7 ms·

Why salaries don’t rise

48 points by altern8 12y ago

Zenst 12y ago
Big difference from the IT industry and other Industry is IT is still evolving and defining itself. This not only means that those in the feild have to learn far more than other trades to do the same job as it changes. But also this lack of stabilisation has not allowed standard certification and qualifications that stand the test of time. Compare that with accountants and lawyers. Yes they have new thinsg to learn, but controlled and lesser in volume. They also have qualifications that are as current today as the day they got them. There is no standard body that has recognition globaly or the history and in a market in which things change so much, it is hard without seperate area's. Other industries have governing bodies and they in part act like Unions and protect workers and standards for the fiarness for all. Actors guild and book and music rights another area of contrast to software. Lets face it software has developed a culture of free and open which is great, imagine if music and books were more towards that model. So I can see why many feel the industry is and the people working in it are overly taken advantage of. Let us not ignore all that learning and long hours has a burn factor and people burn out quicker than some other profesions. Those prefessions factor in pay to compensate or have standard pension deals. But IT is and will be a while until itself has a good standard and until then it is down to individual companies and it is not since the Googles and the like came about that a level of appreciation for what is involved has come into play. But IT is if you compare to the book industry, still defining the format and types of size teh book should be and ink colour and paper thickness and other details. There is a lot of abstraction from creative aspects and the implementing of those. Also the trade has been easy picking for TAX and with that UK introduced a rule IR35 just some may say to hit IT contractors. Yet in contrast the building industry, they can get a CIS that in effect means you pay less National Insurance than normaly would. Like say in other not so old industries like IT. So IT is still as a trade young and with that has less protection and measure of worth than other trades. Also let us not forget the move from companies to focus more onto share dividends than not and experdited trading that makes it mroe trigger happy. If they can get away with paying 50k a year and say the job is only worth that and use that to class people as over qualified, when the job is actualy underpaid perhaps. Well easy to cry for more fodder into the labour market and one persons poor wage is another persons gold. Just makes it more a case that not skill level and what they are paid are not the greatest of metrics . Still, startups allow you to cut out the wage aspects and many other ways get you into tapping directly instead of more often, feeding into the companies pocket from your own quality of life. Still there are many things in life that have not resolved, I can purchase fair trade chocolate and know the farmer got paid fairly and yet read about local dairy farmers being underpaid for milk at a loss and no fairtrade logo on milk ever. So many unfair things propagate in life. Way to view it, if dairy farming as a industry gets treated badly and is more established than IT then, we take what we can get. Least for a while yet and things are more standard. C today is not C when invented and things change more often than fashion wardrobes at times. At the very least enjoy the ride.
deleted 12y ago
[deleted]
everyone 12y ago
Cant we just fire all these finance guys out of a cannon into space?
- mikeash 12y ago
  Yeah, right; where are you going to get the money to finance the cannon?
  - kazinator 12y ago
    Out of next year's budget, just as we learned by watching the finance guys. Or maybe by selling some debt to another corporation to be used as a valuable tax reduction device.
    - cheepin 12y ago
      ...and just like that, we have become the finance guys.
      - kazinator 12y ago
        But cool finance guys who know how to code and correctly recognize Tom Baker as the best Dr. Who.
        jxi 12y ago
        Hedge fund finance guys already know how to code.
      - angersock 12y ago
        When you gaze into the balance sheet, so too does the balance sheet gaze into you.
tsotha 12y ago
Yeah... no. The reason salaries aren't going up is in the piece but casually dismissed as if it doesn't matter. Instead of "following the money" to people who own companies, why don't we follow the smell of bullshit to the BLS. Unemployment numbers are laughably phony. Of course workers don't have bargaining power - there are millions of people who've been out of work for half a decade desperate for a job and yet not counted as "unemployed". Also, add in health care cost increases that employers have to pay but that don't show up in salary surveys.
- Iftheshoefits 12y ago
  That's part of it, sure. The other part of it in America is the successful suppression of any sort of labor movement and the success of efforts by the very rich to drive a wedge between the merely affluent and the middle and lower classes. America has a real strong strain of the "I'm not poor, I'm merely a temporarily embarrassed millionaire" sentiment.
  - jgmmo 12y ago
    Organized labor getting everything they wanted is what led to basically all US auto companies going bankrupt.
    - mikeash 12y ago
      There are lots of situations where letting either side have free reign is bad, and the best is for both sides to be in healthy competition.
    - michaelchisari 12y ago
      American unions were always pussycats compared to German and Japanese unions, which didn't suffer near the same fate.
    - Frondo 12y ago
      You ought to read this: http://mediamatters.org/research/2014/03/05/myths-and-facts-unions-and-organized-labor/198343 http://mediamatters.org/research/2014/03/05/myths-and-facts-...
adventured 12y ago
Wages are not stagnant, they have begun to rise. And this is simultaneously at a time when Americans just received one of the greatest purchasing power increases in modern history, as the USD has skyrocketed in the last nine months (so far that the USD and Euro are near parity). November "Wages and salaries climbed last quarter by the most since 2008 as a dwindling number of unemployed per job opening approached a tipping point." http://www.bloomberg.com/news/articles/2014-11-19/wages-poised-to-rise-as-signs-emerge-of-improved-u-s-job-market http://www.bloomberg.com/news/articles/2014-11-19/wages-pois... December "An important measure of household income rose in December by the largest amount in nearly 8 years, signaling a long-overdue rebound in family earning power." http://finance.yahoo.com/news/families-are-finally-earning-more-151120875.html http://finance.yahoo.com/news/families-are-finally-earning-m... January "Average hourly wages, meanwhile, jumped 12 cents to $24.75, the biggest gain since September 2008" http://www.kansascity.com/news/business/article9388535.html http://www.kansascity.com/news/business/article9388535.html Wages aren't rising as quickly as expected, because the labor force is not tight enough yet. The U3 is only partially accurate. The labor force participation rate is sitting near a 40 year low and the U6 unemployment rate is still significantly elevated. The U6 was about 9% in 2004 (8% by 2006). It's 11.4% as of February.
