Wage reality

Are U.S. IT workers grossly overpaid? That’s what some Canadian CIOs claim. But what else can they say?

One IT compensation survey done by Canadian Pacific Railway finds that Canadian IT people make as little as 80 cents for every dollar U.S. IT workers get, after adjusting for currency exchange rates. A Canadian outsourcer puts it at closer to 70 cents on the dollar. If they don’t say U.S. IT workers are grossly overpaid, the obvious conclusion is that Canadian CIOs are grossly underpaying their own IT people.

Which is it? Neither, of course. That’s not how the market works.

And it’s the market that determines how much any group of IT workers gets paid. Why do U.S. IT people get more for the same work than Canadians? For the same reason that IT people in New York or San Francisco get more than their counterparts in Pittsburgh or Omaha. They’re in different local markets, and they get paid whatever the local market will bear.

Employers everywhere want to pay as little as they can. Employees want to get as much as they can. But it’s the almost infinite complexity of the market that actually determines just how much any individual IT worker gets paid — a swirling mix of supply, demand, skills, history, corporate culture, tradition, timing, age and gender (even though those two aren’t supposed to matter), reputation and salesmanship (on both sides) and, yes, location.

That’s why one employee gets paid more than another doing exactly the same job. Add up all the IT people in one company or city or region, and you have the imaginary “average” IT worker. Is he overpaid? Underpaid? Unless we’re talking about the boss’s nephew or wages that are fixed by law, those words are meaningless. If the market determines IT compensation, then IT workers are just paid what they’re paid.

So Canadian IT people aren’t underpaid. U.S. IT people aren’t overpaid. And if someone claims they are, it’s either self-serving rhetoric or a sad sign that someone isn’t very market-savvy.

Yes, of course, you knew all that. But it’s easy to get sucked in by that kind of talk — especially these days, when everyone involved in IT staffing is looking for ways to beat the market.

One obvious way, of course, is offshoring or nearshoring. U.S. companies like the idea of sending work to places where local market rates for IT work are lower, such as India, Russia and, yes, Canada.

Just as obvious is importing talent. Many IT workers with in-demand specialties from Canada, Russia and India want to come upmarket to the U.S., where they get an automatic bump in salary just for being in a different local market.

But changing locale isn’t the only way to beat the market. Remember, you can’t change what the average IT worker gets paid in your local market. But that average IT guy is imaginary. If you’re making IT staffing decisions in the real world, you can beat the market by avoiding what’s average.

Maybe that means looking for below-local-market-price IT talent from groups where supply is high and demand is low. Older workers. Or wet-behind-the-ears students. Or workers who have been unemployed for a while and are getting desperate.

Maybe it means tightening up your hiring process. Remember, half of all IT workers are below average. If you hire only people in the top half — at market-average rates — you get a lot more bang for your buck.

Maybe it means hiring part-timers or supporting job sharing. Maybe it means using layoffs and reorganizations to cut deadwood, not just head count. What will work for you in your local IT labour market? You’ll have to figure that out for yourself. But it all starts with keeping in mind how the market — and your market — works.

Frank Hayes, Computerworld U.S.’s senior news columnist, has covered IT for more than 20 years. Contact him at frank_hayes@computerworld.com.

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