Israel’s Employment Service Warns of “Unprecedented” High-Tech Unemployment Amid AI Disruption

The Israeli Employment Service has issued a stark warning over rising unemployment among high-tech professionals and educated workers, calling the trend a sign of “unprecedented levels of unemployment” and urging urgent government action to prepare for mass job displacement due to artificial intelligence.

For the past two years, the Employment Service has tracked a dramatic increase in joblessness among experienced, highly educated workers in their peak earning years. One particularly alarming data point is a 100% rise in unemployed programmers over the past three years—a phenomenon the agency calls “the weakening of the strong.”

In response, the Employment Service has released its first official policy paper addressing the threat of widespread technological unemployment. The document outlines a set of strategic recommendations to help Israel’s labor market adapt to the growing impact of AI and automation.

A Looming Crisis: AI Threatens 20–30% of Jobs

“The potential for automation of 20–30% of the economy in the coming years, combined with a mismatch between the pace of technological change and the rate of new job creation, could lead to a rapid—though possibly temporary—increase in unemployment, at levels not seen in decades,” the report warns.

To mitigate this scenario, the Employment Service proposes seven key recommendations—some within its jurisdiction, others requiring broader government intervention in areas like taxation and labor regulation.

Key Policy Recommendations

1. Extended Unemployment Benefits for Automation Victims
The agency proposes longer unemployment support for those laid off due to automation, arguing they will need more time than the current legal framework allows to retrain and reenter the workforce.

2. Wage Insurance for Career Downgrades
To support workers who are forced to take lower-paying jobs, the Service recommends “wage insurance,” whereby the state supplements lost income for up to two years via the National Insurance Institute.

3. Incentives for Employers to Retrain, Not Dismiss
To prevent layoffs, the Employment Service calls for tax incentives or subsidies for companies that retain and retrain at-risk employees. Access to government aid could be conditioned on workforce retention and retraining efforts.

4. Government as Employer of Last Resort
A modernized version of public job creation programs is suggested—focusing on national needs like renewable energy infrastructure, digitizing government archives, and technical logistics work.

5. Emergency Reskilling and Rapid Training Programs
The Service recommends a nationwide mapping of skills gaps, paired with a “mass rapid training” program in both resilient and vulnerable sectors. Fields like nursing, caregiving, education, cybersecurity, and IT are highlighted.

6. Establishment of an AI Labor Task Force
A new task force is proposed to monitor AI’s impact on professions in real time. This body would operate in partnership with the Central Bureau of Statistics, and the Ministries of Finance and Economy.

7. Encouraging Technological Entrepreneurship
To stimulate innovation and self-employment among jobseekers, especially tech-savvy ones, the agency suggests expanding seed grants, reducing bureaucratic hurdles (e.g., patent filing and taxation), and offering regulatory relief.

Limited Authority, High Stakes

While the Employment Service is spearheading this initiative, it lacks the authority—and budgetary control—to implement most of the recommendations. Costs could run into hundreds of millions of shekels, depending on the chosen scenario. Nevertheless, the agency is optimistic that some proposals could be adopted through government decisions.

The recommendations were developed over several months by a research team in the Employment Service, in collaboration with Spark Consulting (led by Ron Tzur) and the Mosaic Institute. They were inspired by international policy models and were released ahead of a major conference on the future of work, co-hosted by the Employment Service, Google, and SDG Israel.

The event, held today, brings together senior officials from the Ministry of Finance, the Prime Minister’s Office, and the Central Bureau of Statistics to discuss long-term strategy for the labor market in the AI era.

Fragmented Governance and Delayed Response

Despite growing concern, Israel’s employment policy remains fragmented. Oversight is spread across 11 different government bodies. A 2025 initiative to consolidate them under one ministry failed in the Arrangements Law. Additionally, several national AI initiatives remain stalled:

• A Prime Minister-announced AI headquarters (2024) has yet to launch

• The Nagel Committee on AI held its first meeting only in May

• A Civil Service Commission committee led by former commissioner Roy Kahlon never published conclusions

Employment Service Director: “The Challenges Are Coming to Our Doorstep”

Einbal Meshesh, Director General of the Employment Service, emphasized the urgency of proactive planning:

“Artificial intelligence is entering the labor market at an accelerated pace. It is reshaping professions and may, in some scenarios, create widespread technological unemployment. From this place of government responsibility, we’ve formulated a strategic framework — and we hope that at least some of the recommendations will be implemented.”

The agency positions itself as the natural lead in preparing for the labor shifts ahead, not only because of its statutory role supporting the unemployed but also due to its regulatory role in shaping Israel’s labor market.