OpinionTech salaries are falling - Here’s why that’s not a bad thing
Opinion
Tech salaries are falling - Here’s why that’s not a bad thing
Alarming headlines have recently reported on the decline in wages in high-tech; The truth is that in the long term, this trend could be good for Israeli high-tech.
Over coffee the other day, a friend of mine perfectly captured the current mood in Israeli high-tech. As a senior manager at a successful unicorn, he casually mentioned that their company had pushed bonus payouts from December to June -a quiet but telling shift. Then, just as he drained the last sip of his coffee, he leaned back and said, half-joking, half-serious, “Maybe it’s time to pull an idea out of the vault and launch my own startup.”
The decline in wages, which may initially be perceived as unencouraging news, could mark the beginning of a new era in the industry – one based on sound foundations, innovation, and entrepreneurship. True, the stagnated or declining salaries is hard on employees – especially those who made plans based on the market trends from 3 years ago. But for some this shift will ignite a broader phenomenon in the local high-tech industry.
Over the past decade, Israeli high-tech has experienced unprecedented growth. The surge in investments, especially during peak periods like 2021, led to an unprecedented fight for talent and raised wages to record levels. But when the market began to sober up and the inflated valuations turned out to be problematic, a crisis arrived, manifested in valuation declines, layoffs and now also in wage stagnation.
It should be said that a market correction is not a sign of weakness; on the contrary. The correction indicates that the industry is returning to more sound economic fundamentals. Instead of focusing on an ever-inflating valuation, companies are focused more on efficiency, profitability, and delivering real value.
Despite the war in our country that has been going on for over a year, the wage decline in Israeli high-tech is not happening in a vacuum. In the United States, for example, technology giants like Meta, Amazon, and Google have been forced to make significant cuts in recent years, including layoffs and pay cuts. But alongside the slowdown, an opportunity has also emerged there: small startups now enjoy access to quality talent that previously favored large companies.
In Israel, the impact is similar. The trend of stagnant wages is opening doors for startups and small companies that previously could not compete with tech giants' compensation packages. In addition, multinational companies, which previously balked at rising wages, may find Israel a more attractive and economical option for R&D centers and expansion.
If we return to the conversation with my colleague, the new situation also encourages the establishment of startups and ventures. On the one hand, we see that there is money available for investments – venture capital funds have raised significant amounts in recent years, and according to IVC and Leumi Tech, investments in Israeli high tech companies reached nearly $10 billion in 2024.
Slowed wage growth makes it easier for entrepreneurs to recruit quality employees. In such a situation, the stars align: employees who are tired of waiting for bonuses, entrepreneurs with ideas that have been gathering dust in "the vault", and reservists who are returning home full of new ideas, inspired by new technologies – all find the right time and place to start their ventures.
So where do we go from here?
If current trends continue, Israeli high-tech could emerge stronger – with more stable companies, prepared for future crises, and a hub for global innovation. The wage decline is a reminder that healthy economic growth sometimes requires a temporary slowdown.
This is not a cause for concern, but an opportunity to reshape Israel's next generation of startups - based on creativity, initiative, and a healthier market that functions according to stable economic laws.
Moran Chamsi is a Managing Partner at Amplefields Investments.