- wheaties 12y ago
  This, right here. This is what matters. It's not just that U3 and U6 mean something entirely different but that even the "employed" are people working 20hr jobs, i.e. what anyone else would consider part-time work.
fma 12y ago
Maybe the article refers more towards the assembly line worker, but GM IT receives an annual merit increase (a.k.a. raise) across the board. YMMV based on performance, but if you worked the year you get something. But I do agree that 'returning value back to investors' is sucky. I'm of the opinion rewarding your employees, and hence retaining your employees and their knowledge brings value to the company, and in the end, the investor.
ap22213 12y ago
Software development is supposedly a high-demand skill. And, I hear that companies can't seem to hire anyone qualified. I still get dozens of recruiters contacting me, each week. Yet, with all of that, my salary has remained stagnant for the past few years. My guess is that people have no idea what they're worth, so they don't ask for anything more. I see way too many developers who are getting paid pennies to the dollar. I see upper-end developers working for 70-80k. Look, people. If you have skills, you should be getting paid 150k+ a year. Please, stop taking menial salaries. You're hurting all of us.
- ryandrake 12y ago
  Or perhaps, those $150K jobs are few and far between, and in reality there is no labor shortage. If supply gets low, price (wages) will go up. Price is not going up. Therefore supply is not getting low.
  - tech2000 12y ago
    So all those recruiters he mentioned are just prank calling or they all have the same single job and tons of applicants? I don't get it.
    - ryandrake 12y ago
      Or, all those recruiters are spamming him with jobs that pay below market, because since (as I postulate) there is no actual shortage of labor, there are likely many people out there willing to work for at-or-below-market wages.
      - EC1 12y ago
        I thought this too. Then I entered a job and interviewed 100~ candidates. There is absolutely such a shortage, and this isn't even for anything complex, this was just for a frontend position. I genuinely had to ask a few candidates if they've ever programmed in JS or HTML before this interview, can't even imagine the type of bullshit at higher levels. You can staff your entire company in under a day, sure, but they're going to be utterly useless. Most are, mainly because they don't delve into it beyond school work / work so they never blossom into someone who is very good.
pXMzR2A 12y ago
I love that a nation and an industry that is bent over backwards against unions (both in policy and in stereotypes) gets surprised when wages don't go up. What do you think pushes companies to increase wages, rainbow ponies? Benevolent investors? Gee. Organized labor.
- adventured 12y ago
  Tight labor markets also force companies to increase wages. See 1993 -> 1999, 2003 -> 2007 You can watch while simultaneously organized labor lost nearly all influence over the labor market throughout eg the 1990s, and wages increased as the labor markets got tighter during prolonged economic expansion. For the most part, companies increase wages when they have no choice. The lack of labor supply combined with even low level growth forces wages higher. This is an almost universally agreed upon fundamental of economic theory and practice for the last 200 years, with vast data available as proof. If organized labor were required to boost wages, tech companies in Silicon Valley wouldn't pay such high wages compared to your average UAW member. A company like Microsoft would be able to pay its programmers peanuts, because they are not organized. Instead, Microsoft pays its programmers extraordinarily well.
- prostoalex 12y ago
  Unionizing works for micro-optimization but rarely works at macro level, when entire division, company or industry can be outsourced. To quote from http://www.nytimes.com/2012/01/22/business/apple-america-and-a-squeezed-middle-class.html?_r=2&pagewanted=all http://www.nytimes.com/2012/01/22/business/apple-america-and... "Apple executives say that going overseas, at this point, is their only option. One former executive described how the company relied upon a Chinese factory to revamp iPhone manufacturing just weeks before the device was due on shelves. Apple had redesigned the iPhone’s screen at the last minute, forcing an assembly line overhaul. New screens began arriving at the plant near midnight. A foreman immediately roused 8,000 workers inside the company’s dormitories, according to the executive. Each employee was given a biscuit and a cup of tea, guided to a workstation and within half an hour started a 12-hour shift fitting glass screens into beveled frames. Within 96 hours, the plant was producing over 10,000 iPhones a day."
ghshephard 12y ago
It's important to see what the average age of these newly employees are, age of those unemployed, and also who is exiting the job market. If the newly employed are young (and therefore making lower wages), and those unemployed (or leaving the job market, or just not looking) - are older, and therefore commanding higher salaries - that alone could account for why salaries not increasing on average. It would be useful to get a breakout of salaries biased by tenure, so as to accommodate for the confounding impact of average age of employed/unemployed/left-the-job-market.
patmcguire 12y ago
My own theory: For most employers, there's something almost inconceivable about rising salaries. It's been routine for so long to have layoffs, to tighten belts, to pull together in these tough times and sacrifice, that market power over labor has been internalized into the entire way they do business. If you read any HR industry literature you'll see a lot about the costs of a bad hire and missing out on candidates because they were out of a company's budget. You will not see concern about the opportunity cost of leaving a position vacant. If a company spends six months hobbling along understaffed, waiting for the sure thing to walk in the door for $5k less, that will seriously harm their business. It isn't considered. There are a lot of things like that, aspects of employment that the employer won't change because it simply isn't done. This sort of creates an informal price ceiling, which has exactly the effects you'd expect: lower supply (discouraged workers, low labor force participation), "shortages", and more or less frozen wages.

