministry of Economy has placed 250 young graduates from the Arab, Druze and Haredi communities in tech jobs at companies such as Amdocs, Wix, Monday.com, Vayar and Pagaya. The Trust explains that each successfully filled tech job creates between two and six additional peripheral jobs, which has created at least 800 additional jobs. The Trust’s program has an extremely high placement rate, at 92 percent, with 70 percent of training participants being women. Another figure cited by the Trust concerns the ability to retain employees who graduate from the placement program. After four years, 94 percent of employees are retained.
Investments are profitable
A 2021 Deloitte report examined the return on investment of the various employment programs, including the two programs currently being phased out. The report concluded that these programs “present an economic viability for the state’s investment.” It found, among other things, that the return on investment rate was 40%, “and, with the tax advantage of indirect jobs, it was 95%.” Regarding the High-Tech Inclusion Grant Program, the report found that “the program produces a direct tax benefit of NIS 2.5 for every shekel invested,” which translates into a return of approximately 150%. It also stated that “increasing the income channel of program participants enabled (upward) social mobility of 1-2 deciles.”
The Ministry of Economy and Industry said: « The Budget Division of the Ministry of Finance has demanded the cancellation of these programs due to budgetary constraints. The Ministry of Economy, through the Investment Authority, would be happy to resume operation of these and other programs, which have also been canceled by the Budget Division of the Ministry of Finance, at any time. »
Published by Globes, Israeli business news – fr.globes.co.il – July 10, 2024.
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