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Update on tech wages

? Bad Forecasts |


| Hiring the Right People ?

January 06, 2006

Update on tech wages

Michael Mandel

The government came out with its latest labor market numbers this morning. Since I seem to be the only economics writer who actually cares about the tech sector, I decided to do the calculation again. I'm using a slightly different presentation which offers more perspective.

These numbers tell me that there is a strong acceleration of labor earnings in telecom and web search portals (the Google effect, of course); a decent acceleration in computer systems design, which is a proxy for programming; and a bouncy pattern in software publishing. Still, the year over year earnings growth in software publishing is 5.6%, still better than the 3.9% for the whole workforce.

10:37 AM

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Thanks for the numbers, Michael. I'd have been really happy to get a 6.8% raise last year, but it was more like 3%. Most of my comrades in arms are also receiving 3-5% raises and only one guy I know got a 10% raise (but he was well underpaid).

Back in 2000 most people I knew got 11-15% raises each year and one co-worker scored a 30% raise, and this was on top of all bonuses.

The only true way to get real increases in the tech world is to move positions. Either switch teams within the same company and score a promotion and the 5-10% raise or quit and work elsewhere for a 10-30% raise (in general), which works only until you're at the top of the pay and then you have to become a contractor to make any money (and assume the risks).

Posted by: Wes at January 6, 2006 11:24 AM

Also an update from me....

I met another guy last night who just lost his software job because his company was bought, and every single one of their jobs was sent to India.

I know, that's the way things go. It's time for all those software engineers - and managers, and everyone else employed there - to move to a better locale for software (Bangalore, perhaps?), shift jobs or re-train.

Posted by: Brandon at January 6, 2006 12:54 PM

I'm listening to these comments, and I certainly get the idea that the view on the ground looks less positive, wage-wise, than these numbers seem to indicate. I'll look for more evidence for and against...

Posted by: Mike Mandel at January 6, 2006 02:27 PM

Decreasing bonuses to increase base salaries might explain much of the increase in weekly earnings.

There you sit, wondering if I pulled this hypothetical out of thin air, or not....

I'll believe wages are rising when I see the year over year IRS-reported gross incomes rise.

Posted by: RP at January 6, 2006 03:13 PM

To provide a contrast to the doom and gloom, I received a quite large increase in salary over the course of that last year.

I'm a 2004 graduate who was hired at pretty standard entry level pay, but as my company got a feel for what I am capable of, and as I taught myself how to do more and more tasks, they gave me a pair of substantial raises.

Two keys for me here were

1) I'm at a small company that has (sort of by definition of small companies) too much work that needs to be done.

2) As I learned more and more about the technologies involved I was able to automate some of my original tasks and move into new, higher value areas.

I'm fairly convinced that the key to raises and advancement is to never be satisfied with what you know, and constantly be learning. However, I'm drawing this conclusion from only a short experience and sample size of one, so I could be wrong.

Posted by: Kevin at January 7, 2006 08:29 PM

"weekly nonsupervisory earnings" means earnings per person, or aggregate earnings across the entire economy? If it's the former, then it could mean higher average pay for fewer people.

Also...does "computer systems design" refer to a job category, or to an industry? That is, if a person does computer systems design, but is employed by Target, does he fall into this category? I'm guessing it's an *industry* category, since that's what the other three categories are.

And finally..if these categories *do* refer to industries, then who is counted within the industry? Does "telecom" include everyone in the company, including linemen and account execs, or is it restricted to someone's assessment of jobs that represent the Platonic Form of telecommunications?

Posted by: David Foster at January 7, 2006 09:49 PM


Here's my yearly raises for the past 5 years, if you want "real-world" data.

2000 - 10%

2001 - (2)% (took new position)

2002 - 5%

2003 - 3%

2004 - 30% (took new position)

2005 - 3%

All in all, not too shabby I guess. At least I wasn't without work. I'd like to see 5%+ a year though without having to change jobs.

Posted by: Wes at January 9, 2006 10:28 AM

David--It's earnings per person for that industry, and it counts everyone who is not a manager (hence, nonsupervisory).

Wes--Thanks very much. By my count thats 11% per year for the past three years. Good work!

Posted by: Mike Mandel at January 9, 2006 01:01 PM

Frankly, I don't know why anyone would want to work in tech anymore - let's face it, the skills involved have largely become a commodity, with a large part of the formerly requisite creativity engineered out of the equation by software tools, etc..

I work for a major telcom provider, and the advent of IP-based routing protocols running on off-the-shelf platforms has put many telcom workers, and their intimate knowledge of chattering-relay technology on the street. Now, you either make a lot of money designing these networks (beyond the skills of most former telcom workers), or you make very little reacting to 'idiot-light' style alarms. Many in the industry only continue to work because they work with platforms that will eventually be replaced with converged approaches, and companies won't spend the money to more fully automate OA&M.

Brandon, I'm not going to India - ever. In five years, I'll be out of tech forever ... it doesn't matter whether I love the work or not; it just won't ever pay well over a sustained period. My take on the current uptick in tech wages is that they're the labor market's latent response to a soon-to-be corrected notion that the good times have returned.

Bottom line: American tech workers whose jobs CAN be done in Bangalore WILL eventually be done in Bangalore, because Americans will never compete successfully against someone with a state-subsidized graduate degree, who demands only $15k/yr, to produce a commodity. Sorry

Posted by: larry b in op at January 9, 2006 01:32 PM


"Frankly, I don't know why anyone would want to work in tech anymore - let's face it, the skills involved have largely become a commodity, with a large part of the formerly requisite creativity engineered out of the equation by software tools, etc.."

