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Is Wage Growth in the Information Industry Sustainable?

Author

Kristopher Kapphahn

More by Kristopher
Author

Kristopher Kapphahn

More by Kristopher

For full-time workers in the information industry, wage growth continues its upward trajectory. According to the ADP® Q4 2016 Workforce Vitality Report (WVR), full-time job holders in the information industry saw 5.1 percent growth, while job-switchers saw 6.7 percent growth during the fourth quarter of 2016. Yet, employment growth continues its slight decline. According to the January ADP National Employment Report® (NER), the information industry lost 6,000 jobs from December 2016 to January 2017.

So what is driving wage growth in the industry? Is it sustainable?

Organizations Will Have to Fight for Talent

In the Q3 WVR, Ahu Yildirmaz, vice president and co-head of ADP Research Institute®, reported that "employees in the information industry are experiencing some of the highest growth in wages, while overall employment growth in this area is relatively slow." Yildirmaz attributes these trends to a "war for talent among information industry employers who are increasing wages to attract and retain top talent."

With such a demand for their specialized skills, information industry workers are in a position to leverage their skills for other opportunities. The average tenure of a software developer in Silicon Valley is nine months, reports The Seattle Times. Job hopping typically results in a pay raise as well, so switching jobs could be the way to achieve an upward career trajectory for sought-after tech employees in Silicon Valley.

This battle for the most skilled and talented tech workers has been going on for a while now.

Is Growth Sustainable?

Wage growth in the information industry is driven by a bidding war over skilled employees. All else being equal, a reduction in demand for skilled employees would reduce wages, increasing the supply of skilled employees. But a reduction in the demand for these workers would most likely only result from a severe industry contraction.

According to Bloomberg, that may come in the form of a potential tech bubble, a subject of speculation. "Most startup investors, however, expect several years of relative stagnation, which is why many are looking away from the crowded field of consumer software and toward companies focused on business services, where they see more stability and growth potential," Bloomberg reports.

Wage growth in the information industry is driven by competition for a limited supply of highly-skilled workers. Some observers expect potential contraction in the near future, which would drastically reduce this wage growth, but this not a certainty by any means.

To learn more about workforce trends, check out the ADP Workforce Vitality Report: http://workforcereport.adp.com/

March 18, 2017