Information technology professionals, who were wooed with exorbitant salaries and lucrative perks in the late 1990s, are facing a reality check this year as their total compensation declines for the first time since 1997.
Economists and recruiters attribute the dip to the recession and slowing consumer demand for computers and services, a change that has led to pay freezes, pay cuts, loss of bonuses and layoffs in a sector that was instrumental in sparking the nation’s last economic boom.
“Every quarter, fewer and fewer companies are reporting that they are having difficulty filling their technical and professional jobs,” said Kathryn Kobe, an economic consultant at Joel Popkin & Associates in Washington who tracks wage indicators. “The economy has slowed down enough that there is not as much demand.”
A new survey of 10,109 information technology professionals by InformationWeek magazine supports those claims. The trade publication reported last week that median compensation for technology managers dropped 8 percent, to $89,000 this year from $97,000 in 2001.
Meanwhile, median compensation for IT staffers dropped 11 percent, to $63,000, down from $71,000 last year. The declines are the first since the publication began tracking salaries and compensation five years ago.
Overflowing talent pool
Bill Coleman, senior vice president of compensation at Salary.com in Wellesley, Mass., said many companies are avoiding the generous salaries and perks that were used to attract employees a few years ago. And, with information technology unemployment hovering at 5.7 percent nationwide, employers have more than enough talented professionals to choose from these days.
“Four or five years ago, people were working and being promoted faster than they otherwise would have been, and they were receiving salary increases faster,” Coleman said. “Now, when they leave a job, they are facing the reality of what the real market is, and they are noticing that total compensation has leveled off. Salary growth has also slowed down. Eighteen months ago, IT salaries were increasing by as much as 12 percent per year.”
Morris Green, chairman of Hayward Simone Associates, a staffing and technology management services firm on Wall Street, can vouch for that. He maintains that clients who once commanded six-figure salaries are being offered significantly less by companies seeking to reduce labor costs. Moreover, talented clients who formerly were placed within a few days or weeks are now unemployed for a month or more.
“Salaries are down anywhere from 25 to 30 percent, and that includes base salary,” Green said. “The market is flooded with talented people. We are back to an employers’ market.”
When InformationWeek examined the data it collected, it found that 4 percent of the individuals polled were unemployed. Of those, the majority–64 percent–were laid off in the aftermath of September’s terrorist attacks. On average, the laid-off professionals were given about three weeks’ notice before their jobs were terminated.
In addition, 2 of 5 said they received no severance package, and another 27 percent reported receiving less than a month’s worth of salary. A third received, on average, four months’ severance.
Specialists in demand
“The hardest-hit job functions were application development and networking,” said Rusty Weston, author of the study. “Specialists in the areas of security, groupware, and wireless appear most likely to remain employed. The deployment of all three of these skills is quite often for long-range initiatives, requiring expertise over time.”
Weston also found that base pay was up by only 3.8 percent for information technology managers and 1.7 percent for staffers, suggesting that the escalating salary increases that characterized the Internet era had ended. Those small increases were more than offset by declines in bonuses, stock options, signing bonuses and other cash incentives, leaving technology professionals with a decline in overall compensation.
“Most people are also seeing some cost-of-living adjustments in their salaries,” Weston said. “We had been looking at double-digit increases in base pay and in total compensation over the past few years. So this is a sharp decline.”
