The digital world: computerization trends in Israel’s labor market

The modern market is dynamic, shaped by an array of influences such as technological developments, globalization, and capricious consumer preferences. While such rapid technological advances are generally a blessing, they come at a cost in the guise of a loss of existing jobs. Using a method developed by American researchers that rates occupations, on a scale from 0 to 1, by the risk that employees will be replaced by computers, Taub Center researcher Shavit Madhala-Brik mapped Israel’s labor market into low, medium and high risk occupations in a new study published in the State of the Nation Report 2015.

Madhala-Brik found that among workers between ages 25 and 64, 39% of work hours are considered at high risk; 20% at medium risk, and 41% at low risk, as shown in the first figure. This translates into roughly one million Israeli workers in this age group who are at high risk of being replaced by computers or machines. Occupations such as tailors, construction workers, bookkeepers, and clerks fall into the high risk category, as well as a number of other occupations that are characterized as repetitive or technical. Professions requiring creativity, social intelligence, and proficiency in negotiation are characteristic of low-risk occupations. As Madhala-Brik notes, these trends are not unique to Israel; countries such as the United States and Germany have 47% and 49% of work hours in high-risk occupations, respectively.

Computerization is expected to particularly affect jobs held by some of Israel’s more vulnerable populations groups – specifically non-Jewish men, teens and young adults, and low-income workers. In general, a negative correlation was found between an occupation’s average wage and its likelihood of being computerized – that is, those who earn low wages tend to be at higher risk. As a result, non-Jewish men stand out as a high risk group – 57% of Muslim, Christian and Druze men are in professions at high risk of computerization. Over half of the hours worked by non-Jewish men are in manufacturing, construction, and skilled work of a similar nature. In contrast, only 35% of Jewish men work in high risk professions, while 39% of both Jewish and non-Jewish women in Israel are in such professions. Israel’s youth and the unemployed may also face challenges in this regard; a total of 60% of work hours among those aged 15-24 are in high-risk occupations. Similarly, the percent of unemployed individuals is relatively high in professions with a high likelihood of computerization, especially among unskilled workers and those in industrial and construction work, meaning that these individuals will have a difficult time finding their way back into the workforce.

In general, the education level within a profession is negatively correlated with the level of computerization risk of that occupation. Occupations that have a lower share of academic degree holders among those employed in them are more likely to be automated. As the second figure shows, this trend is consistent through most of the distribution, with two major anomalies. There is a sharp rise in degree holders among occupations at the highest risk level. This jump occurs because of jobs such as insurance agents, secretaries, accountants, and bank tellers – many of which are manned by academic degree holders, but that nonetheless are at high risk of computerization. The second anomaly is found at the opposite end of the spectrum – there is a drop in degree holders among the occupations with the lowest risk of computerization. This includes hairdressers, athletes, cosmeticians, and police officers, most of who have relatively few years of schooling. Madhala-Brik finds that while higher education certainly plays a substantial role in determining one’s risk level, it does not necessarily protect a worker from computerization, and workers with lower education are not necessarily at high risk.

The replacement of people through computerization comes with an occupational upside – new opportunities in the market. Vocational training is a policy tool that can be used to address the anticipated changes in the labor market and prepare the population for new and low risk opportunities. Such programs already exist, both in the form of courses offered by the Ministry of the Economy’s Manpower Training and Development Bureau and in the form of a voucher system to subsidize participation in vocational programs. However, there is a great need to expand these services; of the half-million jobless Israelis who visit employment bureaus each year, only about 1% are referred to vocational training frameworks. There is also a need to adjust the jobs for which these programs provide training; Employment Service survey data indicate that the most common jobs the voucher programs prepare individuals for are those at high risk of computerization, such as bookkeeping and payroll controlling. Expanding vocational training programs, and adjusting them to the reality of Israel’s future labor market needs, will ensure that the population, particularly the vulnerable citizens, will have employment prospects that are secure for the long-term.