Posted on 09/28/2003 10:40:37 AM PDT by nwrep
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After 10-year surge, salaries level off at $89k
By EE Times Staff, EE Times
August 28, 2003 (10:49 a.m. EST)
URL: http://www.eetimes.com/story/OEG20030828S0040
For more than a decade now, design and development engineers and managers have ridden a pay surge that's taken them from $59,800 in 1994 to a high of $89,100, on average, in 2002. But the wave crested in 2003, dipping slightly to $88,900, $200 under last year's mean.
It's not the first time the U.S. EE Times "Salary & Opinion Survey" has recorded a decline; it also happened during another pullback in the technology field, in 1988-89, when wages fell $100 from one year to the next. That brief retreat was followed by a series of plateaus and booms. Between 1993 and 1994, for instance, salaries burped up only $800, but after that, engineers enjoyed record lows in unemployment (below 1 percent) and the emergence of the Six-Figure Engineer (staff-level EEs earning $100,000 or more).
Although the overall U.S. mean fell slightly in 2003, 58 percent of this year's American respondents actually got raises; only 8 percent lost ground. The remaining one-third said their salaries stayed put. The breakout for more than 400 European engineers responding to this year's survey was similar, with 52 percent reporting raises, 43 percent remaining the same and 5 percent losing ground. EEs in the United Kingdom reported a mean salary of $56,062 in U.S. dollars, Germans came in at $54,759 and French respondents trailed at $48,922.
Why did U.S. wages fall?
The reason for the overall dip in mean salary is twofold: First is the statistical reality that our survey is measuring a separate group of designers and managers, not the same ones queried last year, and this sample simply earned a bit less. Second, corporations have instituted policies to freeze salaries or reduce the increases. Altogether, 42 percent of the respondents' employers froze salaries in the past 12 months. Compare that with 1991, another down year, when 16 percent of that year's sample saw salary freezes.
Here's what some of this year's 842 surveyed U.S. EEs and managers said:
"Pay raises have been limited to 2 percent total over the past year for the engineering department. We allocated those raises to the more-junior engineers to increase retention. The senior members of the group did not take a pay raise."
"Raises were smaller than usual and late. Motorola, Tellabs, 3Com and Lucent are close by. As long as they are laying off rather than hiring, our management feels we should feel lucky to have jobs."
One European designer says that "a perceived shortage of engineers means many opportunities for companies to trim, downsize and lower salaries. Also, many engineers [are] prepared to work for lower salaries. The shortage is not of engineers, but cheap engineers."
An engineer in the U.K. cries: "This year I received a 1 percent annual salary rise, the lowest in my career to date!"
Corporations have stretched the raises over longer periods, as at this engineer's company.
"Merit raises have gone from a 12- to 18-month cycle. Amount of raise has been reduced. 401k company-matching contribution has been suspended. Medical benefits have been reduced, with an increase in the portion the employee has to pay for."
Many companies have pay-for-performance policies in place that help when times are good-and hurt when they're not. "I expect my salary to not increase this year, due to the low number of orders we have received this year so far," one respondent lamented.
Corporations have adopted other strategies to reduce costs. Benefits have been shaved, and not just in the electronics field. The Employee Benefit Research Institute's Small Employer Health Benefits Survey found that 65 percent of companies increased deductibles for employees and 35 percent boosted the employee share of health insurance premiums. Witness this engineer's experience: "I started with a new company that pays a higher base salary but has less in bonuses. I'm also paying 70 percent of my health insurance costs now. Before, it was 15 percent."
While the Bureau of Labor Statistics reported overall wages rising 0.6 percent last quarter, benefit costs shot up 1.4 percent, much of it attributable to to double-digit increases in health insurance.
Bonuses aren't as large as in previous years, readers report. "My bonus is a significant part of my overall compensation," says one respondent. "It is about one-half of what it would normally be."
"My bonuses went from $40k to $6k," an engineer reports. "This year there will probably not be any bonus."
Indeed, some 46 percent of our U.S. EE sample collected bonuses last year, averaging about $6,000. By comparison, in 2000, 62 percent of our sample got bonuses. That's a drop of 16 percentage points in just three years, illustrating that bonuses hinge on the company's performance and are not to be depended on.
