The strong shekel, not the rise of AI, is killing Israeli high-tech

The Israeli high-tech industry is facing a crisis due to the strong shekel and government inaction, rather than the rise of AI, according to a JNS article. Israeli tech companies, which raise funds and generate revenue in dollars but pay salaries and taxes in shekels, are experiencing a significant increase in operational costs. The dollar's collapse to 2.8-2.9 shekels per dollar has made employing an Israeli programmer 8.2% more expensive than a comparable American developer, with overall labor costs in Israel jumping 20% in dollar terms. This economic dynamic is driving companies to cut local jobs and outsource software development to countries like India and Eastern Europe. The article argues that the government's continued collection of high labor taxes, despite the strengthening shekel, acts as a "silent and cruel tax," eroding profitability and sacrificing the industry's long-term growth for short-term tax revenue. The author, Adv. Tamir Dortal, urges the government to take drastic steps, such as pursuing a decisive military victory to restore economic certainty or implementing aggressive regulatory reforms to cut employment costs and reduce taxes, to prevent the industry's systematic destruction.