Inside Today's Falling IT Salary Levels

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If you’re inclined toward an optimistic view, you might look at the slight dip in IT salaries without too much worry.

Sure, IT pay in 2009 is looking anemic. Based on data from Janco Associates(see chart below) the average paycheck slipped a fraction of one percent from 2008. That’s not great, but hey, it’s not terrible. Given the constant dark headlines – and an unemployment rate marching toward double digits – it could be worse.

But a decline is still a decline. Factor in the ravages of inflation, and in real terms that slight fall represents a significant loss of 3-5 percent. Ouch. (Government data claims that inflation actually declined1.3 percent over the last year, but if you believe that you also believe in the tooth fairy.)

Making the salary dip seem worse, perhaps, is the inherent instability of a career in IT. Some lucky individuals stay at one post for several years, but plenty of IT staffers re-enter job market every 2-5 years. Sagging salaries mean that an applicant who now offers more experience could actually see lower pay.

Dreary economic tidings push down IT salaries in a host of ways: company closings, a focus on cost cutting, increased outsourcing. Some firms have hiring freezes. Plenty of aging boomers who hoped to escape the grind now face deflated portfolios and so plan to hang in there – meaning fewer job openings.

Note in the chart below that a few IT positions have maintained salary levels:

Compared with 2007, this year has seen deep erosion among managers in mid-sized tech shops:

A View from the Trenches
It’s a Contractors’ World
Glimmers of Hope
Uncertain Outlook
RELATED NEWS AND ANALYSIS

A View from the Trenches

Tom Silver, a VP at tech job site Dice, noted that the IT job market has gotten markedly worse since the winter.

A Dice survey of 1,900 employers indicated that 58 percent foresee salary levels declining for new hires. A mere 7 percent said salaries would go up, with the rest saying no change.

“That’s decidedly down from when we asked the question six months ago,” Silver said. In November 2008, 32 percent expected declining salaries.

Alarmingly, 43 percent of respondents said layoffs are likely or very likely for technology professionals in the next six months.

Those IT pros who are looking for work are encountering greater competition. Fifty six percent of employers said that they are seeing increasing number of applicants compared with six months ago. Thirty two percent of employers said that back in November 2008.

It’s a Contractors’ World

As tech employers get nervous, they’re trying to fill more jobs with part-timers.

“We’re starting to see more of a shift toward contractors or consulting work, which is exactly what we would expect to see,” Silver said. “It’s what we saw during the last downturn a few years ago.”

“There are some critical projects, like infrastructure projects that help companies become that much more efficient, that have to get funded. Yet employers are still a little bit gun-shy about hiring people on a full time basis.”

Next Page: Uncertain IT hiring outlook

At the Dice site, which several months back offered some 90,000 IT job openings, the list has dwindled to about 47,000. “We’re down 45 percent or so in terms of job count versus a year ago. It’s a pretty tough market out there,” Silver said. He cited a U.S. Bureau of Labor statistic that indicated a surprisingly high tech sector unemployment rate of over 5 percent (versus over 9 percent for the general labor market).

Glimmers of Hope

“There are still areas of tech that are hanging in there pretty well,” Silver said.

“If you have familiarization with anything having to do with making [employers’] systems more secure, then you are in demand.” Also hot is “virtualization, a new area that helps employers make infrastructure run that much more efficiently and save money in the near term. And by all means, if you’re a good programmer…you’re still in pretty good standing.”

Foote Partners, an IT workforce research consultancy, also identified job titles that are holding up in the downturn: IT architecture, business process, security, communication, e-commerce, and several ERP and infrastructure specializations.

In its June 2009report, Foote CEO David Foote wrote, “Once again, job security depends more on the particular combinations of skills brought to the job, both hard and ‘soft’, not necessarily the job or job title.

“Decisions on thinning the workforce don’t begin with job titles or functions, but instead identifying those workers whose skills are either not strategic or do not match up well with the work that needs to get done. So, for example, some applications developers or storage administrators are more important than others even though their job titles may be identical.

“Clearly, the survivors are the shrewd IT professionals who have always been the most aggressive and alert in directing their career development, managing to always be out front of the demand for skills. They may not even be the hardest workers, but they are certainly the most effective. And in a sense the most loyal to their employers if not also their profession.”

Uncertain Outlook

While there may be strategies to retain one’s current post, that doesn’t change the fact that the gloomy drumbeat shows no signs of abating.

“The market is definitely slowing, there’s no doubt about it,” noted Silver.

“People want to feel better, and many people do feel a little bit better, [but] at least for the near term, hiring behaviors from employers are really not changing very much.

“For the most part, I don’t think that’s going to change for a while. Your guess is as good as mine as far as when it happens. I think employers are still playing things fairly close.”

ALSO SEE: IT Salary Levels, 2004-2009

AND: TExpert: IT Hiring has ‘Stabilized’