48 points by altern8 12y ago

Zenst 12y ago

Big difference from the IT industry and other Industry is IT is still evolving and defining itself. This not only means that those in the feild have to learn far more than other trades to do the same job as it changes. But also this lack of stabilisation has not allowed standard certification and qualifications that stand the test of time. Compare that with accountants and lawyers. Yes they have new thinsg to learn, but controlled and lesser in volume. They also have qualifications that are as current today as the day they got them. There is no standard body that has recognition globaly or the history and in a market in which things change so much, it is hard without seperate area's. Other industries have governing bodies and they in part act like Unions and protect workers and standards for the fiarness for all. Actors guild and book and music rights another area of contrast to software. Lets face it software has developed a culture of free and open which is great, imagine if music and books were more towards that model. So I can see why many feel the industry is and the people working in it are overly taken advantage of. Let us not ignore all that learning and long hours has a burn factor and people burn out quicker than some other profesions. Those prefessions factor in pay to compensate or have standard pension deals. But IT is and will be a while until itself has a good standard and until then it is down to individual companies and it is not since the Googles and the like came about that a level of appreciation for what is involved has come into play. But IT is if you compare to the book industry, still defining the format and types of size teh book should be and ink colour and paper thickness and other details. There is a lot of abstraction from creative aspects and the implementing of those. Also the trade has been easy picking for TAX and with that UK introduced a rule IR35 just some may say to hit IT contractors. Yet in contrast the building industry, they can get a CIS that in effect means you pay less National Insurance than normaly would. Like say in other not so old industries like IT. So IT is still as a trade young and with that has less protection and measure of worth than other trades. Also let us not forget the move from companies to focus more onto share dividends than not and experdited trading that makes it mroe trigger happy. If they can get away with paying 50k a year and say the job is only worth that and use that to class people as over qualified, when the job is actualy underpaid perhaps. Well easy to cry for more fodder into the labour market and one persons poor wage is another persons gold. Just makes it more a case that not skill level and what they are paid are not the greatest of metrics . Still, startups allow you to cut out the wage aspects and many other ways get you into tapping directly instead of more often, feeding into the companies pocket from your own quality of life. Still there are many things in life that have not resolved, I can purchase fair trade chocolate and know the farmer got paid fairly and yet read about local dairy farmers being underpaid for milk at a loss and no fairtrade logo on milk ever. So many unfair things propagate in life. Way to view it, if dairy farming as a industry gets treated badly and is more established than IT then, we take what we can get. Least for a while yet and things are more standard. C today is not C when invented and things change more often than fashion wardrobes at times. At the very least enjoy the ride.

