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Surprises With Tech Compensation

The IPO market continues to be red hot. This week, Medallia (MDLA) soared 76% on its debut and Phreesia (PHR) rose 39%. And yes, this bullish activity is driving up compensation in Silicon Valley, especially from stock option packages.

Yet this is also causing some problems. After all, non-tech companies realize they need to hire technical talent but have fewer resources to compete. Hey, even startups are feeling the pressures.

But when you look at compensation data, there are some other interesting trends that are emerging. Consider the findings from a recent report from Hired, which is a marketplace for matching tech talent. It is based on more than 420,000 interview requests and job offers across 10,000 companies and 98,000 job seekers.

So then what are some of the takeaways? Well, let’s take a look:

Boston, Austin and D.C. are gaining momentum: As should be no surprise, the San Francisco Bay Area is the highest paying market for tech workers (the salary levels rose 2% last year). But the fact is that the market is dynamic and workers are looking elsewhere. For example, tech salaries in Boston jumped 9% last year and Austin and Washington D.C. saw 6% increases.

“The salary growth in up-and-coming tech hubs is a clear sign of these cities doing everything they can to attract the best tech talent and compete with the Bay Area — and from our analysis, it’s working too,” said Mehul Patel, who is the CEO of Hired. “Our data shows that Austin, where average tech salaries grew from $118K in 2017 to $125K in 2018, is the most appealing place for tech talent to work.”

IPOs and equity compensation: Keep in mind that the IPO boom is not creating a frenzy for equity. “We also looked at tech worker sentiment around the importance of equity in a compensation package and despite this year’s IPO wave, our results found that more than half of global tech workers (54%) are on the fence about forgoing a higher salary for company equity, suggesting that added pressures could be boosting salaries,” said Patel.

Tech workers will move: The situation in the Bay Area is creating something odd. That is, tech workers feel underpaid because the cost of living is increasing even more, the taxes are high and real estate prices are at extreme levels.

According to Hired, when you make adjustments for these factors, an average salary in Austin would be $208,000. In other words, a typical tech worker would need an $83,000 raise to get to parity.

Currently, the most popular cities to relocate include: Austin, Seattle and Denver. Oh, and 60% of tech workers plan to relocate within the next five years.

Age: Tech remains generally biased towards younger people. The Hired report indicates that the average tech salary plateaus at 40 in the US.

Education: The requirements are changing rapidly. For the most part, tech workers do not see as much value in advanced degrees. The Hired survey shows that 31% believe they could have the exact same job without their degree and only 23% of those with master’s or doctorates believe they command higher salaries because of their advanced degree.

Instead, tech workers are looking to alternative forms of education, such as coding bootcamps and online learning platforms.

The Hired report notes: “Tech giants like Apple, Google and PayPal have moved away from traditional education requirements and are increasingly interested in candidates with specific in-demand tech skills and on-the-job experience that may not be acquired through higher education.”

Published inIPO

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