Another tactic corporations are deploying to cut costs is requiring workers to take paid (or even unpaid) vacation time while the company shuts down for a couple of weeks.
As one engineer summed it up: "We are back to the 'lucky-you-have-a-job' economy that we last 'enjoyed' in the early 1990s."
Helping to offset the pullback in salaries for engineers is the income produced by their spouses. Among the 81 percent of our U.S. sample who are married, total household income runs an average of $117,000, placing engineering families amid the higher income brackets among professions.
Engineers invest in stocks; 87 percent of our sample have some holdings. Like almost everyone, about 62 percent report decreases in the value of their portfolios, while 15 percent probably consider themselves lucky to be at the same level they were a year ago. Despite the up-and-down market, 22 percent of the sample say they're ahead of the game today.
To this point, most engineers responding to our survey see no real impact on their lifestyle from the three-year decline in stock prices since 2000. Only 8 percent have had to cut back their day-to-day spending.
Rather, the effect is being felt most acutely in retirement plans, where 32 percent report lower values. Stock options are another area where cutbacks are being felt. Values have gone down-sometimes drastically-stretching out plans for retirement or for purchase of big-ticket items.
"My stock options are so far underwater they are actually a retention disincentive," says one reader.
Another options holder chimes in: "I worked for a startup that was acquired by a larger company. A few years back, I could have retired."
In 2002, 59 percent of the respondents owned stock options in their company, worth around $25,000. Although we didn't ask the question this year, we wouldn't expect a drastic change in the percentage of people with options. But the value may well have dropped, as it did for this correspondent: "Company stock options are currently worthless and cannot be used to supplement base salary." We'll revive the question again next year to find out more.
Salary by job title
So who ended up with what? No one should be surprised that design managers earned more than staffers, averaging a cool $110,000 vs. staffers' $85,800. Our handful of corporate managers collected $124,000. But 2003's managers are bringing home less than last year's group, which could reflect the overall reduction in bonuses and performance incentives. Our vice presidents of engineering averaged $11,000 less than last year, at $111,000 vs. 2002's $122,000. Similarly, chiefs of engineering dropped $2,500 from last year's $102,500 mean salary. Both categories are relatively small in terms of number of respondents.
By contrast, our biggest survey groups fared pretty well:
But the averages fell for several larger categories:
Salary by region
As they have for many years now, our San Jose, Calif., respondents (incidentally, our largest regional group) led the way in the salary parade. On average, they earned $111,800 in the past year, easily outpacing other metropolitan areas. Before you call the movers, however, check out Silicon Valley home prices, among the highest in the nation. And even before that, check out the want ads in San Jose. There have been significant cutbacks in the area, and the boom in startups that partially drove demand has been suffering as venture capital has withered.
Other major centers of engineering talent and their salaries:
Overall, the Western region, at $94,100, remains the best-paying area of the United States, with the Northeast averaging $91,600, the South Central region (including Texas) $87,900 and the North Central area, $78,900.
Salaries by age
Traditionally, the salary curve starts off at its lowest point among twentysomethings, peaks at the lower 40s, levels off into the early 50s and then starts a decline. Engineers have complained that while they may start their careers as high earners, with salaries in the $40,000-plus range, they hit a plateau at a time when lawyers or doctors are bringing in top dollars.
This year's group of EEs and managers does level off in the lower $90s at about the age of 40, and stays there until they reach the 55-59 age group. Then the veterans buck the trend, turning in average mean base salaries of $98,910, the highest of any age bracket. We don't have a really good explanation. Only 11 managers are represented in the 55-59 bracket, so their generally higher salaries are not a factor.
There are more military/aerospace engineers in this age group than any other types, and while that's not our highest-paying industry, it is the most stable. Respondents working at defense contractors have the longest tenures of any of our industry segments (12.7 years vs. 8.8 overall), the most experience (19 years vs. 17) and are tied with components for the lowest unemployment rate this year (5.6 percent vs. 9.2 percent overall). Defense engineers may not get the biggest bucks to start with, but as they go gray, it's possible they encounter less job turbulence-and perhaps even less age bias?-than in the more go-go, younger atmosphere of, say, communications vendors.
