The field of engineering is incredibly diverse and the pace of change within the field continues to accelerate. Compensation figures are but one metric illustrating the direction of the field, albeit an important one. The objective of this guide is to be a resource for engineers managing their careers and for hiring organizations striving to attract, recruit, and retain top engineering talent.
Although compensation is an essential metric for engineers and hiring organizations alike, we would like to put context around the figures within this guide by discussing some of the directional forces impacting engineers and the organizations that employ them. However, as you will see, the state of the engineering talent market is not a straightforward story.
Engineers Are in Short Supply?
By the end of 2017, most economists agreed that the U.S. economy was at or close to full employment. Of course, full employment suggests that competition for talent will escalate among hiring organizations and that basic principles of supply and demand will cause wages to rise at an increased rate.
Additionally, by November 2017, the unemployment rate within the manufacturing industry had fallen to 2.6%, the lowest on record for this metric (dating back to January 2000). Other factors potentially restricting the availability of engineering talent are proposed restrictions and reform of the H1-B visa program, as well as immigration policy in general.
Many headlines and data sources tell hiring organizations to prepare to compete for and to pay more for the talent they are seeking. For engineering professionals, has your ship come in? Will your compensation packages mushroom more than you ever dreamed possible?
But Are Engineers Really in Short Supply?
In seemingly direct conflict with the above statements, TechService Alliance’s Engineering Employment Index reflects a paltry increase in the number of engineering jobs in the U.S. Also, most compensation data points within our 2018 Guide to Engineering Compensation reflect compensation increases of 2% to 4.5% when compared with 2017 data—a fairly normal rate of increase that contradicts declarations of widespread engineering labor shortages.
Yes, Engineers Are in Short Supply. But No, They Aren’t.
Many of us strive for clarity and definitive conclusions, but the reality is that the engineering talent market continues to be full of contradictions, and likely will be for the foreseeable future.
Some evidence suggests that a persistent rate of structural unemployment is a factor in the mix. Brian Beaulieu, ITR Economics, says that 2% of the country is structurally unemployed. Meaning, 2% of the country either does not have the needed skills for available jobs or are unwilling to move to where jobs are available.
While we will not attempt to make conclusions relating to how structural unemployment is impacting the engineering market, there is evidence of a “structural-unemployment-like effect,” especially within certain geographies and for certain engineering disciplines.
In November 2017, Justin Baker, a writer for Hacker Noon, concluded that the persistent software engineer talent shortage will continue in 2018. “The software engineering shortage is not a lack of individuals calling themselves ‘engineers’, the shortage is one of quality — a lack of well-studied, experienced engineers with a formal and deep understanding of software engineering,” stated Baker.
Observed shortages of software engineering talent by industry experts, coupled with year-over-year compensation increases, market depending, of 3.5% – 6%, paint an interesting picture. Healthy, yet not outsized, rates of salary increase suggest that the shortage of software engineering talent is not across the board. Rather, talent in specific markets and specific skill sets are in short supply, rather than software engineers as a whole. This supports the notion of a “structural-unemployment-like effect” of sorts within the field.
In the aerospace industry, leaders are highly concerned that there will not be sufficient talent to replace retiring members of their industry. Additionally, while aerospace companies have traditionally competed for top talent with other players within the aerospace sector, they now find themselves competing with the likes of Amazon, Google, and other technology leaders.
“Our industry has great potential to create new high-skill, high-wage jobs, but it takes the right kind of people to create the innovations and ideas that keep our industry vibrant long into the future,” said Aerospace Industries Association President and CEO David F. Melcher.
While the aerospace engineer job creation outlook through 2026 is expected to be about average when compared to the labor market as whole, according to the Bureau of Labor Statistics, highly specialized talent in specific geographies appears to be the primary concern of the aerospace industry leaders.
Electrical Engineering Compensation Decline – Trendline or Momentary Blip?
2018 engineering compensation data reflected the above discussed undercurrents, but by and large did not unveil dramatic findings. The electrical engineering discipline, however, was an interesting exception. While we did not include Madison and Nashville in our 2017 Engineering Compensation Guide, within the Chicago, Cleveland and Detroit metro markets the data reflects a 10-18% decline in 2017 to 2018 average salaries for electrical engineers. Within the 90th compensation percentile, there was still a decline, but it was less: 4% decline in both the Chicago and Detroit metro market and a 15% decline within the Cleveland metro market.
While we always hesitate to make definitive statements without ample history or data, based on both the data and our own recruiting experience, we suspect unspecialized electrical engineering positions may be pulling down the discipline’s overall compensation numbers. The electrical engineering discipline within 180 Engineering was very healthy in 2017 and we experienced strong competition for top talent particularly within the medical device, aerospace and advanced manufacturing fields.
What Are Engineering Hiring Organizations and Engineering Professionals to Do?
Although some trends within the engineering talent market are unclear, important conclusions can be made. First, engineering professionals and engineering innovation-driven companies must be willing to ensure that skills remain current and continue to grow, as it is only through skill and talent that the next waves of innovation occur.
Additionally, engineering hiring organizations must be wise to strategically assess and plan for likely needed talent, then execute accordingly. Without this foresight and proactivity, companies will likely find themselves paying more for needed talent and may even find themselves with growth-crippling shortages of talent.
Download the 2018 Guide to Engineering Compensation to learn more