Technology Skill Trends Driving Wage Growth Outside Silicon Valley

According to a survey by Hired, the salaries of tech workers are the highest in San Francisco and the Silicon Valley in California. Still, they are rising faster in other cities across the USA and around the world.

The average tech worker salary in 2019 was (US) $145,000, up 2 percent from 2018. New York was up by 3 percent to $133,000, and Los Angeles was actually down by 1 percent to $128,000.

However, salary growth was much stronger in many other cities. Austin, Texas, and London, UK both had 6 percent growth; Paris, France, and Bangalore, India had 8 percent growth; and Boston, Massachusetts, and Toronto, Ontario (Canada) had a remarkable 9 percent growth.

The Hired survey also compared the cost of living in different cities to see how the purchasing power compared to San Francisco. San Francisco and Silicon Valley have some of the world’s highest housing costs and high local taxes. The survey calculated that a tech worker in Los Angeles (average salary: $128,000) has the same standard of living as a San Francisco worker earning $171,000, and a tech worker in Austin (average salary: $125,000) has a standard of living comparable to $208,000 in San Francisco.

So the cost-effectiveness of hiring outside Silicon Valley drives the demand behind the wage growth in other locations. But this is not the same trend as manufacturers building factories or service providers setting up call centers in the locations with the cheapest wage rates. Why not? There are several main factors:

1. Quality technology education has spread across the globe. The first wave was in the form of new curricula at brick-and-mortar universities, colleges, and technical schools. With the advent of high-speed internet and universal connectivity, high-quality technology instruction is now available anywhere a broadband connection can be found. First-class technology skills can now be found (or cultivated) around the world, and learners around the world are responding to the rapidly growing global demand for those skills. According to a survey by Docebo, the leading e-learning market is the U.S. at nearly US$30 billion annually. Still, Europe and China are large and growing markets, and India is catching up with a compound annual growth rate of 17%. 
2. Another factor driving tech salary growth outside Silicon Valley is the rise of tech hubs in other locations, which create local ecosystems for startups and enterprise expansion. Boston, Seattle, Washington, and San Diego, San Francisco, and San Jose, California, accounted for 90% of all U.S. high-tech job growth between 2005 and 2017. London, Bangalore, and Hyderabad are just a few of the hubs outside the U.S. Now, some entrepreneurs and venture capital investors seek to create tech industry hubs in cities like Indianapolis, Indiana, Columbus, Ohio, and Pittsburgh, Pennsylvania. Similar efforts are happening in other countries like the United Kingdom.
3. The digital transformation of the economy and lifestyles is a global phenomenon. Where in past decades, the markets for technology-based goods and services were skewed toward North America and Europe, now consumers, companies, and governments worldwide demand the latest technology. Combined with the ability to deliver many services digitally, it has caused an explosion of opportunities for technology companies in locations around the world to scale to serve markets at the local, regional, and global scales.

The future of technology employment will continue to evolve beyond where to find the least expensive labor to where to find the most cost-effective labor: workers who combine the best quality of work and the most innovative ideas with (comparatively) affordable wages. Over time, competitive pressures will gradually cause technology wages to equalize across geographies.

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