2022 Is the Year of Compensation in Technology and Wage Gains

The Great Resignation is signifying wage gains for workers in Technology

This is just a little note on Compensation in 2022. I saw this topic trending on Hacker News in January 2022 and I wanted to address it for my audience here.

With inflation and a booming economy in the U.S., 2022 is shaping up to be a major year for compensation raises, higher signing bonuses and wage growth adjusting for record setting inflation.

Companies are setting aside 3.9% of their payroll budgets to raises in 2022, a record high not seen in a decade, according to a November survey of 240 U.S. businesses (half of which represent more than 10,000 workers) from the think tank the Conference Board.

With the rising costs of real-estate, cost of living and with persistent inflation coupled with a continuation of the Great Resignation, I think we could see wage gains in industries where there is a talent shortage like cybersecurity see significant wage gains in 2022.

This will include jobs most in demand like software engineers, data scientists and a wide range of IT jobs like Cloud architects and IT professionals in banking and FinTech.

Overall we have to suspect that in reality workers’ bargaining power is higher than it’s been in decades with programmers, data scientists and data engineers among the highest.

• Many employers expect to pay more in salaries and/or bonuses to retain talent amid the “Great Resignation.”

• More than half of human resource leaders in the U.S. said their company expects average merit increases of more than 5%, according to a new survey.

• In cybersecurity, software engineering and data science I could see this number significantly higher in 2022. (So know what you are worth).

Remember with the Fed intervention of 2020 and not stopping for many months, there’s around 35% to 40% more liquidity in the system. That translates not just to equity bubbles but real world supply-demand labor talent shortages.

Compensation in 2022

• The global pandemic has accelerated trends in compensation seen in what was already a fiercely competitive and dynamic job market.

• The shift to a distributed workforce has broken down regional talent barriers to create an even greater nationwide competition for talent. Continued venture and private equity investment has fueled job openings in some industries, while the pandemic has created shortages elsewhere.

• As these forces have worked together to drive the “Great Resignation,” this report reveals some of the rapidly changing dynamics in how companies of all sizes are compensating their employees.

Remote work and WFM have basically broken down geographical talent barriers, meaning your skill set is correlated to your salary better than before and is not impacted by your geographical region as much as years ago.

Read the report by Sequoia here. ~ Read the comments on Hacker News here. This was a trending post on Hacker News for a reason.

Investing in Talent and Reducing Churn Is More Key Than Ever

Compensation is just one piece of a company’s total people investment, but a difficult one to get right, particularly while managing the dynamics of being a rapidly growing company in a highly competitive job market.

Some companies will force employees to return to the office, which will lead to higher talent churn rates. Others will try to use compensation and (higher than usual) wage gains to enforce greater compliance with a return to office scenario.

Software Engineers actually can do quite well if you work at a company that is growing fast.

Regional Overview

• Salaries across the U.S. are increasing rapidly. While the west continues to lead the country in salary levels, the rise of remote work coupled with high levels of venture and private equity investment are dismantling regional talent barriers and cultivating a true nationwide war for talent.

• Geographical region will continue to be less important, as the war for talent evolves in 2022.

• With more specialized skills such as cybersecurity or A.I. engineers will have more bargaining power in their industries with respect to compensation and signing bonuses in 2022.

Many Americans have already quit their jobs, with a record 4.5 million walking away in November 2021 alone, and some experts anticipate quit rates will accelerate this year. Indeed polls on GenZ have indicated that they will continue the Great Resignation experiment further into 2022 and 2023.

I write a lot about GenZ trends on my Newsletter Off the Grid.

This is not to say that all U.S. states are created equal when it comes to inflation and wage gains in compensation. There are still very defined geographical differences with the northeast of the U.S leading the way. So your wage growth in New York City or Boston is a lot better than in some other areas such as the Midwest, generally speaking.

The forms compensation takes is also a bit surprising. A surprising finding here - that doesn’t match what many would have expected - is how Engineering is compensated 90% in cash. People often assume equity is pretty heavy for software engineers, especially in senior and above positions. So consider this when you enter the data science or software engineering industry.

Essentially the more specialized and engineering focused your job is, the more salary (cash) compensation is guaranteed.

This can also be important to understand for a programming or data science enthusiast wondering if it’s good to follow a software engineering career path.

The gender pay gap is also among the most brutal for female software engineers and engineers in Technology. After a 5 year tenure, only Sales approaches the insanity of it — where women are earning up to $30,000 less than their male counterparts.

A lot of this data I’m pulling from this source. Where insights from this report represent data collected from Sequoia’s Employee Experience Surveys (2017 – 2021), anonymized information and trends from our database, and Dataforest surveys. Dataforest is refreshed periodically with updates from new survey submissions.

If you enjoyed this article, you might enjoy my Newsletter on A.I. at the intersection of breaking news called AiSupremacy.

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