EE Salaries: It Could Be Worse

When David Knol, an electronic design automation (EDA) engineer with five years’ experience, switched jobs last year, he was thrilled to be making more money. ”I felt like this was an extraordinary situation,” says Knol, now an engineering manager at EDA start-up Hier Design Inc. (Santa Clara, Calif.). ”Most people I know are making lateral moves” with no pay increase.

Indeed, with U.S. unemployment among electrical engineers now running around 7 percent, just having a job and getting a raise can be invigorating [see ”It’s Cold Out There,”]. Many companies that employ engineers have frozen wages, while others that haven’t are doling out raises so paltry as to seem imperceptible.

In the current employment climate, it’s no surprise that EEs aren’t seeing much of an increase in salaries. But despite the gloom, median EE salaries still appear to be moving upward faster than inflation. According to preliminary results from the latest IEEE-USA salary survey, EE salaries broke through the six-figure barrier in 2002. In the poll completed in April, the median annual salary was US $101 000, up from $93 100 in 2000. Adjusting for inflation, which has been less than 3 percent in each of the last two years, EEs’ income inched up to $96 700 [see table]. The salary figure factors in only those working full time in their main field of expertise.

”[EEs’] salaries have held up fairly well—if they have work,” says Richard Ellis, a consultant in Carlisle, Pa., who has prepared IEEE-USA’s salary surveys since 1994. At least part of the gain may be attributable to raises that came in late 2000 and early 2001, before the tech industry started its downward plunge, Ellis says. ”This is the first time the median has cracked into the six-figure range, though it’s wise to remember that this is a median,” he added. ”There are people who are way above that, and there are people well below it.” The final results of the biannual survey, for which some 10 000 U.S. members of the IEEE were polled, are due this summer.

Things are so-so all over

Engineers in many countries other than the United States saw their salaries stagnate or fall in 2002, while in a few countries, wages rose. In East and South Asia, the average annual engineering salary was $13 300, according to a survey that EE Times conducted last summer. In 2001, by comparison, it was $13 500. Looking at the numbers by country, salaries in South Korea and China rose in 2002, while in Taiwan and South Asia, they fell. In Japan, meanwhile, a survey conducted by Nikkei Electronics found the mean compensation for EEs was $62 900, with half of the respondents reporting that their salary dropped in 2002; the country’s jobless rate now stands at 5.4 percent, the highest it’s been since the government began measuring unemployment 50 years ago.

The lower wages in most parts of Asia have prompted concern in the United States, Western Europe, and Japan that high-paying jobs for engineers and other professionals are moving offshore, mirroring what has happened in traditional manufacturing. Debate has also flared over guest-worker visas given to skilled foreigners.

To take one example, British Telecom PLC (London) came under fire in May for allegedly paying Indian software developers working in the UK one-fourth of what regular BT workers make. The company has denied the charge, but has said it will go ahead with plans to build two customer service centers in India, employing about 2200 people, over the next year. According to the EE Times survey, British EEs earned an average of $57 800 in 2002, a slight decline from $58 000 the year before.

Raises will be modest

Employment analysts think they see a glimmer of movement on the salary front, but say that until there are solid signs of economic growth, any raises will continue to be modest. ”So many companies and jobs have been obliterated that salaries are probably static at best,” says Steve Patchel, a senior consultant in the human resources consulting firm Watson Wyatt Worldwide’s Santa Clara, Calif., office. In Silicon Valley, tech business closures are so prevalent that some grimly joke that the company owning the most office buildings must be named For Rent. ”I think some companies are going to lift wage freezes in 2003,” Patchel says, ”but the merit raises will be a modest 3 percent for someone who did an extraordinary job.”

That’s what’s happening at Texas Instruments Inc. (Dallas). Bonuses were eliminated in 2001, and raises were frozen in 2002. But this year, the pall has lifted. ”We did implement base salary increases in 2003, as well as pay year-end bonuses to recognize performance in 2002,” says Steve Lyle, worldwide staffing director at TI. He wouldn’t say how large the raises or bonuses were.

Recent U.S. college graduates are also feeling the pinch. The National Association of Colleges and Employers (Bethlehem, Pa.) reports that starting annual salaries for U.S. engineering graduates rose less than $100 this year, inching up to $48 300 for this spring’s graduates. Within that group, certain disciplines fared worse than others: computer engineers, for example, saw a 1.6 percent decline, to $52 700, while computer science grads’ starting salaries of $46 500 were 7.6 percent lower than a year earlier.

Options lose their luster

Employers looking to boost their staff’s compensation without actually paying them more have fewer options—literally. These days, stock options, the darling of the boom years, hold about the same attraction as free coffee in the lunchroom.

Knol, for one, focused on cash rather than options during his hiring negotiations with Hier Design. While he is hopeful about the stock options he’s getting, he adds, ”Options are not as powerful a recruiting tool as before. I certainly don’t see them as guaranteed riches.”

Some companies have dumped them entirely. ”We have changed from a stock options-based plan to an all-cash plan,” says Bruce B. Parkinson, director of salaried personnel at Delphi Delco Electronics Systems (Kokomo, Ind.). The move came after the parent company’s stock lost about half its value in 2002.

In the early days after the tech bubble burst, many companies were willing to reprice options that had fallen ”underwater,” where the options’ strike price was higher than the current market price. But many companies are no longer willing to do that. ”Shareholders are becoming very militant about repricing options, even for rank-and-file employees,” Patchel says.

Despite the slumping stock market, employees still seem to like owning shares in the company they work for. As a result, more companies are shortening the time before employees become vested, or fully own those shares, says Camellia Ngo, human resources director at Magma Design Automation Inc. (Cupertino, Calif.). During the boom years, when worker turnover was at an all-time high, employers preferred longer vesting periods, as an incentive for workers to stick around. Now that the economic slump has boosted retention rates, companies feel comfortable vesting their employees sooner.

It still pays to pay well

While many companies have made liberal cuts to their workforces in the last couple years, they haven’t necessarily slashed salaries. For engineers who haven’t gotten pink slips, in other words, paydays aren’t so bad. ”If a company shrunk its workforce properly, the engineers who are still working are their better people,” Patchel says. ”And they’re being paid what they’re worth.”

That isn’t the case everywhere, of course. Hier Design’s Knol and many others say the high number of job seekers means companies can hire engineers at wages that don’t reflect their experience or expertise.

But that practice may backfire down the road. When the market picks up, underpaid engineers will be more inclined to leave, says Ngo. ”Then the costs to replace them will be much greater than the wage differential.” Magma pays at least the going rate for each job position, she adds, the feeling being that morale can suffer if employees doing the same basic job receive disparate pay.

”We have to assume people will talk about salaries,” she says. ”If two people doing the same job are being paid vastly different wages, they aren’t going to be happy.”