Software developer wages fall 2% as workforce expands

A labor pool with plenty of young people and long unemployed older developers may be making it possible for employers to pay less.

WASHINGTON -- The U.S. tech industry added nearly 64,000 software-related jobs last year, but as the workforce expanded, the average size of workers' paychecks declined by nearly 2%.

There are a number of possible explanations for the decline in pay, but a common one cited by analysts is simply that the new people being hired are paid less than those already on the job.

The average annual wage of all workers in the software services sector was $99,000 in 2012, about $2,000 less than the prior year, reported TechAmerica Foundation in its annual Cyberstates report.

The foundation is an affiliate of the industry trade group TechAmerca. It uses U.S. Department of Labor data to assemble its report.

Matthew Kazmierczak, a senior vice president at TechAmerica, said if there is lots of hiring in an industry and the pay for new hires is below average, the average wage could go down.

The pay of newly hired workers could be below the overall salary average "if many of the new jobs are more 'entry' level or [are filled by] people without the same specialized skills or years of experience -- managerial or otherwise -- as a more seasoned employee," said Kazmierczak.

"It is also possible that with the recession, wages [for new hires] dropped as more people were competing for jobs. So wages for new jobs are below average," said Kazmierczak.

The Cyberstates report puts the tech labor force at 5.95 million people in 2012, an increase of 1.1% from the prior year. Of that total, 1.87 million workers are in software services jobs.

Software services, which includes the government-defined labor categories of software publishers, custom programmers, computer facilities management and other computer related services, are the best paid and the largest segment of the tech workforce.

The next largest category, engineering and tech services, employs 1.62 million. The average salary for workers in this segment increased by $1,500 to $92,500. But unlike software services, job growth was modest, increasing by only 11,300 last year.

David Foote, the CEO of Foote Associates, which analyzes IT hiring trends and wages, said the supply of workers in the software services segment "is plentiful" because "there are many unemployed workers who want to get back to work."

Employers, consequently, did not need to offer generous wage packages to fill many of their jobs. "In fact, [employers] could get workers pretty cheap," said Foote.

Foote said the IT-industry-specific Cyberstates study doesn't include all tech workers. Working against the wage decline is high demand for people with certain software skill sets, which puts upward pressure on the pay of certain jobs that are harder to fill, he said.

Victor Janulaitis, CEO of Janco Associates, a research firm that also analyzes IT wage and employment trends, cited a number of reasons for the decline in wages for software professionals. First, technology is becoming easier to implement without the services of an IT professional, he said. Also, the option of turning to outsourcing creates less pressure to increase wages.

As the recession continues, companies continue "to look at productivity and will often look to hire individuals who are lower-cost employees," said Janulaitis.

He noted that the lower-cost segment of the labor pool could include displaced baby boomers who have been out of work for some time and "will take a lower-paying job just to get back into the workforce."

Patrick Thibodeau covers SaaS and enterprise applications, outsourcing, government IT policies, data centers and IT workforce issues for Computerworld. Follow Patrick on Twitter at @DCgov, or subscribe to Patrick's RSS feed . His email address is pthibodeau@computerworld.com.

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