IT wages stay ahead of inflation

While many industry sector wages have barely kept pace with inflation over the past 15 years, IT workers have done relatively well. Their pay has generally risen faster than consumer prices, showing real gains in living standards.

While many industry sector wages have barely kept pace with inflation over the past 15 years, IT workers have done relatively well. Their pay has generally risen faster than consumer prices, showing real gains in living standards.

But IT professionals haven't done as well as one might expect, says salary analyst Kevin McBride of Cubiks consultants.

This is because wage levels for IT workers have tended to fluctuate along with the unsteady nature of the IT industry. Because it is essentially non-unionised, the industry is more fluid to market conditions and salary variance will be greater due to the boom-bust nature of the IT market, McBride says.

One of the early salary surveys of Cubiks (then PA Consulting) in March 1987 shows a contrast to today’s low inflationary times. Average industry pay rates rose 13.6% that year, with systems analysts getting 22% more, to $33,616, and programmers salaries were clocked going up 20% to $29,160. Keypunch supervisors and operators earned less ($21,110 and $19,746 respectively) and gradually became extinct, at least as job titles.

Managers did not do proportionately better, unlike today. In the year to March 1987, PA Consulting reported average base salary increases for computer industry chief executives of 8% -- from $78,320 in 1986 to $85,370 in 1997.

Throughout the 1990s, as the demand for IT workers followed a general upward trend, wages continued to grow in real terms. For Y2K and the billions of dollars of work that created, skills such as legacy code conversion became in extreme short supply as firms fought to avoid the crisis that -- thankfully -- never happened. The e-commerce and Y2K boom flowed over into 2001, with pay increases again staying well above inflation and even well into double figures.

Surveys from TMP Worldwide and Cubiks showed that in the year ending March 2000 IT workers remaining in their jobs enjoyed an average 5.1% payrise, but as the industry fought to attract workers, overall rates increased 9.1%. The webbifying of industry saw new skills like Java development becoming extremely hot, replacing C++ of several years previously.

Last year, Barry O’Brien of Enterprise recruitment reported wages shouting up 10% to 15% a year in the scramble for staff. Salaries for those with Java skills topped $90,000 or more. However, the global downturn is starting to nibble at IT salaries, with US surveys, as reported by Computerworld this month, suggesting that wage rates are actually falling in the US.

New Zealand is not missing out, with Enterprise, Protocol Personnel and others now reporting an end to “silly” premiums and people accepting jobs for $5000 to $10,000 less than they might have done six months previously. The market is in full action, with the high wages of the past fuelling an influx of new workers from schools and universities, increasing numbers of Kiwis returning home from slump-hit Europe and the US and lower demand in the local IT industry leading to an excess of available IT workers. This is pushing wages down in certain areas.

However, analysts expect once the international situation stabilises and the US comes out of recession that the growth of IT and its salary levels to resume, even if not at the boom rates of recent years.

Looking back over the past 15 years, just about everyone in IT has prospered. Most base salary rates have almost doubled, with individuals generally receiving far bigger increases as they became more skilled and experienced. Bonuses have also grown.

Cubiks has kept its job classifications fairly constant over the years, because McBride says the jobs will have stayed relatively the same. It is just that the technologies used have changed.

Many jobs have changed from straightforward copytyping on manual typewriters to using word processors and PCs.

“Some roles have disappeared, like demand for punch card operators pretty much disappeared in the mid-late 1980s, and there are new jobs like helpdesk administrator, databases administrator and webmaster,” he says.

McBride says most salaries in IT tend to be around $90,000, double what they were, but not much more.

Those who have gained the most over the past 15 years include operations managers, data processing managers and information services managers. Operations managers, for example, have seen their typical base salary increase 127.3% from $30,000 to $68,200.

McBride says this is because the role has become more complex. In 1986, internal networks were used by a restricted number of people and mainframe systems were still common. Today, firms will usually have new networks that affect just about every part of the company. With networks doing more, systems have greater potential to fail, are more complex and have more security issues to be looked at.

The main "loser" post-1986 is the systems analyst, seeing wage growth of only 65.6% over the past 15 years from $30,190 to $50,000. Others with significantly below average increases in base salary include data entry operator (up 70%), data entry supervisor (up 72.7%) and computer operator (up 80.7% to 85.7%). McBride says this is because while the technologies used will have changed, the roles have not.

While wages have been a little above inflation, there has not been the rampant growth predicted, he says, and New Zealand salaries along with its living standards increasingly lag behind other countries. Furthermore, despite years of market reform an relative egalitarian pay system remains, with New Zealand having a flatter pay structure than exists in many overseas countries such as the US and Britain, where industry chiefs earn six figures or even more.

While much reflects the state of the general economy, which has not grown as fast as other countries, McBride cautions against thinking staff might be better off overseas -- an increasingly topical subject as labour markets become more global and the issue of the New Zealand so-called brain drain becomes more controversial.

US salaries, he says, are 2 to 2.5 times those of New Zealand, but the US and Britain, for example, are far more expensive places in which to live in.

The economy is smaller and firms overseas tend to be much larger than the small and medium-sized businesses that dominate the New Zealand economy, so it is inevitable a CIO in the US will earn many times more than a CIO in a similar business here.

However, New Zealand firms usually offer staff more autonomy and more differing experience, and give them a greater chance to proceed quicker up the ladder, he says.

There is also our much-vaunted lifestyle, an even bigger selling point in the 21st century’s ever more work-stressed and overcrowded world.

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