Long before Covid, Bill Gates once predicted that, “The competition to hire the best will increase in the years ahead. Companies that give extra flexibility to their employees will have the edge in this area.” Needless to say, Bill hit the nail on the head.
Yet, despite Bill’s sage advice, in 2023, salaries within the tech industry hit rock bottom. In fact, even with the massive layoffs within the industry in the past few years, companies currently present their new hires with offers 20% lower than pre-Great Resignation figures. Although, wages do seem to be seeing some recovery right now.
So what’s going on?
Let’s take a look at the reasons behind falling tech salaries and what to expect in 2024 and beyond.
#1 Lower Salaries, Despite Higher Demand for Talent
In late 2022, job postings for positions in Silicon Valley companies rose by 25%. The law of supply and demand states that this should equal higher salaries for these in-demand skills, right?
Ironically, when Candor compiled salaries for tech jobs in 2022, they discovered wages fell by at least 23%.
Considering the growing demand for talent within the tech world, why aren’t companies offering more competitive salaries or added incentives to attract new hires?
Unfortunately, it’s a complicated situation. Factors like niche skill sets and pay disparity based on position also have a role to play here. At Bamboo Crowd we've observed other trends that are contributing to this: Slower hiring processes, more passive hiring (companies passively looking around the market for talent vs actively hiring), and a steady supply of talent looking for a new role.
#2 Huge Pay Gap Between Workers
In recent years, tech companies have started introducing more stringent hiring criteria. A programmer hired just four years ago might not make it past the first interview today.
That’s because these days, tech conglomerates expect new hires to be capable of wearing multiple hats or of solving very specific, tangible problems. So either you have a niche speciality, or you have to be a jack of all trades.
Furthermore, we expect to see a widening pay gap within the coming years between these two types of tech workers:
- Increased compensation for niche fields: Increased salaries for in-demand and niche engineers, designers and product managers. Think specific sector experience, rare mix of tech stack, experience at a specific company. These salaries will continue to go up, and fast.
- Lower wages for less in-demand talent: With companies hiring more multi-talented personnel and thanks to large teams with broad skill sets, wages for jobs requiring executional skills are shrinking.
To make a long story short: The pool of in-demand, high-paid talent will continue to shrink. In contrast, the pool of those less in-demand tech workers will grow, likely creating significant pay disparity across different roles.
#3 The Rise of Remote Workers & Return to Office
Thanks to the pandemic, remote work is in vogue. In fact, before Covid, only 17% of US employees worked remotely, full-time. Fast forward to the post-pandemic era, and now 44% of employees work remotely for the entire work week.
Moreover, due to the nature of remote work, companies now don’t have to limit their hiring criteria to local workers. That means they can expand their recruitment efforts internationally, where average wages aren’t as competitive.
To illustrate, an entry-level US tech worker expects an average salary of $33,150 annually. In contrast, you can hire an employee in India with a similar skill set whose expected salary for the same position is just $4,623/year.
However, 2024 will see full return to the office across most businesses, which will have a massive impact on compensation.
We’ll begin to see two things emerge:
- Pay for remote workers stagnating
- Pay for those willing to go into the office growing
Because companies know that this will become a negotiating tool: “Sure you can stay remote, but we won’t review your compensation this year or we’ll give you a small raise.” On the flip side, companies will be willing to pay more to get top talent in the office.
#4 Tech workers who have taken roles in the last 12 months will hit the market.
It’s no secret that the tech industry has been conducting mass layoffs recently. In fact, just this year, the US tech industry laid off more than 154,000 workers. Case in point, since acquiring Twitter, Elon Musk fired 80% of his staff—translating to more than 6,000 jobs lost.
As a result, companies know they can negotiate harder or walk away—and they’ve done just that. The tech industry has been volatile regarding salaries in the last few years, and we see that harsh environment leading to a massive movement in tech workers looking to get better packages elsewhere.
If the market continues to pick up steam, so will this trend.
#5 Tech workers want more cash in hand.
Equity has been a huge tool for tech companies to compete on talent in the past. But many people have been burned by this in the last few years.
The result is that equity doesn’t have the allure it once did. So now, companies will have to rethink their strategies for hiring tech talent.
Sure, people are still interested in equity, but that better not come at the expense of base pay. Especially in such a volatile wage market, tech workers are more concerned with a consistent salary than ever before.
The Forecast for 2024 Tech Salaries
Presently, a career in the tech industry isn’t looking as lucrative as it once did, but all hope is not lost.
- With all the layoffs this year, unemployed tech workers will have to settle for less-than-ideal offers... for now but that could change fast.
- Remote workers’ wages will stagnate, and those with more general development skills are in less demand.
- However, salaries for niche engineers, product managers, and designers are on the rise, and;
- Tech workers who are willing to live and work locally will be better positioned to negotiate a strong package.
So, even with changing dynamics within the tech industry, workers will still be able to increase their salaries in 2024 and beyond by making strategic career decisions.