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Tech workers and pay – how out of control is it?

Two articles crossed my desk about pay in the tech industry.    

First is the Wall Street Journal.   Quote “Wage inflation in the technology sector is accelerating, pressuring companies to boost compensation for key roles by 20% or more as they compete for a limited pool of workers skilled in areas such as cloud computing and data science. 

There is no single source of data on all tech jobs, but it is clear from a range of market analysts and executives that demand for labor in the tech sector is on the rise. During the first quarter, U.S. employers posted 1.1 million tech jobs, an increase of 43% from a year earlier, according to information technology trade group CompTIA. 

The tech roles in greatest demand include cloud computing architects, data scientists and modelers, and machine learning experts. Staffing firm Mondo, an Addison Group company, said that at the high end of the compensation range, cloud architects saw average salary increases of 25% between 2020 and this year, while average salaries for software engineers rose 11% over the same period. 

The article continues with stories of wage increases across the board, from venture capital Murray Hill reporting increases topping 20 or 30 percent, to the CEO of Egnyte, noting average wage increases of 50% and some workers doubling their pay in the past year in their European operations in Poland.  

Insider had their version, too – and cited quote, “An internal Google survey recently obtained by Insider showed that a rising number of employees said their total compensation wasn’t competitive compared with similar jobs at other companies. While 63% of Googlers said their compensation was competitive in last year’s survey, only 53% said the same in 2022.” 

The article then looked at Glassdoor and Levels.fyi postings showing pay discrepancies, highlighting the difference between market pay, the competitive salaries used to attract hires, and current pay, which is what a company pays existing employees.  

Quote “the tech-recruiting firm Dice reported that tech salaries increased over 6% in the past year to a record average of $104,056. In June 2020, wages rose a whopping average of 9.8% for job switchers in the IT industry, the payroll firm ADP told The Wall Street Journal.”

Why do we care? 

Labor remains the number one cost line for IT services.   You can’t deliver services without people, regardless of how much automation you put in place.   I won’t gloss over the automation solution – that certainly should be part of the equation.    What’s notable is that those who lean into automation then are required to have those significantly more expensive humans running the systems.    

The paradox of removing humans from the system by automation also makes an organization incredibly reliant on the humans it has due to their high skill levels. 

And if the answer is the owner does it, you’re really in trouble. 

I’m highlighting this risk area for owners and managers due to the speed.  These are massive jumps in one year and likely well out of range of annual budget planning.    It’s just Q2, and those budgets may be incorrect already.