The average U.S. engineer now makes $102,748 in salary and bonuses, marking the first time EEs have reached six figures in the four years that we've done our salary surveys. And there's more good news, as the engineering and tech services industry added 66,300 jobs last year, putting that number at an all-time high.
But there are troublesome signs behind this rosy picture. While base salaries are up 7%, bonuses are flat. Stock options and other perks, which have historically been an important component of an engineer's compensation, are down by 3%. What's more, the average pay for engineers ages 24 and under - precisely the people the industry needs to attract and keep - dipped 4%.
Job Growth Fuels Higher Incomes
According to a report released earlier this year by the AeA (formerly the American Electronics Association), based on U.S. Bureau of Labor Statistics (BLS) data, U.S. high-tech industries saw significant job growth for the second year in a row - and the unemployment rate for EEs is now below 2%. The report shows that the high-tech industry added nearly 150,000 net jobs for a total of 5.8 million in the United States. This growth is greater than the 87,400 jobs added the prior year, and the two years of growth cumulatively represent an increase of 4%.
"We are pleased to see the rebounding of the tech industry," said William T. Archey, president and CEO of AeA. "This is the second year in a row that tech industry employment has added jobs. Not only do these jobs make critical contributions to the U.S. economy, but they also pay extremely well. The average tech industry wage is 86% more than the average U.S. private sector wage. In fact, in 48 'cyberstates,' the average high-tech wage is at least 50% more than the average private sector wage, and in 10 of these states the differential is over 90%."
Despite these increases, the AeA noted that the industry still faces significant challenges. "Companies of all sizes continue to have problems recruiting highly qualified and educated individuals to work for them, whether those individuals are foreign or domestic," Archey said. "This was reflected in the 2.5% unemployment rate for computer scientists and the below 2% unemployment rate for engineers in 2006."
As Archey sees it, the problem is twofold: first, the lack of American students enrolling in and graduating from math, science, and engineering programs; and second, a broken U.S. visa system. This April, within two days of the start of accepting applications, the U.S. government received 133,000 applications for 65,000 H-1B visas - i.e., those reserved for highly skilled individuals. And these applicants were looking for jobs that didn't start until this month.
An examination of market sectors reveals that the high-tech manufacturing industry added 5100 net jobs. The semiconductor industry also grew significantly, gaining 10,900 jobs. Software services and engineering and tech services employment were up for the third year in a row, increasing by 88,500 jobs and 66,300 jobs, respectively. Only the communications services industry continues to struggle, losing 13,300 net jobs in 2006.
On a state-by-state basis, tech employment gains occurred in 40 states. The last time so many states saw this much tech job growth was 2000, the last year of the dotcom bubble. While it's no surprise that California led the nation in net job creation, it may be news to some that Florida saw the second largest gain - adding 10,900 tech jobs.
This was the second year in a row that Florida was among the top five states by tech employment creation. Florida was also number one in rate of growth (+4.1%), followed by Virginia (+3.0%). Virginia had the added distinction of leading the nation with the highest concentration of tech industry workers as a percent of the private sector workforce (8.9%). Previously, Colorado had held that position.
The AeA report additionally found that venture capital investment in the technology industry rose last year by $285 million to $12.7 billion. In fact, high tech now accounts for a full half of all venture capital investments in the nation.
The Big Picture
The base salary of the average engineering professional is currently $93,743 - up 7% over last year. However, bonuses were flat in 2007, and stock options fell 3%. Average total income in 2007 (base salary plus bonuses and all other sources of income) reached $102,748, compared to $96,320 in 2006. Although engineers had told us they expected their compensation packages to grow less than 3% this year, average income across the industry increased by 6.6%.
Now that paychecks are starting to look better, engineers may be wondering if there are better deals elsewhere. In fact, 42.2% believe their pay is less competitive than what they could be earning elsewhere, while 41.4% think it's probably just as good.
Engineers continue to keep their guard up as companies continue to outsource design work to cheaper labor markets overseas - and Congress continues to support the influx of lower-paid foreign workers.
"The future of high-tech engineering is a dead end here in the U.S.," said one survey respondent. "The engineers from Japan have run rings around the U.S. for years, and now we have to contend with China and India as engineering competitors. Once a foreigner takes control here in the U.S., he only hires people of his own race or nationality. I have watched this happen at an everincreasing rate."
