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Info Tech Salaries Drop, Our Survey Finds. What's Holding U.S. Pay Down?

Apr 25, 2008 (08:04 PM EDT)

Read the Original Article at http://www.informationweek.com/news/showArticle.jhtml?articleID=207401820


Salaries for U.S. tech professionals are getting the squeeze. For the first time since the popping of the dot-com bubble, InformationWeek's annual U.S. IT Salary Survey finds that the median pay for IT professionals dropped year over year.

For IT staffers, median base pay fell to $73,000, down from $74,000 the previous year. For managers, median base pay dropped to $96,000 from $97,000 last year. Median total compensation, including cash bonuses, also dipped a hair--down $2,000 to $76,000 for staff, and down $2,000 to $103,000 for managers. The survey includes more than 9,600 U.S. IT pros.

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It's unsettling for IT pros, who've weathered a tumultuous boom-and-bust-and-rally so far this decade and once again face the uncertainty of economic downturn. Wages stagnated before for U.S. IT workers, starting in 2002, as IT layoffs abounded during that recession just as the offshore outsourcing surge began (see chart, "A Decade of Paychecks" below).

chart: A Decade Of Paychecks -- Data: InformationWeek Research U.S. IT Salary Survey of 9,653 IT professionals, spring 2008; 5,080 IT staff and 4,573 IT managers

(click image for larger view)

Yet the forces holding down average salaries today are more complicated than six years ago--and probably include some good news, in the form of increased hiring, which is growing faster in the lowest-paying IT segments. The economic slowdown likely is taking its toll and could do more damage. There are long-term forces at work, including competition with lower-cost offshore talent, though a surprisingly small share--about one in five--sees outsourcing driving down U.S. IT pay. Other factors pulling down median pay could be retiring baby boomers being replaced by less-expensive younger workers, and even an industry-wide mismatch of skills with job titles. "My guess is that all of these factors are playing a role in the IT wage picture," says Ron Hira, a professor of public policy at Rochester Institute of Technology.

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IT remains a well-paying professional career in the United States, one that employs around 4 million in the country, where jobs have been growing quickly and opportunity abounds for people with the right skills. IT has always been a segmented market depending on skill levels, and that continues today. A staff specialist in ERP or Web infrastructure can easily make six figures, while the typical help desk pro makes half that. Competition's fierce for people with high-end skills, including the right mix of industry and tech experience. "If you're a former nurse doing tech stuff now, you're good to go," says John Glaser, CIO at the Boston-area hospital group Partners HealthCare, who sees a talent crunch in health care IT as hospitals race to implement e-records.

However, IT also remains a profession of continuous change--like the huge shift early this decade that slashed programming jobs and brought a surge in management functions--making data like our salary survey critical for any serious IT professional to understand. This article will parse through the forces holding down U.S. IT wages. The accompanying article, "Average Info Tech Pay Drops To $105,000 For Managers, $78,000 For Staff, Our Survey Finds", provides an in-depth breakdown of the survey stats.




THE SLOWING ECONOMY'S EFFECT
The InformationWeek survey was conducted in February and March, before much of the financial services turmoil hit, so pay trends could dip even more if this slowdown is severe. "The impact of the recession hasn't fully shown up yet," Hira says.

It hasn't shown up in the number of employed IT pros. It's surprising to see IT wages stall in part because IT employment appears to have grown so strongly the past year. For the 12 months ending in March, average U.S. IT employment is 12% higher than a year ago, hitting an all-time high of 3.8 million IT jobs, according to Bureau of Labor Statistics surveys. Yet a lot of that growth is in lower-paying roles. In the first quarter, 30% of new U.S. IT jobs were created in computer support, where the median pay is $51,000, according to our survey. That could explain some of the falling overall median.

The impact of an economic slowdown also varies by geography, which Hira thinks explains why the Washington-Baltimore area is doing much better than New York and New Jersey. Median pay for staff in Washington-Baltimore rose this year to $95,000 from $92,000, while median pay for IT staffers fell from $90,000 to $85,000 for those in New York, northern New Jersey, and Long Island, which depends more on banking.

But it's not just Wall Street tech pros feeling nervous about jobs. The state of the economy has everyone nervous in Maine, says Keith Gosselin, who runs IT for Biddeford Savings, a four-branch community bank in southern Maine. Gosselin has seen most of the bank's IT operations outsourced, so his job is a mix of managing vendors right down to fixing a fouled-up fax machine. Gosselin, who joined the bank about five years ago after working for it while running his own IT services company, is unusual in getting "a bump" of about 3% in salary for passing the Certified Information Security Management exam, on top of a 3% raise; just 7% of staffers say they got a bonus based on certification, our survey finds. A recruiter has his resumé, but "for now, I'll sit still unless something great comes up."

This is a global IT talent market, and U.S. pros must be aware of what work is vulnerable to being outsourced to lower-cost countries, from India to South America. IT pros believe that the trend's hurting the overall profession, but surprisingly few see it hurting their careers personally, our survey finds.

