In the midst of the ongoing conflict with Gaza, businesses are grappling with an 18% average drop in workforce availability, according to a report published by the Labor Ministry.
Approximately 760,000 people, constituting nearly one-fifth of the workforce, have been affected by military service, residence in the Gaza periphery, or childcare responsibilities. An additional 46,000 employees, comprising about 1% of the workforce, have faced termination or unpaid leave, with 70% falling into the latter category.
This situation has created a notable workforce gap that stands to impact two of Israel’s most critical industries, the heart and stomach of its economy – hi-tech and agriculture.
Hi-tech: Smooth sailing or turbulence?
There are conflicting opinions regarding how well the Israeli hi-tech industry is doing during the ongoing crisis. Speaking at a seminar hosted by the Israeli Advanced Technology Industries (IATI), several industry leaders weighed in on the situation within the tech industry. Despite the upheaval, they spoke optimistically about the resilience of Israel’s tech sector.
Ronen Nir, managing director at PSG Equity, said, “Based on previous elements that we’ve seen, I believe there is going to be a huge wave of new innovation coming out of this: military technologies that are going to have civilian applications; a lot of applications that have been developed to support the ongoing civil effort in Israel are going to become commercial companies.”
He believes that “out of all this mess and bad times that we are going through, we will probably see the biggest tailwind that we have [ever seen] for the new wave of innovation in Israel.”
Echoing this positive sentiment during a press event last week, OurCrowd CEO Jon Medved emphasized that, despite having some 10-25% of their workforce in the reserves, tech companies are efficiently meeting commitments and service agreements. The tech community, in particular, is demonstrating agility and adaptability.
“The tech community is fully mobilized,” Medved said. “Companies seem to be, by and large, handling it well because of multitasking; because of redundancies built in; and because, frankly, this isn’t our first rodeo.”
However, there are those who believe that things are more troubling. Among them is the president of the Israeli Hi-Tech Association, Marian Cohen.
“I do not think that everything is okay with the hi-tech sector. The percentage of workers [who have been called up for reserve duty] in hi-tech is significantly higher than the rest of the industries: The average of the recruited people in our industry is about 20%, which is very high,” he said.
“As well, when you look at the people who are volunteering everywhere, you will see again, a very high percentage of hi-tech employees. And this volunteering is impacting the companies. We are volunteering whole-heartedly, but it has an impact on the industry as well,” he added.
For Cohen, even though companies have found ways to manage at present, there may still be trouble down the road, depending on when the conflict resolves.
“If it’s anywhere between three to six months from now, I think that it’s going to have a serious impact – not only on the hi-tech sector but on the economy,” he said.
Cohen explained that the primary concerns are twofold. First, there is the potential breach of commitments and contracts with international customers, given that the hi-tech industry is a significant exporter. Second, there is the potential difficulty in raising funds for start-ups.
He emphasized the importance of supporting and ensuring the survival of these start-ups to maintain the industry’s vitality in the coming years. He also underscored the need for proactive measures and the urgency in safeguarding the supply chain and business continuity to mitigate the looming challenges.
Unfortunately, he hasn’t seen much proactive effort from the government in this regard. “I do not see too much coming from any governmental institutions,” Cohen noted.
“We have meetings, they express concern, they express understanding, but for the time being, I do not see too much being really implemented or executed by the many, many, many, many, many ministries and institutions of the government. I understand that they have a lot on their plate – about which also I do not see a lot of action being taken – but considering that we are already in the sixth week since the beginning of this war, I personally expected much more from them.
“Looking forward, I think that the price tag of this is going to be something that we’ve not seen before,” Cohen warned. “It’s not something that we can extrapolate from any event that has happened before.”
He called the situation “a major happening in the history of Israel.”
“We have not encountered such a situation before,” he said, “and it needs to be approached on a totally different basis than any event before.”
For Cohen, “this is going to affect the whole economy of Israel, this is going to affect the industry, and it is going to affect the Israel citizens and residents in this country.”
Companies are buckling down
Whether the outlook is ultimately positive or not, businesses operating within the sector are still finding themselves in a challenging position and have had to think on their feet in order to adapt.
Buff Technologies, a company specializing in a global loyalty club platform for gamers, is a prime example. With 60% of its senior management in the reserves, including its CEO and its chief risk officer, the company has faced challenges in personnel retention, work continuity, and management control.
“One of the challenges that we had in the beginning was to understand that the employees – as well as us – need time to digest and cope with everything that happened – and that it’s okay to pause work for a week and focus on taking care of our mental health first, and work can wait,” said CRO Ophir Gertner.
Buff Technologies swiftly adopted new work methods, such as remote work in the first month, followed by two days in the office for updates and face-to-face work. Regular team conversations on virtual platforms were implemented to foster connectivity.
Gertner explained, “Fortunately, most of our business activity is abroad, and we have key employees, mainly in software development, who are also abroad and work full time, so their productivity was not affected. This is something that we took from the Ukraine-Russia war. When the war started there, we realized that we need to be more diverse in terms of work division and appreciate the benefits of having teams in several locations.”