As another engineer put it, "It is borderline immoral. As skills are shipped overseas, engineering careers becomes less rewarding and less attractive and less stable. The U.S. is slowly losing its technical edge. While CEOs are concerned about the next-quarter profits, the U.S. companies are slowly becoming more obsolete, and the technical high-paying job market is slowly eroding."
Corporate executives who typically take part in Electronic Design's reader surveys cover the gamut, from heads of large corporations to owners of small engineering startups and spinoffs. As you'd expect, incomes among this group depend more on bonuses and incentives. On average, tech executives pulled down $125,497 this year, or about 4% more than a year ago.
Engineers involved in design and development saw the biggest increase in their pay stubs this year, 9.8%, and now bring in $101,165 annually, compared to the $89,046 earned by engineers involved in other engineering functions like quality control, reliability, and test. Engineering managers as a group now average $124,709 in annual income.
This year, semiconductor houses once again led all industries in compensating engineers (averaging $129,985), followed by software firms ($121,890), computer manufacturers ($119,700), avionics companies ($108,788), and communications systems manufacturers ($108,514). In addition to doling out the highest salaries to designers, chip houses are also once again the most active in looking for new engineering talent.
As in the past, engineers working at U.S. contract manufacturing firms bring up the rear in OEM salaries, as domestic electronic manufacturing services (EMS) firms continue to help clients cut costs by keeping their own engineering costs low. The average compensation paid to these workers dipped slightly, from $92,147 in 2006 to $89,048 in 2007. The good news is that traditional design houses in the U.S. say they are looking to outsource more work to domestic contract manufacturing firms - 64.3% versus 59.8% a year ago.
Another sign of the healthy state of the industry is that almost half of our readers surveyed this year said that a headhunter or recruiter had contacted them at some point during the past 12 months. Given the strength of the engineering economy and the current low unemployment rate, it was surprising to find that only 35% of survey respondents said they believe their company is more focused on employee retention this year - down from about 40% a year ago.
"During the past 20 to 25 years, I have witnessed the status of an engineer go from a respected, valued, well-compensated, core member of society to that of a commodity or an overhead expense that should be used for a specific purpose and then disposed of," said an engineer. "Most engineering jobs now are with consulting firms that bid on specific, short-duration jobs, which by nature utilize engineering skills as a commodity with no long-term obligations. Other professions, such as doctors, lawyers, and CPAs, seem to have been able to maintain their longterm viability and respect within society."
While the "lucky to have a job" mentality of a few years back may have faded, most engineers still feel somewhat insecure - and they may be justified in their feelings. As one reader stated: "Pressure on engineers has increased, and managers with no technical background receive much more recognition than hardworking engineers. When the job is well done, the managers receive recognition, but when there is a problem it is always the engineers who will be blamed for it."
Two factors that are inextricably linked to higher wages are company size and geographic region. As we've seen in past surveys, larger companies tend to dish out bigger salaries, bonuses, and raises. They're also more generous when it comes to noncash rewards and benefits such as stock options, 401(k) plans, pensions, patent awards, continuing education opportunities, and health coverage.
On average, however, engineers at smaller companies feel more secure in their jobs, and they're more satisfied with their current paychecks - so bigger isn't necessarily better for everyone (see "Small Firms Pay Less Money - But It May Be Worth It," p. 26).
Salaries State by State
It should come as no surprise that in regions where the cost of living is high, paychecks are higher too. Areas around California and Massachusetts - traditional technology breeding grounds - continue to attract more jobs and higher pay. This year, the Pacific states (California, Washington, Oregon, Alaska, and Hawaii) regained the top spot as the best place for engineers to earn a living by averaging $115,324 and edging out the New England states (Massachusetts, Connecticut, Maine, New Hampshire, Vermont, and Rhode Island), where total incomes averaged $108,200.
Next up this year were engineers in the Mountain states (Arizona, Colorado, Montana, New Mexico, Nevada, Idaho, Utah, and Wyoming), where incomes averaged $108,019. Following these states are West South Central states (Arkansas, Louisiana, Oklahoma, and Texas), who saw their total compensation dip slightly to $102,476 after seeing the greatest percentage increase in their paychecks in 2006. Mid- Atlantic states (New York, New Jersey, Pennsylvania, Delaware, and Maryland) averaged $100,193. Their colleagues in the South Atlantic states (Florida, Georgia, North Carolina, South Carolina, Virginia, West Virginia, and Washington, D.C.) were next on the list, averaging $99,642.