deleted 12y ago

[deleted]

everyone 12y ago

Cant we just fire all these finance guys out of a cannon into space?

mikeash 12y ago
Yeah, right; where are you going to get the money to finance the cannon?
- kazinator 12y ago
  Out of next year's budget, just as we learned by watching the finance guys. Or maybe by selling some debt to another corporation to be used as a valuable tax reduction device.
  - cheepin 12y ago
    ...and just like that, we have become the finance guys.
    - kazinator 12y ago
      But cool finance guys who know how to code and correctly recognize Tom Baker as the best Dr. Who.
      - jxi 12y ago
        Hedge fund finance guys already know how to code.
    - angersock 12y ago
      When you gaze into the balance sheet, so too does the balance sheet gaze into you.

tsotha 12y ago

Yeah... no. The reason salaries aren't going up is in the piece but casually dismissed as if it doesn't matter. Instead of "following the money" to people who own companies, why don't we follow the smell of bullshit to the BLS. Unemployment numbers are laughably phony. Of course workers don't have bargaining power - there are millions of people who've been out of work for half a decade desperate for a job and yet not counted as "unemployed". Also, add in health care cost increases that employers have to pay but that don't show up in salary surveys.

Iftheshoefits 12y ago
That's part of it, sure. The other part of it in America is the successful suppression of any sort of labor movement and the success of efforts by the very rich to drive a wedge between the merely affluent and the middle and lower classes. America has a real strong strain of the "I'm not poor, I'm merely a temporarily embarrassed millionaire" sentiment.
- jgmmo 12y ago
  Organized labor getting everything they wanted is what led to basically all US auto companies going bankrupt.
  - mikeash 12y ago
    There are lots of situations where letting either side have free reign is bad, and the best is for both sides to be in healthy competition.
  - michaelchisari 12y ago
    American unions were always pussycats compared to German and Japanese unions, which didn't suffer near the same fate.
  - Frondo 12y ago
    You ought to read this: http://mediamatters.org/research/2014/03/05/myths-and-facts-unions-and-organized-labor/198343 http://mediamatters.org/research/2014/03/05/myths-and-facts-...

adventured 12y ago

Wages are not stagnant, they have begun to rise. And this is simultaneously at a time when Americans just received one of the greatest purchasing power increases in modern history, as the USD has skyrocketed in the last nine months (so far that the USD and Euro are near parity). November "Wages and salaries climbed last quarter by the most since 2008 as a dwindling number of unemployed per job opening approached a tipping point." http://www.bloomberg.com/news/articles/2014-11-19/wages-poised-to-rise-as-signs-emerge-of-improved-u-s-job-market http://www.bloomberg.com/news/articles/2014-11-19/wages-pois... December "An important measure of household income rose in December by the largest amount in nearly 8 years, signaling a long-overdue rebound in family earning power." http://finance.yahoo.com/news/families-are-finally-earning-more-151120875.html http://finance.yahoo.com/news/families-are-finally-earning-m... January "Average hourly wages, meanwhile, jumped 12 cents to $24.75, the biggest gain since September 2008" http://www.kansascity.com/news/business/article9388535.html http://www.kansascity.com/news/business/article9388535.html Wages aren't rising as quickly as expected, because the labor force is not tight enough yet. The U3 is only partially accurate. The labor force participation rate is sitting near a 40 year low and the U6 unemployment rate is still significantly elevated. The U6 was about 9% in 2004 (8% by 2006). It's 11.4% as of February.

wheaties 12y ago
This, right here. This is what matters. It's not just that U3 and U6 mean something entirely different but that even the "employed" are people working 20hr jobs, i.e. what anyone else would consider part-time work.

fma 12y ago

Maybe the article refers more towards the assembly line worker, but GM IT receives an annual merit increase (a.k.a. raise) across the board. YMMV based on performance, but if you worked the year you get something. But I do agree that 'returning value back to investors' is sucky. I'm of the opinion rewarding your employees, and hence retaining your employees and their knowledge brings value to the company, and in the end, the investor.

