High Pay Doesn't Equal Affordability - InformationWeek

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8/10/2001
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High Pay Doesn't Equal Affordability

Research shows where IT dollars stretch the most; forget San Francisco and the Big Apple

David Wagner of San Jose, Calif., has seen an eightfold increase in the value of his home since he bought the three-bedroom ranch in 1978 for $63,000. Wagner, a programmer at shipping company Viking Freight Inc., a FedEx subsidiary, says he's doing well financially but feels the pressure of raising three kids under the weight of Silicon Valley's high cost of living. He and his wife couldn't afford to buy the same house at today's prices, he says.

After 30 years as a technology hot spot, Silicon Valley and other high-tech hubs are losing some cachet with tech workers. The high cost of living, traffic congestion, and overall inability to support tremendous growth mar the landscapes for many IT professionals who grapple with affordability issues.

It's no wonder alternative locations are gaining appeal. Several off-the-beaten-track cities in the United States offer IT professionals the chance to chase their career goals while enjoying a better standard of living, according to a recent study conducted by InformationWeek Research and Carnegie Mellon University's Software Industry Center.

Staffers' Salaries
What's your current salary?
Salary adjusted for cost of living (in thousands of dollars) Median base salary (in thousands of dollars)
63 65 Houston
62 66 Dallas and Fort Worth
59 65 Atlanta
58 63 Austin, Texas
56 65 Denver
56 60 Kansas City, Mo.
54 60 Phoenix, Ariz.
52 56 St. Louis
52 61 Minneapolis and St. Paul
52 54 Indianapolis
50 65 Chicago
49 63 Philadelphia
48 67 Washington, D.C.
48 65 Los Angeles
46 60 Seattle
44 76 San Francisco
44 68 Boston
43 54 Portland, Ore.
42 60 San Diego
38 68 New York
Note: Adjusted salary is based on the sixth edition of the Places Rated Almanac Cost of Living Index by David Savageau and Ralph D'Agostino.
Base: 10,526 IT staff
Data: InformationWeek Research Salary Survey of 19,206 IT professionals, Spring 2001

That's not to say Boston, New York, and San Francisco are slipping when it comes to cash compensation. In InformationWeek's annual online Salary Survey, base salaries in those top-paying cities rose in the past year for both IT staffers and managers (see Salary Survey data online at informationweekresearch.com/advisor/default.html). IT managers in San Francisco receive the highest median base salary in the nation-$105,000-while IT staffers' median base salary comes in at $76,000. New York and Boston salaries follow closely.

But when salaries are weighed against an area's affordability, it's a different story. Using the Places Rated indices from the sixth edition of Places Rated Almanac by David Savageau and Ralph D'Agostino (Hungry Minds, 1999), InformationWeek Research and Carnegie Mellon determined that base IT salaries don't stretch nearly as far in Boston, New York, and San Francisco. When housing, transportation, and other cost-of-living expenses are factored in, all three front-runners tumble far down on the list and New York plunges to dead last.

Houston, on the other hand, seems the place to be. While home to smog and sprawl, it tops the affordability list for IT staff and managers. Houston boasts adjusted median annual salaries of $84,000 for IT managers and $63,000 for staff. And Dallas-Fort Worth's adjusted base salaries rank second for IT staff and managers. Rounding out the top five are Atlanta; Austin, Texas; and Denver for staff, and Atlanta, Denver, and Austin for managers.

These cities offer the same amenities as the traditional high-tech hubs: excellent schools and universities, rewarding work, interesting career paths, and lifestyle opportunities. For instance, Houston, the fourth-largest city in the nation, boasts not only inexpensive housing but the likes of gas-and-power trader Enron, NASA, and computer manufacturers Compaq and Dell Computer, which draw IT professionals from all over the country.

"Tech professionals are looking to move because they know they can earn the same amount of money [as elsewhere], but their standard of living will be better," says Tom Carrera, CEO of CareerEngine.com, a job-services and outplacement company.

Real-estate costs are a major draw for Houston, says Sal Rampelli, manager of operations for Houston IT-recruiting firm National ProSource Inc. "A brand-new, four-bedroom, 2,500-square-foot house in an acclaimed school district goes for $100,000 to $120,000," he says. Not bad, when the median price for a San Francisco house is $489,790, according to the California Association of Realtors.