OUTSOURCING: HURTS US, NOT ME

Highest Paid
Staff Functions ...
Total annual cash compensation
(in $ thousands)
$95 Enterprise application integration
$92 Web infrastructure
$92 Enterprise resource planning
... And The Lowest Paid
$65 Training
$65 General IT staff
$51 Help desk/IT support

Note: Figure is the median for each function.
Data: InformationWeek Research U.S. IT Salary Survey of 9,653 IT professionals, spring 2008; 5,080 IT staff
Asked about the impact of outsourcing, 55% say it has led to fewer jobs being available, followed by lower morale (54%), new hires at lower pay (41%), and skills valued less (32%). Yet only 22% think it leads to reduced salaries for employees. When asked how outsourcing affects them personally, two-thirds say it's had no impact, 14% have gotten new responsibility, and 4% have been promoted. Six percent say they've lost a job.

Economic theory tells us that jobs vulnerable to offshoring will face the most wage pressure, but jobs that are difficult to do remotely and must stay in the United States could actually see wages rise. Among those "sticky" jobs are positions with customer-facing roles such as analysts, as well as those too sensitive to offshore, such as security, says professor Erran Carmel of American University's Kogod School of Business, who also chairs the IT department. However, our salary survey shows pay for a variety of "analyst" jobs either flat or down. Business analysts, for example, earn a median $75,000, down from $80,000 last year. Pay for security staffers continues to rise, up $3,000 to $83,000.

Robert "Woody" Weaver says he's found a sweet spot in the global IT competition. As an IBM IT security architect consultant, he's doing "customer-facing" work for the federal government, having recently finished an assignment for the Veterans Affairs Department; he now has an engagement related to a five-year contract IBM has with U.S. Customs. "I was doing systems integration work in the commercial sector, and that's more boom or bust, whether people are buying equipment," Weaver says. Having a security clearance--not difficult for a nonfelon to get, but it can take awhile--adds job stability.

It's been a good year for Weaver in terms of raises--7%, plus a small bonus, in part for doing work outside his IT-specific duties, such as helping prepare sales material for other contract bids, mentoring, and helping with documentation. Weaver, who's been working as a contractor since 1996, also spent many years as a college professor of computer science and math. "I've been in this for 30 years," he says.

Anna Gathright is in the private sector and doesn't feel much pressure from offshore competition. This year brought her a 9% raise, tied to her promotion to systems administrator from programmer at Murphy Oil, an oil and gas company in south central Arkansas. "Both jobs are very stable," she says, and not particularly vulnerable.

Another factor possibly dragging down pay trends is baby boomers retiring, says David Foote of IT salary research firm Foote Partners. Retiring senior IT workers usually are replaced by younger individuals who are often paid a lower salary for the same job, he says.




SO, IS THIS STILL A HOT CAREER?
Our data shows fewer IT pros are happy with their paychecks this year. Fifty-six percent of staff and 63% of managers are satisfied or very satisfied with their compensation; that's well off last year's 63% for staff and 71% for managers. In overall job satisfaction, 59% of staffers and 67% of managers are satisfied or very satisfied, off a few points from last year but comparable to 2006.

More people are putting a premium on job security: 37% cite it as a factor that's most important to their jobs, up from 29% last year. But IT people's sense of their job security is unchanged, with nine out of 10 IT pros feeling strongly or somewhat secure.

It's looking farther down the road that many U.S. IT pros worry about the career. Only 39% of staff and 51% of managers say the career path looks as promising as it did five years ago, almost identical to last year's view.

With a lot of help desk jobs moved offshore or automated, it's harder for younger people to enter the tech field for their first jobs, says Bill O'Reilly, who has worked for six years as the IT manager at Seattle Prostate Institute, a provider of health care for prostate cancer patients. "When I started out, you could dabble for a few years and learn a lot of different things," he says. "Now you need to specialize, be the person for virtualization or be the person for security."

Highest Paid
Management Functions ...
Total annual cash compensation
(in $ thousands)
$130 Data mining/data warehouse
$121 Web infrastructure
$121 Wireless infrastructure
... And The Lowest Paid
$79 Training
$75 Web content development
$72 Help desk/IT support

Note: Figure is the median for each function.
Data: InformationWeek Research U.S. IT Salary Survey of 9,653 IT professionals, spring 2008; 4,573 IT managers
John Pouliot, network administrator for a large Boston law firm, shares the concern that entry-level jobs are tougher to get but still recommends IT as a "successful and rewarding" career for young people to consider. Pouliot, who expects a pay increase of 3% to 5% this year, warns young people that they shouldn't bank on employers to help them stay up to date on the latest technology. It's true: Only about 30% of IT pros get tuition reimbursement, and about 20% get certification classes paid for. A quarter say their companies offer mentoring to groom younger staff. "You need to spend time on your own keeping up with technological trends" to stay relevant, he says. "This is not a 9-to-5 career."

Erik Kjellquist managed to get his salary increased by about a third as IT manager for Audio Sears, a 100-employee manufacturing company, where he's the one-man IT shop. He was getting ready to leave for another job and helping look for his replacement, but managers opted to give Kjellquist a raise when they couldn't find the right fit.

As one who's been in the job market, Kjellquist is frustrated by what he sees. Half of IT staffers say "aligning business and technology goals" is a critical skill, and 80% of managers cite it in our survey. But ads on Monster, HotJobs, and the like don't call for well-rounded, business-oriented IT experience; they pinpoint very specific skills, such as Flash programming, calling for certifications on a list of products, and demanding specific experience, like years working on a certain server platform. "I hear a lot of the buzz that companies are aligning their IT with business goals, but I don't see a lot of jobs out there that address that," he says.

The IT job market's always been tough to pin down, given how fast technologies and business needs change. This year's salary crunch only adds to the uncertainty.

Photo illustration by Viktor Koen