ap22213 12y ago

Software development is supposedly a high-demand skill. And, I hear that companies can't seem to hire anyone qualified. I still get dozens of recruiters contacting me, each week. Yet, with all of that, my salary has remained stagnant for the past few years. My guess is that people have no idea what they're worth, so they don't ask for anything more. I see way too many developers who are getting paid pennies to the dollar. I see upper-end developers working for 70-80k. Look, people. If you have skills, you should be getting paid 150k+ a year. Please, stop taking menial salaries. You're hurting all of us.

ryandrake 12y ago
Or perhaps, those $150K jobs are few and far between, and in reality there is no labor shortage. If supply gets low, price (wages) will go up. Price is not going up. Therefore supply is not getting low.
- tech2000 12y ago
  So all those recruiters he mentioned are just prank calling or they all have the same single job and tons of applicants? I don't get it.
  - ryandrake 12y ago
    Or, all those recruiters are spamming him with jobs that pay below market, because since (as I postulate) there is no actual shortage of labor, there are likely many people out there willing to work for at-or-below-market wages.
    - EC1 12y ago
      I thought this too. Then I entered a job and interviewed 100~ candidates. There is absolutely such a shortage, and this isn't even for anything complex, this was just for a frontend position. I genuinely had to ask a few candidates if they've ever programmed in JS or HTML before this interview, can't even imagine the type of bullshit at higher levels. You can staff your entire company in under a day, sure, but they're going to be utterly useless. Most are, mainly because they don't delve into it beyond school work / work so they never blossom into someone who is very good.

pXMzR2A 12y ago

I love that a nation and an industry that is bent over backwards against unions (both in policy and in stereotypes) gets surprised when wages don't go up. What do you think pushes companies to increase wages, rainbow ponies? Benevolent investors? Gee. Organized labor.

adventured 12y ago
Tight labor markets also force companies to increase wages. See 1993 -> 1999, 2003 -> 2007 You can watch while simultaneously organized labor lost nearly all influence over the labor market throughout eg the 1990s, and wages increased as the labor markets got tighter during prolonged economic expansion. For the most part, companies increase wages when they have no choice. The lack of labor supply combined with even low level growth forces wages higher. This is an almost universally agreed upon fundamental of economic theory and practice for the last 200 years, with vast data available as proof. If organized labor were required to boost wages, tech companies in Silicon Valley wouldn't pay such high wages compared to your average UAW member. A company like Microsoft would be able to pay its programmers peanuts, because they are not organized. Instead, Microsoft pays its programmers extraordinarily well.
prostoalex 12y ago
Unionizing works for micro-optimization but rarely works at macro level, when entire division, company or industry can be outsourced. To quote from http://www.nytimes.com/2012/01/22/business/apple-america-and-a-squeezed-middle-class.html?_r=2&pagewanted=all http://www.nytimes.com/2012/01/22/business/apple-america-and... "Apple executives say that going overseas, at this point, is their only option. One former executive described how the company relied upon a Chinese factory to revamp iPhone manufacturing just weeks before the device was due on shelves. Apple had redesigned the iPhone’s screen at the last minute, forcing an assembly line overhaul. New screens began arriving at the plant near midnight. A foreman immediately roused 8,000 workers inside the company’s dormitories, according to the executive. Each employee was given a biscuit and a cup of tea, guided to a workstation and within half an hour started a 12-hour shift fitting glass screens into beveled frames. Within 96 hours, the plant was producing over 10,000 iPhones a day."

ghshephard 12y ago

It's important to see what the average age of these newly employees are, age of those unemployed, and also who is exiting the job market. If the newly employed are young (and therefore making lower wages), and those unemployed (or leaving the job market, or just not looking) - are older, and therefore commanding higher salaries - that alone could account for why salaries not increasing on average. It would be useful to get a breakout of salaries biased by tenure, so as to accommodate for the confounding impact of average age of employed/unemployed/left-the-job-market.

patmcguire 12y ago

My own theory: For most employers, there's something almost inconceivable about rising salaries. It's been routine for so long to have layoffs, to tighten belts, to pull together in these tough times and sacrifice, that market power over labor has been internalized into the entire way they do business. If you read any HR industry literature you'll see a lot about the costs of a bad hire and missing out on candidates because they were out of a company's budget. You will not see concern about the opportunity cost of leaving a position vacant. If a company spends six months hobbling along understaffed, waiting for the sure thing to walk in the door for $5k less, that will seriously harm their business. It isn't considered. There are a lot of things like that, aspects of employment that the employer won't change because it simply isn't done. This sort of creates an informal price ceiling, which has exactly the effects you'd expect: lower supply (discouraged workers, low labor force participation), "shortages", and more or less frozen wages.