Here is the breakdown by age:
Salaries by industry
As mentioned, military/aerospace is not the highest-paying industry. It averages $86,938. The big pay is in communications, computers and components. Despite the upheaval in the computer and communications industries in the past three years, pay is substantially better than in other sectors.
Education pays
To the age-old question, "Should I go for my master's?" the answer is an unqualified "Yes"-that is, if you're thinking in terms of what you're likely to earn afterward. Indeed, some readers have taken the opportunity of a layoff to go back to school for that master's degree. The salary level by education:
It's not a given that a PhD degree, even in a technical field, translates into a long, prosperous career. A few years ago, during the last recession, doctorate holders complained that they couldn't land jobs easily, because companies preferred hands-on, less-expensive engineers.
Salary by country of origin
Some 87 percent of this year's respondents are native-born U.S. citizens. As you'd expect, because they are overwhelmingly represented in the survey, their mean salaries parallel the mean for the whole sample ($88,379 vs. the mean of $88,900).
Our sampling of respondents who hail from other countries but are now working in the United States is small, when taken individually, and therefore somewhat suspect statistically. But for information purposes, we'll pass the results along, listed according to the size of the sample.
But based on this data, coupled with replies from previous years, it seems clear that no one is taking undue advantage of immigrant engineers from India or China-or at any rate, not the ones who answer American surveys. Those who don't read English well, who are temps or who are not readers of EE Times may have other experiences.
Incidentally, some 85 percent of the 842 respondents describe themselves as white, and they earn $88,491. Those of Chinese heritage (including lifelong U.S. citizens as well as immigrants) collect $89,363. Those of Indian heritage earn $95,258 and Hispanic engineers pull in $83,541. African Americans trail, at $77,900. Only 3.6 percent of the respondents were women, who averaged $85,000, vs. $88,934 for the males.
Related charts:
That's about 5.9% every year, way ahead of inflation.
PhD, $112,115; MBA, $97,407; MSEE, $96,642; MSCS, $91,928; BSEE, $83,367; BSCS, $87,826; associate's degree, $65,703.
The premium for Ph.D. is about $5,500, or $165,000 in 30 years. However, if one completes that degree in 5 years, the holder of a Master's earns 96,000 * 5, a great deal more.
We're also all doomed.
Haven't you heard? The Japanese bought Rockefeller Center and Pebble Beach.
Are you opposed to an increasing standard of living?
Not at all.
I am opposed to:
1. Constant b---g in press and, more disturbingly, on this forum about how badly this sector is hit: they've got to be fair and admit that they've had it very well for a long, long time; now life is simply returning to normal.
2. Those screaming for protectionism not entertaiing the thought that they may've priced themselves out of the market.
Have offered to take a cut in your pay because you're overpaid and had it very, very well for a long, long time?
Maybe he's opposed to being told that our standard of living is falling?
For many the standard of living has fallen.
The point remains correct, however: the foregone salary is about 300,000, plus tuition if one is unable to get a waiver. The differential is 15,500* 30, about 500,000, very comparable.
To make the computation correct, one has to discount the stream of cash flows differentials, whereas the foregone salary occurs up front. The net present value of the salary differential seems about the size of the foregone salary even when tuition is not taken into account.
To summarize: (i) one cannot judge whether it is wort it to get a Ph.D. by looking at the salary, and (ii) the monetary value of the Ph.D. is negligible.
The price change is only one mechanism to bring an equilibrium. There also may be rationing, and that is what H1B was designed to combat: shortage of labor.
The market determines what's normal.
If you take Economics 101, you will know that normal for you is not $6000 because you are more productive. What the market shows, however, that it is not 90,000 either.
Have offered to take a cut in your pay because you're overpaid and had it very, very well for a long, long time? I do not understand this sentence.
According to the money income measures, real median income did not change for households with non-Hispanic householders who reported white as their only race ($46,900) or for households whose householder reported a single race of Asian ($52,626). Income declined for all other racial and ethnic groups.
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