That's a good comment, but you refer to people watching idiot lamps as tech workers. I think not...

Regardless of what kind of glamor someone decides to apply to a job, there are few true technology jobs. Back when communications was hot I met a guy who said he worked in communications. I asked him what part, he said cell phones. I asked what part of that and he worked at a Verizon wireless store. Communications my foot, that is retail.

I work for a retail company in the technology department. Only companies that really sell software are true technology companies (IBM, Microsoft, Google). Retail is a scary place to work because of the thin margins often forces companies to offshore real development.

In the future the only tech jobs aside from Microsoft, Google, and other tech companies will be either requirements gathering, project management, or support. That means installing software, making minor modifications, and database support that doesn't go overseas. Nothing is safe. Very little development will be done here, which not surpringly, is where a majority of the idiots come into the equation. Those are people who read books and study keywords to get a job. Put them into any real business problem and they will try and bluff their way through it. Those are the people who should truly be worried about a job.

Posted by: Wes at January 9, 2006 04:45 PM

Wage growth is how we employees look at it. What has happened to total spend by companies on employees? I'm thinking of health care, retirement matching, training, etc.

I just wonder if wages are a smaller percentage of employee expenses than they used to be.

"you got a raise. it's called health insurance for 1 more year"

Posted by: Dan at January 17, 2006 03:43 PM

Theres a good article about IT employment here:

They focus on the increase in the number of IT manages, but also have some very interesting data on the number of jobs in a number of areas in 2000 and 2005. We're now back in overall IT jobs and unimployment to almost the 2001 high, and growing fast, but a few select areas are down significantly in number. I think the IT naysayers may be looking at those particular areas and using those to guess the health of the industry as a whole, and this is just wrong. Economic progress always has areas rising and falling, and thats true within IT as much as anywhere. The field as a whole, however, looks pretty damned health.

Posted by: Kevin at January 20, 2006 06:14 PM

An update on real wages, nationally....

Posted by: Brandon at January 31, 2006 08:10 AM

America started it NJ is IT and the Patent Center.

Yes my mentor Thomas A. Edison still holds the record.

God Bless America, land that we all love. Do we all stand beside her here? I do!

Who will not take American dollars? Do they give us any or there money? Yes how you count it does matter and is size.

IT wages will and do depend on the ROI. The K I S S principle is always evident.

Raises depend on the valuation seen and then is given. Similar to trust.

Posted by: Jonathan R. DeMallie at August 20, 2006 10:55 PM

I think the comment above on IT/tech skills becoming commodities is largely proving to be true. It seems to me that every industry or category has a life cycle. For you flamers out there bear with me all the way to the bottom. These are general comments and trend observations, not statements of perfection that are easy to quantify. Gaps, exceptions, and success stories are still part of the landscape. I'm going on observations and experience not Census Bureau data.

#1 - Early in the life cycle is the "specialty" time. For labor this is when demand is high and there are very few people who possess those skills. To me, this equates to the early -mid 90's. MSFT/Dell/Silicon Valley/etc. were all booming, stock valuations were going through the roof. It was a go go time with lots of excitement. Several good years in this phase. It also put a big light on an appealing industry where the jobs paid well and workers were valued. The flood of newbies into the industry started here.

#2 - Mid life cycle is "mature". Roughly supply = demand. This follows the specialty phase by a couple of years. The first people to jump into the industry are now in the industry and starting to change the ratio of supply and demand. Companies are now selling products that automate or process all the things that used to require specialty skills. There is now a pool of knowledge to draw upon based on the experience of the early "specialty" workers. No more new stuff. Most of the work is known, understood, and can be described by rules and logic diagrams.

#3 - Once you go past the mature part of the life cycle you are sinking into the pit of "commodity". Now demand is low and the labor supply is quite high. Value is no longer part of the labor equation because the demand for it is now greatly diminished. As in other industries, labor is now a line item on a budget that can/must be squeezed just like every other line item. Deservedly so, since many recognize that automation, rules, and processes can now do the work that used to require specialty skills. Version 3 and 4 of software is now out and has largely been debugged and made easy so that a low tech or no tech person can do the job. In some cases, you could say that we've worked ourselves right out of a job.

What's the answer? How do you fight this unstoppable cycle? It's not bad. It is human nature. It's business. #1 we recognize an opportunity, #2 we offer a solution and then #3 we proceed to make it make it smaller, faster, cheaper, better and easier to produce, until we have squeezed everything we can out of it, including the people that used to be part of it. It has happened over and over through history.

The only solution I see is to start the cycle all over again in a "new" category or industry. Innovating, opportunity recognition, trendspotting, and problem solving come into play here as we all go about finding that next best "thing". Progressing through your work life, to me, is more and more about sequentially starting or finding a niche where demand is high and supply is low and then managing the life cycle that is invariably attached to that specialty. LIFELONG LEARNING has new meaning. You always have to be getting ready for the next thing, the next change. I think that from here on out, we are all going to have to deal with significant change in our work lives. Multiple categories and industries.

Does anything stay the same? Maybe the items that many techs deride and ridicule. Sales and marketing are the first things that come to mind. Business is another. Personal skills. Now that I think about it, these things have always been around. It's the techie things that have always been blowing in the wind and fading away.

Posted by: Jeff Bach at October 3, 2006 11:09 AM

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