"Affordability is huge," says Tony Plunk, a staff programmer at Apache Corp. in Houston. Plunk, who supports hardware and software for several divisions of the $2.4 billion oil-and-gas-exploration company, says living in Houston lets him afford a large house and a small boat. "I wouldn't be able to experience the same quality of life in another city," he says.

And there's another incentive to attract IT professionals to Houston and the other top-ranking Texas cities: no state income tax. This holds particular appeal for Kim Sharabura, a software developer at retail-application development company JDA Software Group Inc. Two years ago, she and her husband moved from Toronto to Irving, a Dallas suburb. "In the United States, you get paid more-and in American dollars," she says. "And in Texas, there's no state income tax, so you get more money and you get to keep more money." Sharabura recently bought a house-something she couldn't have afforded in Toronto or in another U.S. metropolitan area. "You get the benefits of a big city without the cost of the big city," she says.

Two years ago, Jose Nunez moved to the Dallas-Fort Worth area as director of software development at IT services and outsourcing firm ACS Inc. "In terms of career development, Dallas is the mecca of IT," he says. But other Dallas assets are even more important to Nunez. "To make my kids and family my priority, I don't have to sacrifice my career," he says, pointing to a 25-minute commute and excellent school districts.

Managers' Salaries
What's your current salary?
Salary adjusted for cost of living (in thousands of dollars) Median base salary (in thousands of dollars)
84 87 Houston
82 88 Dallas and Fort Worth
77 85 Atlanta
72 77 Austin, Texas
72 85 Denver
69 75 Kansas City, Mo.
72 80 Phoenix, Ariz.
71 76 St. Louis
68 80 Minneapolis and St. Paul
68 71 Indianapolis
67 87 Chicago
69 88 Philadelphia
65 90 Washington, D.C.
65 88 Los Angeles
58 75 Seattle
61 105 San Francisco
58 90 Boston
62 79 Portland, Ore.
57 82 San Diego
53 95 New York
Note: Adjusted salary is based on the sixth edition of the Places Rated Almanac Cost of Living Index by David Savageau and Ralph D'Agostino.
Base: 10,526 IT staff
Data: InformationWeek Research Salary Survey of 19,206 IT professionals, Spring 2001

Many of the top cities in the InformationWeek Research cost-of-living survey boast similar features. When recruiting IT candidates from across the nation for Denver-area companies, Catalyst Search LLC IT recruiting manager Brett Palmateer finds that "Denver is already on their list" of relocation choices. "The low stress, numerous things to do outdoors, and attractiveness of a nice place to raise a family are all huge draws," Palmateer says.

"The climate and atmosphere are different in Denver," says Mike Hager, a nine-year Denver resident and VP of network security for mutual-funds firm Oppenheimer Funds. Hager is responsible for disaster recovery for the Massachusetts Mutual Life Insurance Co. subsidiary in Englewood, Colo. He says it's the appealing atmosphere that has spurred Hewlett-Packard, IBM, and many financial-services companies to set up offices in the area. Beyond job opportunities, major "recreation areas are only an hour and a half away," he says.

While these up-and-coming cities may offer strong advantages over Silicon Valley, Boston's Route 128 tech corridor, and Research Triangle Park, N.C., they still suffer similar shortages of IT labor, even in today's economy. In December, the Atlanta Chamber of Commerce and local technology companies launched a print and radio campaign in New York and Boston to lure IT workers south. One key pitch is the support and networking available to area tech professionals. Atlanta Chamber of Commerce president Sam Williams boasts of the Technology Association of Georgia, a nonprofit organization with more than 6,000 members. Atlanta-area professionals and techies statewide can attend monthly or quarterly seminars on database development, Oracle coding, or other technology subjects aligned with their specialties or interests, Williams says.

David Hunter, director of E-commerce services at BuildNet Inc., an online exchange for building-material suppliers, says the association is doing a "tremendous job creating a professional environment." He attends seminars regularly to connect with fellow IT professionals. Hunter has lived in Atlanta since 1973, and he's there to stay. "In my experience after 28 years, even in a bad recession, Atlanta will not be as hurt as other regions," he says.

A few years back, Hunter considered relocating to Raleigh, N.C., but Atlanta's affordability helped him decide to stay. "There's been tremendous growth in Atlanta over the last decade, but you can still get an affordable house within an hour of the city," he says.

And when it comes to technology jobs, geography is a big factor.

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