If tech is so important, why are IT wages flat?

Unemployment for IT is well below national rates, but wages are barely moving

WASHINGTON -- Despite the fact that technology plays an increasingly important role in the economy, IT wages remain persistently flat. This may be tech's inconvenient truth.

The still sluggish U.S. economy gets most of the blame for this wage stagnation, but factors such as outsourcing and automation also contribute to the problem, say analysts.

"IT salaries have not really kept pace with inflation," said Victor Janulaitis, the CEO of Janco Associates, which reports on IT wage compensation.

In 2000, the average hourly wage was $37.27 in computer and math occupations for workers with at least a bachelor's degree. In 2011, it was $39.24, adjusted for inflation, according to a new report by the Economic Policy Institute (EPI).

[See related story: "In a symbolic shift, IBM's India workforce likely exceeds U.S."]

That translates to an average wage increase of less than 0.5% a year. In real terms, IT wages overall have gone up by $1.97 an hour in just over 10 years, according to the EPI. The Washington-based think tank gathered data from the Current Population Survey, a monthly survey of households conducted by the Census Bureau for the Bureau of Labor Statistics.

And here's another data point to consider. Yoh Services, a staffing firm for skilled IT professionals, keeps a running index of hourly technology wages. In its latest measure, for week 12 of 2012, it listed the hourly wage as $31.45; in comparison, Yoh listed the hourly wage as $31.78 for the same week in 2010.

Someone who earned $31.78 in 2010 would need to make $33.71 today to stay even with inflation, according to the government's Consumer Price Index Inflation Calculator. Yoh has data going back over 10 years, and in most years hourly wages have run in the $30 to $32 range.

Joel Capperella, vice president of marketing for Yoh, said companies are making more use of contracted labor, allowing organizations to staff up temporarily during periods of high demand and essentially "run virtual just-in-time talent supply chains."

Capperella said there is a correlation between the wages paid to temporary professional workers and the salaries of full-time employees, "because historically temporary demand increases have preceded an increase in permanent employee demand," he said.

"However, this recovery period has been so sluggish that the industry has not seen the correlation between an increase in contracted labor indicating that an increase in permanent jobs is imminent," said Capperella.

Nonetheless, it's still true that wages will rise for people with skills that many employers are seeking, according to analysts. For example, Capperella said the supply of IT pros who know the agile development methodology is very low, while demand for people with those skills is strong. Therefore, those workers will "command a very high hourly and salary rate," he said.

John Longwell, vice president of research at Computer Economics, said that "it would be fair to say that the globalization of markets for goods and services is helping restrain wages across many sectors, including the IT sector."

But Longwell cautioned against overstating the impact of IT offshoring.

"Maybe 30% of IT organizations are offshoring some -- and only some -- app development work," Longwell said. "This is substantial, and offshoring is certainly having an impact on programmers."

But other factors, such as low inflation, sluggish economic growth and improving productivity, "are important factors in restraining U.S. wages in general, including IT wages," said Longwell.

The EPI report was written as a counterpoint to a Microsoft report (download PDF) urging Congress to make more work visas available.

Microsoft is proposing that companies pay the government $10,000 for H-1B visas in a new annual pool of 20,000 visas for people from foreign countries who hold degrees in the so-called STEM fields (science, technology, engineering and math). The company also proposed that the government annually set aside 20,000 green cards that would be available for $15,000 each.

The company argues that there is still an IT skills shortage. To back up that argument, it cites its own experience in recruiting workers as well as statistics indicating that there is a shortfall in the number of U.S. students who are graduating with degrees in computer science. In its report, Microsoft says that the U.S. economy each year is producing 120,000 additional computing jobs that require at least a bachelor's degree, but only about 40,000 computer science bachelor's degrees are awarded annually.

That looks like a clear gap, but EPI report author Daniel Costa, an attorney and immigration policy analyst at the policy research firm, said that less than one-fourth to less than one-half of workers in computing occupations will have a computer science degree.

If there was a shortage of skilled workers, it should show up in employment statistics, and Microsoft argues that it does. It points to an unemployment rate of 3.4% for people in computer-related occupations. It also cites the problems it encounters as it tries to fill its own job openings.

But the EPI report argues that for computing professionals, particularly those with college degrees, the actual full-employment unemployment rate is closer to 2%.

"As of 2011, the unemployment rate of college-educated STEM workers was still 3.4% -- more than double the 1.4% rate it stood at immediately preceding the recession that began in late 2007," wrote Costa.

Contrary to Microsoft's claim, Costa wrote that "there are too many educated, experienced STEM workers who are trying to find a job; there is not a shortage of them."

Patrick Thibodeau covers cloud computing 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.

See more by Patrick Thibodeau on Computerworld.com.

Copyright © 2012 IDG Communications, Inc.

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