Amazon reportedly offering Israeli programmers nearly NIS 100,000 a month

Unable to compete, local start-ups may be forced to ship jobs overseas as US firm sets up R&D center.

By MAX SCHINDLER
Updated: NOVEMBER 14, 2017 08:16
Amazon boxes are seen stacked for delivery [File] (photo credit: REUTERS)
Amazon boxes are seen stacked for delivery [File]
(photo credit: REUTERS)
The world’s largest Internet retailer, Amazon, is reportedly luring Israeli programmers and engineers with salaries far higher than usual, in its bid to rapidly expand a new research and development center.
The move exemplifies how multinational corporations are seen as encroaching upon local startups and exacerbating a shortage of Israeli hi-tech workers.
The founder of an Israeli cybersecurity company said two of his deputies were headhunted by Amazon and received unprecedented job offers, The Marker financial site reported, quoting anonymous start-up founders and human resource managers.
One programmer, the head of a performance team, received a salary and benefits package that totaled NIS 92,000 ($25,995) a month.
As it stands, an experienced programmer can make around NIS 40,000 ($11,370) monthly, about four times more than the average Israeli salary, according to the Central Bureau of Statistics.
Amazon has generally been offering programmers some 50% more, around NIS 60,000, along with signing and annual bonuses, according to The Marker. The new employees, who include scientists, software engineers and product managers, will help with Alexa Shopping, the digital personal assistant that allows people to buy merchandise by shouting.
By hiking up salaries some 50%, Amazon – which announced its plans in October – is forcing Israeli hi-tech firms into an untenable position, with some start-ups reportedly warning that they might have to relocate jobs to Eastern Europe, China and India.
Such wage pressure – with average wages for Israeli engineers rising by 38% between 2005 and 2015 – is undermining the ability of Israeli start-ups to churn out disruptive innovation tools and technologies, putting a damper on what is known as “Start-Up Nation.” Some Israeli firms can respond by compensating employees with stock options. The average Israeli hi-tech worker makes around NIS 21,000 ($5,940) a month.
The aggressive hiring drive comes at a time when Israeli hi-tech firms face a shortage of 10,000 engineers and software programmers, according to a report released by the Israel Innovation Authority last month.
“If there is no dramatic increase in the number of employees in hi-tech, Israel’s economy will reach a dead end and get stuck,” the report states. While the percentage of its GDP that Israel spends on R&D investment is greater than that of any other developed country, and Israeli venture capital investments make up the highest share of GDP per capita worldwide, the country faces a near crippling lack of hi-tech workers.
“The shortage increases when you go up the pyramid; there are really few available high-end engineers doing algorithms. It’s also a problem for the mid-level of software developers and coders,” the authority’s chief strategy officer, Uri Gabai, told The Jerusalem Post last month.
In December 2016, Amazon founder and CEO Jeff Bezos visited Israel, and the company is renting offices in both Tel Aviv’s Azrieli Sarona Tower and Haifa’s Matam Technology Park. Amazon first came to Israel after acquiring Annapurna Labs for $350 million in 2015.
The company is aggressively expanding worldwide, with net income of $2.4 billion on revenue of $136b. in 2016, resulting in a net profit margin of 1.7%. The slim profit indicates that the company is seeking to keep prices and income low in order to compete more with brick-and-mortar retailers.