Record High Salaries in Israel's High-Tech Sector Amid Slow Job Growth

Israel’s high-tech sector has seen a significant increase in wages in 2024, yet job growth has remained stagnant. Despite this, the gap between high-tech salaries and those in other industries continues to widen, making the economy more unequal. Here’s an analysis of the latest trends in Israel’s high-tech industry and the broader economic implications.

Summary

In 2024, the average salary in Israel increased by 5.1%, rising to NIS 13,514 ($3,743) from NIS 12,863 ($3,563) in 2023. This wage growth was notably higher in the high-tech sector, where average salaries rose by 6.8%, from NIS 29,826 ($8,261) to NIS 31,858 ($8,824). High-paying positions in fields like scientific research and programming saw even higher salaries, with averages reaching NIS 35,877 ($9,939) and NIS 33,395 ($9,251), respectively.

However, despite the wage increases, the number of salaried positions in high-tech grew by a modest 0.8%, with a total of 400,600 employees in the sector. High-tech now accounts for 10% of all salaried positions in Israel, a figure that has remained largely unchanged. In contrast, wages in other sectors like education, commerce, and health showed more modest gains, contributing to a widening wage gap across industries.

A sharp drop in salaries from December 2024 to January 2025, following an all-time high in December, indicated that some of the wage increases were likely influenced by one-time bonuses rather than sustainable growth. The overall number of salaried positions in the economy remained stable in January, showing minimal fluctuation from the previous month.

What Undercode Say:

Undercode’s blog highlights the growing disparity in wage growth between high-tech and other sectors in Israel. While high-tech salaries continue to surge, job growth in the sector remains sluggish, barely surpassing a 0.8% increase. This reflects the broader issue of high-tech’s dominance in the economy, where fewer people benefit from these high salaries due to the relatively limited expansion of the workforce.

The increasing concentration of high salaries in the tech sector has significant implications for Israel’s economy. The rapid wage increases in high-tech exacerbate income inequality, leaving industries like education, healthcare, and commerce trailing behind. With sectors that traditionally require more labor, such as education and healthcare, seeing only modest wage increases, there’s growing concern about how this will affect the wider socio-economic landscape.

Moreover, the fact that National Insurance benefits are tied to the consumer price index rather than actual wage growth means that the real value of social benefits is diminishing. This impacts lower-income groups who rely more on these benefits for their livelihood. As wages in the high-tech sector rise disproportionately compared to other sectors, the gap between the affluent and the rest of the population is becoming more pronounced.

The seasonal dip in salaries from December 2024 to January 2025 also raises questions about the sustainability of these wage increases. A significant part of the December surge was likely due to one-off bonuses and end-of-year payments, which artificially inflated the average salary figures. This highlights a potential instability in the long-term wage growth trajectory, suggesting that the high-tech sector’s pay might not consistently maintain these record levels throughout the year.

Furthermore, with job growth in high-tech sectors remaining stagnant, it’s clear that Israel’s high-tech industry is not growing as rapidly in terms of employment opportunities as the salary data might suggest. The high-tech sector’s strong wage growth is primarily benefiting a smaller group of highly skilled professionals, leaving many others in the broader labor market with stagnating wages or minimal growth.

The widening wage gap between tech and non-tech workers also raises concerns about social cohesion. High-tech’s salary growth disproportionately benefits a limited demographic, making it harder for middle and lower-income groups to close the income divide. In turn, this could lead to a more polarized society, where access to higher wages becomes increasingly dependent on entering the tech field, further entrenching disparities between those who can participate in the high-tech economy and those who cannot.

Fact Checker Results:

High-tech salaries indeed rose significantly, with the average wage increasing by 6.8%.
Job growth in high-tech remained modest, with a 0.8% increase from the previous year.
National Insurance benefits fell behind wage growth, as inflation outpaced income increases by 2%.