Ten years ago, nearing the midpoint of the first Clinton administration, the average respondent in EE Times' "1994 Worldwide Salary & Opinion Survey" earned $59,800. The idea that an EE could pull down a six-figure salary was largely a pipe dream in 1994; even vice presidents of engineering averaged $77,500. Only a handful of exceptional key engineers and, perhaps, corporate owners or officers achieved $100,000.
Today, many designers, managers and entrepreneurs have vaulted past $100,000, helping to pull the mean salary for the EE Times "2004 Worldwide Salary & Opinion Survey" to $96,400.
But it's not just CEOs and engineering vice presidents who have crashed the six-figure barrier. Among the respondents in the 2004 survey, 1,201 holding staff-level positions senior engineers, project engineers and even some design engineers are now in the $100,000+ category.
Some respondents recognize that fatter wallets could have a downside. Said one: "An engineer in India will never make what I make in salary and my employer knows that very well. I am a target."
More evidence of the rapid rise in salaries among U.S. engineers: When we asked the respondents to go beyond their base salary and factor in their total compensation package that is, bonuses, overtime and other incentives the overall mean soared to $100,500. Staffers' all-inclusive wage package averaged $96,000, while 280 managers recorded $121,000 overall.
Over the years, the EE Times Salary & Opinion surveys have concentrated on base salaries. And here the news is great for all levels of engineering as well. More than a third of the staff-level engineers started their year above $100,000. As expected, more than 60 percent of the managers boasted base wages in the six-figure realm; some 12 percent even claimed as high as $160,000 or above, not so far-fetched when you include corporate-level officers and entrepreneurs.
Add in the total engineering household income with spouses, and the typical engineering family in 2004 registers $129,177.
The $96,400 mean salary is a solid $7,500 higher than last year's mean of $88,900, or almost 8 percent. Nationally, wage hikes have averaged around 0.6 percent, so that represents a big jump, even though we are not polling the same group of engineers as the previous year.
Increases this year weren't universal; 31 percent of the EE Times survey said their workplaces still had wage freezes in place, although only a small percentage of our respondents were directly affected. Nonetheless, that's considerably better than the 42 percent reporting freezes in 2003.
More than half of the engineers and managers who took part in the survey believe that their wages are "comparable to others in their field," while another 36 percent disagree. Here are some of our $100,000 base-salary earners, by their job title:
- Group leader, $101,300;
- Member of the technical staff (MTS), $106,300;
- Principal engineer, $111,200; and
- VP of engineering, $131,200.
Not quite there yet, but among our most numerous respondents, are the following:
- Senior engineer, $98,500;
- Project engineer, $85,300;
- Software engineer, $84,200; and
- Design engineer, $77,300.
We can picture some design engineer in Wisconsin shaking his head right now. "Are you crazy? No engineer I know earns that around here!"
He's right. As has been the case for many years now, the highest-paid EEs live in the West, specifically in Silicon Valley. In terms of wages, the San Jose, Calif., region is its own world. It has also generated some of the highest number of responses to our surveys, so the average $114,575 salary there has the effect of pulling up the overall mean. This year, for instance, the base salary mean would have been $93,000 without the San Jose metropolis, meaning this influential, numerous group of 250 EEs out of 1,453 respondents yanked up the average by more than $3,000.
Thank them, even in Milwaukee. The draw of higher wages in Santa Clara or Milpitas helps buoy wages in other regions that need to pay more to retain their best and brightest. Employers in Milwaukee can always point out the advantage that area enjoys in housing prices vs. the expensive housing in northern California.
Some average base salaries, by state:
- California, $106,275;
- Arizona, $99,396;
- Colorado, $98,774;
- Texas, $98,523;
- Florida, $88,714;
- Maryland, $100,333
- Illinois, $87,153;
- Minnesota, $88,300;
- Massachusetts, $96,811;
- New York, $86,935;
- Pennsylvania, $100,400; and
- Wisconsin, $62,181.
Besides San Jose, mentioned above, here's a sampling of salaries by city:
- Phoenix, $101,575;
- Austin, Texas, $109,478;
- Dallas, $98,525;
- San Diego, $89,269;
- Chicago, $88,185; and
- Colorado Springs, Colo., $84,969.
Part of the reason for disparities in different regions of the country may lie with the type of employers there. Breaking down wages by end product provides a revealing glimpse into why some EEs do better than others:
- Components/subassemblies, $106,400;
- Computers, $107,600;
- Communications, $98,400;
- Military/aerospace, $92,600; and
- Consumer electronics, $88,800.