Trailing the field were engineers in the East South Central states (Alabama, Kentucky, Mississippi, and Tennessee) at $96,878 and the East North Central states (Indiana, Illinois, Michigan, Ohio, and Wisconsin), where total earnings averaged $93,346. Pulling up the rear in 2007 were engineers in the West North Central states (Minnesota, Iowa, Missouri, North Dakota, South Dakota, Nebraska, and Kansas) with an average income of $90,297. On the upside, however, this figure represents a healthy 11% increase over last year's percentage.
As in past years, engineers who design chips for a living took home the most pay in 2007, averaging a whopping $132,135 in total compensation - including an industry-leading base salary of $120,095, plus $5500 in bonus money and $6540 in stock options and other incentives. Rounding out the top five wage earners were military systems designers ($111,034), communications systems designers ($109,880), medical device designers ($107,386), and avionics systems designers ($104,519).
The Intangibles
As one might expect, more engineering experience usually translates into higher pay. The older you are, the more you make (at least until you reach the age of 55, when salaries begin to drop off a bit). And if you want to earn more than the average engineer, it pays to go back to school and add some graduate courses to your bachelor's degree.
One reader put it this way: "A greater amount of technical know-how will be required in the future due to the strong technical components of modern society. Those that don't have these skills will be left behind. In order to compete in the global marketplace, I believe engineers will be required to have a master's degree. The bachelor's is to hammer home engineering fundamentals, and the master's is used to apply those fundamentals to specific problems - things like improved robotics, artificial intelligence, alternative energy technologies, and bio-engineering."
Engineering continues to be significantly less financially rewarding for women than for men, despite the fact that men and women hold similar jobs and have similar education. Male engineers currently average $94,103 in base salary and $9014 in bonuses and other income for a total compensation of $103,117. Women, by comparison, average just $76,814 in base salary and $8490 in bonus and other income totaling $85,304 - a difference of more than 17%. While past surveys showed the salary gap narrowing year over year, that wasn't the case this year.
The time demands that have been so prevalent in the engineering professions seem to have finally peaked. In 2007, engineers are putting in about 53 hours a week - about an hour less than a year ago. But like in the past, engineers who work longer hours also usually find themselves bringing home bigger paychecks at the end of the week
As salaries grow, employers appear to be tying additional rewards to the performance of the company or division, rather than to personal performance. And they're finally delivering more on the indirect and non-cash rewards that engineers value most, like 401(k) matching, health benefits, tuition reimbursement, pension plans, and personal time off.
"My company's benefit package is very good and they absorb a significant portion of the health insurance costs, although my contribution level has increased over the years," added one engineer. But not everyone is feeling the love from their companies.
"The work environment has become very impersonal and mundane," stated another reader. "Everything is e-mail, teleconferences, and 'net meetings. We used to travel to meet with our teams and it was fun. We used to have jelly doughnut meetings, but now mostly meetings are sans coffee and doughnuts. On the compensation side the pay is good, but the benefits have been degraded significantly. Medical coverage is mediocre at best and pensions are a thing of the past. I think someone with talent to be an engineer could do better in another field or running their own business."
The number of engineers receiving health benefits from their employers increased from 62% to 67% in 2007. But the fact that salary increases are being overshadowed by rising healthcare costs continues to be a common grievance among engineers. "I am shouldering more of the cost of benefits as the company's income grows," complained one engineer. "There are many factors affecting the company's bottom line, but they are still providing better benefits (at my career point) than other comparable companies. Once the education demands level out, other compensation will become more important."
In exchange for better pension and healthcare benefits, companies have started to cut back on areas where they don't see some immediate or long-term benefit, like car allowances, company phones, and association dues, as well as on stock options and stock purchase plans.
"Health insurance deductions and copays seem to go up a little faster than inflation each year," said one engineer. "The company has developed a more concise plan to measure personal performance and at the same time has segregated the annual bonus into two parts - one part for company performance and one part for personal performance."
Clearly, money is what matters most to employees of the industry. And after several years of lukewarm pay increases, engineers are eager for more scratch. The number-one reason engineers give for considering another job, cited by 69%, is higher pay. Sure, other things matter, like more interesting work, personal fulfillment, and greater stability. But taking all of the factors into consideration, companies would be smart to make sure that their A-list engineers are being taken care of and compensated (at least) in line with market norms.