As the leader of a company that tracks tech employment trends, I’ve had a front-row seat to the industry’s highs and lows over the past few decades. It’s literally my job to keep up with tech employment trends and I can tell you one thing: It’s an interesting time for both workers and decision-makers in the tech sector.
However, beware of news headlines that show only one side of the story. The U.S. tech economy is going through some unusual changes–and it’s not always easy to wrap your head around them.
Tech salaries are on the rise. Sort of
Maybe you’ve seen the recent Wall Street Journal article making the rounds, exploring the $900,000 AI tech job. It’s a great read–but salary trends are not quite so straightforward.
When it comes to tech salaries, the devil is in the details. Historically, there have been three areas of tech significantly undersupplied: Artificial Intelligence (generative AI and machine learning), cybersecurity, and cloud engineering. Due to limited supply, these specialties already experience higher wage increases than other tech roles–and are natural focal points for today’s tech media coverage.
There’s no question these hot spots exist in tech spaces, but we should view any associated spikes in salary among these roles as outliers. My company’s annual salary survey found that the average compensation for tech roles rose by roughly 7% in 2022. It’s a big jump for the industry and evidence of the surge in demand following the pandemic. But apart from certain hot spots, we expect a normalization back to typical wage pressure, meaning salaries across the tech sector are not as favorable as they may appear.
Salaries are extremely sensitive to supply and demand, and demand for tech roles has dropped significantly compared to last year. In CompTIA’s August report, while three of the company’s four employment stats were trending positively, job postings (arguably the most important statistic) were down. Job postings for the month of August totaled 204,400–the lowest point in the past three years and less than a third of total job postings for the same period in 2022.
Despite turnarounds in the overall unemployment rate across the tech sector, technologists have less bargaining power. Salary is up in selective circumstances, but not universally.
The tech sector stands alone
The U.S. tech economy operates differently than other sectors. In the first half of 2023, the U.S. was down almost 100,000 tech jobs. There have only been three times in the last two decades when this was the case: the dot-com implosion in 2001, the Great Financial Crisis in 2008, and the 2020 COVID-19 pandemic. Tech growth is typically a reliable ramp-up and to the right, so it’s shocking that we recently lost so many tech jobs.
These trends indicate a tech recession. America’s GDP is growing, but parts of our economy have contracted significantly, including tech. Regardless of the overall economy, employers have realized that tech positions are sitting well above the average wage rate. So, while companies may still be in a position to hire after a rough start to 2023 (and a tough few years), there’s still wariness about hiring tech employees.
The U.S. economy may be showing signs of better days to come–but the U.S. tech economy has more catching up to do.
Salary is only one part of the story
A focus on salaries alone is somewhat shortsighted when we evaluate tech hiring trends. We must look at other reasons why employees are staying in their current roles.
Recent research from McKinsey found that compensation and financial factors ranked fourth behind considerations such as career development, flexibility, and meaningful connections. Work-life balance and culture are now influencing workers’ decision-making and loyalty. Tech workers want remote and hybrid work options–and they expect their current level of flexibility to continue.
The tech workspace of the past is gone. We know that the old approach didn’t improve productivity and commuting makes no sense today. The leaders and teams I talk to across tech recognize there’s been a real shift in sentiment around hybrid and remote work, one we’re unlikely to walk back.
While employers understand that tech workers expect flexibility, leadership teams are trying to determine if they have the negotiating power to demand in-office work without creating too many waves as we head into 2024. Only time will tell if they do.
No, AI isn’t coming for tech jobs
Another recent study from McKinsey explored the impact of AI in different work modalities for software developers working on code. The top improvement? Documentation. When developers write a line of code, they’re supposed to document what that line of code does. While an important step, documentation is tedious and not very exciting. As a result, workers get around to it less often or not as quickly as they should (if at all).
AI can support this type of documentation work, but that’s currently where AI applications end in many technical roles. AI isn’t likely to change the role of being a technologist in the next five to 10 years beyond simple support tasks–and it won’t take away jobs or lower average tech salaries. Coding is all about solving problems, which AI isn’t ready for yet.
There’s an assumption in certain circles that companies will start to pay technologists less because they’ll do less work as AI intervenes to support them. But that’s not true. Rather, technologist salaries will likely climb as employers ask the people in these roles to take on more diverse responsibilities.
The past few decades in tech have proven that as technologists gain access to new tools, they use those tools daily, become proficient in them, and then establish an assisted level of output as the new norm. We expect the same to be the case with AI.
In an industry that evolves as quickly as tech, it’s important to do your homework. Research, talk to your peers, and don’t take trending headlines at face value. What you see on the surface may only present part of the story.
Art Zeile is the CEO of Dice.
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