Tuesday, January 17, 2012

Geography More Important than Industry in IT Salaries

Over at Computer Economics, we've just published our 2012 IT Salary Report, as we've been doing for over 20 years.

The headline this year is that IT workers in the U.S. will only receive a 2.8% pay increase, at the median, as shown in the Figure nearby. Even organizations at the 75th percentile are budgeting for only a 3.0% wage increase for IT professionals. That lags well behind the 3.4% rise in the Consumer Price Index for the 12-month period through November 2011.

A short summary of these top line trends can be found a post on the Computer Economics website.

Influence of Industry Sector on IT Pay Scales

Although the general trend for U.S. IT salaries is interesting, what I find more interesting is an analysis of factors that affect IT salaries. After we published this report this morning, we received a media inquiry from a reporter covering healthcare IT. She wanted to know, did we have any data on IT salaries specific to the healthcare industry?

Fortunately, this year for the first time, we provided an analysis of IT salaries by industry sector, based on data we acquired from the U.S. Bureau of Labor Statistics. These "pay relatives" by industry sector complement those that we also provide for over 400 metropolitan areas.

So, to answer her question directly: according to the industry sector data, IT compensation in the healthcare sector is about 82% of the national median. For example, if you are a desktop support technician in the healthcare industry, you can expect to make only 82 cents on the dollar, compared to desktop support personnel nationwide.

A Misleading Statistic

These "pay relatives" by industry sector can be misleading, however. In this example, healthcare organizations tend to be located in all metropolitan areas, both urban and rural, that vary widely in their cost of living. Other industries--financial services firms for example--tend to be concentrated in large metropolitan areas, like New York, Boston, and San Francisco, which have higher cost of living indexes. Low and behold, when we look at the pay relative for the finance and insurance sector, we see that it is 104% of the national median.

So, in our opinion, IT workers in financial services firms on average across the U.S. are paid more than their counterparts in healthcare organizations, not because financial services firms pay more, but because they tend to be located in metropolitan areas with higher costs of living.

Implications for IT Managers

Therefore, if you are using the Computer Economics salary tables to evaluate pay scales in your organization, you are better off to put most of your emphasis on the geographic cut of the data than the industry sector cut.

There are exceptions to this rule, of course. For example, business analysts or applications developers with experience implementing electronic medical records are in high demand right now. Healthcare organizations will likely need to pay a premium to recruit and retain IT professionals with this experience. Likewise, financial institutions are likely to be at the top of the pay scale for IT security professionals with experience in financial transaction processing environments. In the applications area, IT management, business analysis, and other business-oriented positions, industry-specific experience almost always commands top dollar.

But for most other IT positions, such as data center operations, system administration, help desk, desktop support, and other jobs that are not highly industry-specific, consider the geographic dimension as the most important in benchmarking IT pay scales. Essentially, if the person holding the job can move from one industry to another, with little or no retraining, the pay scale for that job is highly dependent on the geography, not the industry.

A full description of the Computer Economics 2012 IT Salary Report, with free sample pages is available.

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