Strategic CIO // Team Building & Staffing
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5/20/2011
03:26 PM
Chris Murphy
Chris Murphy
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Global CIO: Modest Salaries Offer Tech Bubble Reality Check

Comparing 2011 IT pay raises to those during the dot-com boom, it's hard to conclude that the LinkedIn IPO means a return to irrational exuberance.

LinkedIn shares killed it on their first day of public trading, so the comparisons to the dot-com bubble come naturally. Something about a 109% one-day return gets people reminiscing about exuberance.

CNBC's Jim Cramer raged against the Wall Street tactics he said led to the stock’s rise, arguing that the LinkedIn IPO is bad for the broader market. Cramer said he’s not worried about "the real economy," and he's not worried about LinkedIn, which he called a "real business" with revenue and profit. But "so were the first IPOs that came through the dot-com chute," he said, as he fretted about weaker, pumped-up IPOs to come.

But what signs of a bubble are there in that "real economy"? With our U.S. IT Salary Survey, taken late last year and this year by more than 18,000 IT pros, we have one big source of data, and we're not seeing a bubble. (You can download the full report with all the data, free.) Here are some key financial data points comparing 2011 and 2001, which was the peak of raises and bonuses in our data:

Median increase in total cash compensation reported by IT staff:

2001: 8.5%

2011: 0.9%

Nothing bubbly about a 1% raise, or the 1.9% reported by managers. Back in 2001, for staffers and managers at dot-com organizations, the median raise, 14.8%, was even bigger than the 8.5% indicated above. (We broke dot-coms out as a separate category in 2001, a fact that should've been a bubble indicator on its own.)

Median bonus for IT staffers:

2001: $11,000

2011: $4,000

A few industries today still award big bonuses to their tech pros, such as securities/investment banking ($11,000 for staff) and energy ($12,000). In 2001, though, the typical IT pro got what today is reserved for the Wall Street types.

One point worth noting: Nominal IT paychecks are larger today than in 2001, as you would expect. This year, the median total compensation for an IT staffer is $87,000; it was $71,000 in 2001, much of that from bonuses. (In 2002, it was $63,000.) The median IT worker's paycheck has edged steadily upward the last several years, a trend that tracks in the broader economy, but 2011 showed no increase out of the ordinary.

Is a tech bubble building only in Silicon Valley, perhaps? Again, there's no sign of it in our salary data. The Bay area is still the top of the pay heap, with median staff base salary of $110,000. However, raises actually were harder to come by this year in the Bay area than many other areas. The median raise was zero for staff and managers in the Bay area, as it was for the Pacific region overall. In 2001, the median raise was 9.9% in the San Francisco-Oakland-San Jose area.

Certainly, some people are landing jumbo paydays based on the private and public investment in a wave of tech startups. The New York Times reports that as Facebook buys startups just to get their talent, the deals are pricing out at $500,000 to $1 million per engineer. That's quite a signing bonus.

But so far, these extremes seem limited to a relatively small universe of social Web businesses. In the dot-com boom, Internet excitement swept telecommunications and a wide swath of industries up along with it, leading to pay windfalls for tech workers across the board. It's possible that a blockbuster IPO like LinkedIn’s marks the start of that kind of boom, but it's hard for me to paint a scenario where the 2001 tech wage bubble repeats itself.


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