Why Are Median Salaries Falling for Some IT Job Positions?

Over at Computer Economics, we've just released our new IT Salary Report for 2019, and there are some findings that are a bit counter-intuitive.

For example, in a time of low unemployment and a strong economy, you would think IT salaries would be strongly rising across the board. But that is not the case. Although across all IT jobs, salaries are rising at the median, for some job positions, the national average salaries are actually falling.

As we write in a Research Byte for the new report. 

Another factor we are seeing is that the salaries of new hires are decreasing. This usually does not happen in a strong economy. However, many IT workers are migrating from high-cost-of-living cities to places such as Nevada, Idaho, Oregon, Colorado, North Carolina, and Florida, where they usually earn a lower salary but enjoy a much-lower cost of living. Many employers have also been moving their operations to these same low-cost areas. In terms of real dollars, salaries might not be increasing as quickly, but workers are still seeing benefits.

“National medians are useful for determining the general direction of the economy or hiring, however this year, more than ever, it is best to look at salaries at a regional level,” said Tom Dunlap, director of research for Computer Economics, based in Irvine, Calif. “As major cities vie to attract employers looking to take advantage of lower costs and new supplies of talent, salaries will be in flux.”  

In economic analysis, one of the mistakes people make is to fail to recognize the rational decisions that individuals and organizations make in response to incentives (or disincentives). There is no doubt that the cost of living--and the cost of doing business--in some parts of the U.S. have gotten ridiculous. Think of the San Francisco Bay Area, for example.

As housing prices, and office space lease rates go through the roof, what are the logical choices? For both individuals and companies, it is to relocate to cheaper metropolitan areas--whether it be across the Bay, or out of state to Nevada or Texas. 

The option of remote work has made this choice much easier. Over the past decade, an increasing percentage of the IT workforce has been working remotely, whether telecommuting a few days a week, or moving out-of-state altogether.

It used to be that relocation meant turnover. Today, not as much so. For strong performers, employers are often willing to let them relocate and work remotely. The business keeps a strong performer, and the employee sees his or her salary go farther. Or, organizations may relocate to a more cost-effective location and allow many of their employees stay put.

Ultimately, salaries find their natural level, and that's what we think is going on right now for some IT positions.

The salary trends introduction to our IT salary report is available at no charge on our website. It also comes with a sample of our salary tables.