By
Suman Bhattacharyyv
April 21, 2022 5:30 am ETPRINT
TEXT

Length (4 minutes)Wage inflation in the technology sector is accelerating, pressuring companies to boost compensation for key roles by 20% or more as they compete for a limited pool of workers skilled in areas such as cloud computing and data science.

There is no single source of data on all tech jobs, but it is clear from a range of market analysts and executives that demand for labor in the tech sector is on the rise. During the first quarter, U.S. employers posted 1.1 million tech jobs, an increase of 43% from a year earlier, according to information technology trade group CompTIA.

Demand for workers to fill those jobs has been surging since the pandemic began, prompting companies to turn to remote work and other digital initiatives. Inflation at a 40-year-high and the war in Ukraine disrupting tech and outsourcing hubs in Europe also are pushing compensation for tech workers higher.

The tech roles in greatest demand include cloud computing architects, data scientists and modelers, and machine learning experts. Staffing firm Mondo, an Addison Group company, said at the high end of the compensation range, cloud architects saw average salary increases of 25% between 2020 and this year, while average salaries for software engineers rose 11% over the same period.

The rising cost of hiring and retaining top tech talent is creating challenges for chief information officers and other tech leaders and has even caught the attention of chief executive officers.

“It’s stunning,” said Michael Burns, co-founder and executive chairman of iDEAL Semiconductor Devices and managing director of the Murray Hill Group venture capital and private-equity firm. Mr. Burns said wage increases in the tech sector can top 20%, and in hot markets such as Austin, Texas, they can hit 30%.

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SUBSCRIBECIOs and other tech chiefs are under pressure to convince board members to approve higher spending for tech salaries that may exceed pay levels for other jobs, according to Scott Spradley, executive vice president and chief technology and automation officer atTyson Foods Inc. Given the tight labor market, the cost of running and maintaining IT operations is on the rise, and the cost of investing in innovation is going up at an even faster pace, he said.

Companies are giving raises to new hires after just weeks on the job and reviewing salaries multiple times a year as bosses come to terms with a soaring level of inflation that is causing a global cost of living crisis, The Wall Street Journal reported.

Asset manager T. Rowe Price last month announced a 4% raise for 85% of its employees starting from July 1, according to the Journal. That raise, which is in addition to the company's year-end salary adjustments, included new hires who had joined the company only a few weeks back, the company's head of human resources told the Journal.

A low unemployment rate has created a competitive labor market that has seen the scales tip in favor of jobseekers. Some workers are finding that now more than ever, switching jobs results in a larger paycheck. In response, companies are looking to stem employee attrition by accounting for inflation in their pay raises.

US employers had accounted for salary increases of 3.9% in 2022, according to a December report from think tank Conference Board. However, US inflation recently reached a 40-year record 8.6% in May. Meanwhile, Pearl Meyer, a compensation consultancy, found that 70% of organizations had implemented larger salary increases this year compared to 2021.