Beyond work challenges, Buff Technologies is actively engaged in supporting its community. The company donated video games to Israel Air Force (IAF) squadrons and to evacuated children. Gertner shared insights into the company’s strong and supportive management, with many members serving in the reserve army, providing flexibility and convenience to manage tasks efficiently.
The company’s openness was evident in business calls where management or employees joined Zoom calls wearing army uniforms, sparking informational and solidarity conversations.
Despite a slowdown in activity for products aimed at the Israeli audience due to the conflict, Buff Technologies reports no slowdown in the global market, which constitutes over 95% of the company’s activity. In fact, there is a notable increase, especially considering the busy last quarter of the year.
Shani Dagan, senior manager of Global People Partners at Sisense, provided insights into the challenges faced by the Israeli company with approximately 15% of its headquarters’ workforce, around 22 employees, called into reserve duty.
“Sisense is a global company with teams from all the business and technical units that are spread across the globe, an important factor that has allowed us to recover quickly and respond to our business and customers’ needs,” she said.
“We also made sure to transfer knowledge where needed in order to make sure there are no dependencies on Israeli employees’ availability in any case.”
The most challenging aspect for Sisense has been the sense of uncertainty and instability that recent events have created. However, the company’s global operational spread has been a crucial factor in the ability to execute and deliver, amid the unpredictability.
In response to the challenging times, Sisense has launched initiatives to support its community.
“Since the war began, we established a policy according to which each employee may take up to seven consecutive or non-consecutive days to volunteer at the company’s expense,” explained Dagan.
Additionally, Sisense initiated a donation campaign to support the residents of Be’eri, with tens of thousands of shekels donated by the company and its employees. The company also donated equipment, chargers, and T-shirts to soldiers – and is launching a campaign to provide free licenses for its analytics platform to empower various organizations with data-driven decision-making capabilities.
Vice president of business development and GC at Ortech Defence Systems Ltd, Avida Stern, shed light on the challenges faced by the company specializing in field shelters and protection systems. A significant 60% of the company’s workforce has been called into reserve duty, with many in management positions actively serving as fighters and officers in combat units.
“The recruitment of the reservists created a temporary gap in the company’s production capacity,” explained Stern. To mitigate this, Ortech implemented strategies such as reshuffling positions among existing employees, recruiting new workers from branches affected by the war, and incorporating volunteers through organizations. In some cases, spouses of reservists even joined the company to pitch in.
The company has been prepared for military operations due to its location near Gaza, and Stern emphasized the importance of keeping things running in the factory at Kibbutz Karmia.
“It is important to preserve production in the factory at the kibbutz; this is something we insist on doing as much as possible,” Stern noted.
Ortech’s core business involves developing systems to protect existing areas, approved by the Home Front Command. The surge in demand during the conflict has led to increased inquiries, creating heavy loads on all systems. Despite these challenges, the company strives to provide the necessary systems in the shortest possible time to meet war-related requirements.
Agriculture: Incentives to compensate farm help
Hi-tech isn’t the only sector in line to be pummeled by the shortage of laborers. The vacuum created by the dwindling workforce is particularly felt in the agricultural sector, where the Agriculture Ministry is grappling with a critical manpower crisis, deemed the worst since the establishment of the state.
Joseph Gitler, chairman of the charity Leket Israel, said that “75% of vegetables in this country are grown in the South… and a lot of those crops are at risk. A lot of it is a closed military zone. So most of those crops are going to get lost. There’s actually probably nothing to do to save them unless, I don’t know – unless the war ends tomorrow.
“So that is definitely going to be an issue. At some point coming up, we are going to have less of certain types of crops, and that could lead to the Agriculture Ministry allowing for imports where they normally might not allow.”
While a decision on imports has yet to be made, the government has worked to encourage locals to join the farming workforce, introducing financial support initiatives. Israelis new to farm work will receive a monthly stipend of NIS 3,000 for a minimum of two months, with the amount increasing to NIS 4,000 for the third month. This additional financial incentive is designed to complement the regular wages paid by farmers and alleviate the strain caused by the shortage of laborers.
The agriculture sector’s crisis is further underscored by the significant impact of the recent conflict on the workforce. Before the Israel-Hamas war, nearly 30,000 foreign farmhands, predominantly from Thailand, worked in Israel, with a substantial number employed on farms close to the Gaza Strip.
Tragically, on October 7, some 32 Thai farm laborers lost their lives, and 23 others were kidnapped. The peril associated with working near borders, coupled with the exodus of foreign workers, has created an exceptionally challenging environment for this sector.
As part of the government’s response strategy, farms located within specified distances from borders will receive compensation for loss of profits. Those within 9 km. of the Lebanon border or 7 km. of the Gaza border will be fully compensated. Additionally, farms situated seven to 20 km. from either border can claim damages of up to a maximum of NIS 3 million per month.
At the same time, many charities, including Leket, are coordinating groups of volunteers to show up at these farms and collect the produce that is left on the ground.
“We are reaching out to all the farmers we normally work with and taking calls from many other farmers around the country who simply have a shortage of workers and are looking for help. We have thousands of people who joined our WhatsApp group and who are comfortable going out in the field lending these farmers a hand,” he said.
“It’s not a solution. It’s a Band-Aid. But it’s a big help to the farmers.”