In-Depth

IT Employment and Salary Forecasts Still Gloomy

Indications are that the economy is picking up. Will IT employment and salaries ever follow?

• By Stephen Swoyer
• 11/18/2003

With progress of this kind, is a recovery in IT spending likely? Research firm International Data Corp. (IDC) thinks so, predicting that IT spending will grow at a healthy five percent clip in 2004, to $916 billion. The big question for many IT professionals, however, is whether there will be an attendant recovery in salary growth, which—like IT spending—has dipped into negative territory over the last three years.

In this respect, there are conflicting assessments. The conventional wisdom seems to be that if you managed to hold on to your job through the tumult of 2002 and 2003, there’s a good chance that you’ll receive a raise in 2004. If you’re out of work and searching for a job (or if you’re looking to change jobs), however, you may find that the base salary you’re offered is a step down from what you earned last year—or even two years ago.

For starters, a recent study from IT staffing firm Robert Half Technology predicts that starting salaries for technology workers in the United States will actually fall by an average of 1.6 percent in 2004. The salary survey, which is based on an analysis of the job searches, negotiations, and placements conducted each year by Robert Half’s recruiting specialists, found that IT professionals in hot sectors—such as information security and systems auditing—will see meager up ticks in salary and compensation next year.

One reason for lack of a recovery in average starting salary and compensation may be that there’s still a glut of IT workers in the market. According to state-by-state employment and salary data collected by the American Electronics Association (AeA), for example, tech employment declined between 2001 and 2002 in 49 of 52 U.S. states and territories. Hardest hit were California—which lost 123,000 tech jobs between 2001 and 2002—Texas (61,000 fewer jobs), and Masschusetts (39,600 fewer jobs). All told, AeA says, the tech industry lost 540,000 jobs—or eight percent of its workforce—in 2002. Overall tech employment in the U.S. dropped from 6.5 million in 2001 to just under 6 million in 2002, according to AeA.

Although the final numbers aren’t yet in, AeA estimates that the technology industry will lose another 234,000 jobs in 2003. While that’s by no means good, of course, it does mark a 57 percent improvement over 2002. The uncomfortable upshot, however, is that more than three-quarters of a million technology professionals have lost their jobs since 2001. This surfeit of unemployed or underemployed technology workers could make it difficult for a recovery in high-tech salaries to occur apace with an up tick in IT spending.

Additional evidence is suggested by the precipitous decline in starting salary and base compensation among many former high-flyers of the dot.com boom. Robert Half projects that traditional desktop support workers will experience a decrease of 5.3 percent in average starting salary, with compensation ranging from $47,000 to $65,000. Almost as bad are starting salaries for LAN administrators, which Robert Half says will decrease by as much as 4.5 percent in 2004, with overall compensation in the neighborhood of $43,750 to $62,500 annually.

To be sure, some industries have fared much worse than others. According to the U.S. Bureau of Labor and Statistics, electronic manufacturing bled jobs between 2001 and 2002, losing 13 percent of its workforce. The software development sector did somewhat better, however, with a nine percent reduction in its workforce, while engineering and technology services lost only 15,000 jobs—a reduction of one percent.

For 2002, the U.S. Bureau of Labor and Statistics says that 6.2 percent of computer programmers were unemployed, 5.4 percent of systems analysts and 4.4 percent of electrical and electronic engineers, among other job fields.

Even with mammoth job losses and an unemployment rate hovering for much of the year around 6.7 percent, California remained far and away the biggest technology employer, with 995,000 tech employees in 2002. Texas was a distant second, with 479,000 technology jobs, and New York third with 330,000.

One potentially surprising upshot of AeA’s research is that technology workers are still very well compensated, at least in comparison with private sector employees. In 2001, AeA researchers say, the average salary for a technology worker was $66,300; that of a private sector worker, $36,200. The AeA study notes that software developers top the list, with wages and compensation in the neighborhood of $105,000.

In terms of tech compensation, however, California takes a back seat to Washington, home of a certain well-known software giant. According to the U.S. Bureau of Labor and Statistics, the average tech salary in Washington state is $94,000 a year; in California, it’s $81,000. Massachusetts ($77,200), Virginia ($74,300), and New Jersey ($73,800) rounded out the top five. Coming in dead last was Puerto Rico ($32,453), preceded by North Dakota ($36,533), South Dakota ($37,521), Montana ($39.059), and Wyoming ($40,309).

The findings of the AeA study roughly track with a survey of North American IT managers that research firm META Group released earlier this year. META Group’s study projected that base salaries for all IT workers would rise by 5 percent in 2003, with certain in-demand job classifications—such as systems architects, network engineers, and Web developers-- seeing increases of as much as eight percent. More to the point, META Group found that the median salary for Unix systems administrators was almost $85,000, while that of senior application developers was nearly $74,000. The META Group survey also confirms the findings of Robert Half’s study, noting that help desk support and LAN administrators rounded out the bottom of the pay scale, earning almost $42,000 and $54,000, respectively.

In an earlier study of enterprise CIOs, Robert Half found that companies that did hire new employees were looking for specific skills, particularly in the area of Windows, SQL Server, and Cisco administration. Windows skills topped the list, with 79 percent of CIOs reporting a need for Windows NT 4.0, 2000, or XP administration skills, along with another 40 percent who identified a specific need for SQL Server administrators. Twenty-nine percent of CIOs identified Cisco network administration skills as a high-demand specialty.

A recent survey by MCPMag (a sister publication of Enterprise Strategies that caters primarily to Microsoft Certified Professionals) found that Microsoft Certified System Engineers (MCSE) who specialize in Windows 2000 reported double-digit salary growth—11 percent—in 2003. The base compensation of these professionals nevertheless trails that of Windows NT 4.0 MCSEs, who reported earning an average of $61,600 annually. The most lucrative certification is the Microsoft Certified Solution Developer for Visual Studio.NET (MCSD VS.NET), where professionals earn an average base salary of $82,300. Perhaps most startling, a Windows NT 4.0 MCSE with as little as five years of experience could earn an average base salary of $63,200, the MCPMag survey found.