The defense business has picked up some recruits from the commercial side in recent years as refugees from the communications crash of 2000-02 have sought stability. Some took wage cuts to make the move. Of course, in the early '90s, a post-Cold War wave of layoffs swept the military/aerospace industry, illustrating that no business segment is immune to cyclical hiring and firing.
Other factors that can help or hurt wages:
- Gender. Men ($96,500) earn more than women ($91,500);
- Age. The top age group are those who are 55-59 ($105,000), but the biggest pay raises come between ages 20-24 ($55,000) to 40-44 ($104,000) before leveling off;
- Country of origin. Among U.S. workers, Europeans ($106,000), Britons ($111,000), Asians ($104,700) and Indians ($99,000) do better than the 82 percent of our sample born stateside ($95,400);
- Education. PhDs ($119,000), as usual, lead this year's pack, with MSEEs ($104,200) and MBAs ($104,000) ahead of BSEEs ($90,800); and BS computer scientists ($94,700); and
- Job function. Design/development engineers ($94,600) are just ahead of software designers ($93,000), but R&D specialists ($101,500) and design managers ($114,100) outstrip both.
In addition to our 1,453 U.S. salary responses, we surveyed 457 European engineers. Their salaries in U.S. dollars are considerably lower than those of the U.S. group, at a mean of $64,200. Part of the reason for the lower wages may lie in the fact that 19 percent of the European sample work at industrial controls and equipment companies, which on the whole don't pay as much as, say, computer companies. Half of the European sample came from the United Kingdom, a quarter from Germany and 14 percent from France. The rest are based elsewhere, including a couple of dozen U.S. employees based at European sites. They're paid the most, at $75,000. Among the permanently based Europeans, U.K. designers and managers topped the survey with $67,627, followed by Germans, at $62,224, and French, at $55,198. (The conversion of euros to dollars may also play a role in the relative salary levels).
On the whole, at 55 percent, the Europeans believe their salaries are comparable to those of other professions. More than a third, however, said their wages lag behind. We asked Europeans to comment on how the current economy in Europe has affected their wages. Here's a sampling of their reactions.
"Base salary is only marginally increased, if at all."
"Employer clings to the semiconductor crisis of 2000 to 2003 and does not increase salaries even in times of economic upswing."
"Periods between increases are extending by a few months."
From the U.K.:
"Flat economy has put pressure on base salary. No raise in 24 months. Bonus paid on performance."
"In real terms, I'm worse off than the same time last year."
"It is a buyers market with too many engineers out of work, so the salary levels are depressed."
"I was one of the happy few. This gave me the opportunity to enjoy a 60 percent raise in my salary over the past three years."
"France is still in recession, and labor costs are still too high (35-hour workweek).
"Adoption of the 35-hour work week in 2000 [equaled] a general wage freeze for several years. Lack of growth since 2002 [equals] a general wage freeze until profitable again."
Expensing of options
Throughout the '90s and up to today, stock options have proved to be a lucrative incentive for enticing engineers and managers to join a company. Basically, an employee can buy company stock at a preset price after X years of service or other agreed-upon goals. Especially after the accounting scandals of recent years, reformists have demanded that companies reveal in their financial statements how many options are outstanding and list those shares as ex-penses, or liabilities. "Not expensing stock options inflates reported earnings," one reader claims. Fill reporting reduces the asset side of the balance sheet.
Options are widespread. In the EE Times' "2002 Worldwide Salary & Opinion Survey," nearly six out of 10 engineers and managers owned an average of about $25,000 in options.
Some companies have already started issuing financial statements with options listed. But technology industry groups such as the AeA are fighting that, with the AeA accusing the Financial Accounting Standards Board of refusing "to look at the economic complications of expensing."
The House passed a bill in July that would ease expensing requirements set down by FASB, leaving the Senate yet to act. When and if expensing of options happens, according to a new Mellon Financial Group survey, 74 percent of companies plan to either drop or reduce broad-based options for middle- and lower-level employees.
We asked the 2004 respondents whether expensing of stock options would hurt entrepreneurialism in the tech industry.
"It will limit the caliber of people an organization can attract and retain," replied one respondent. "Stock options in the status quo attract many key people who are not just driven by bottom-line net paychecks. Some want to truly be part of an organization, and expensing of stock options will limit growth of these companies."
"Stock options are a valuable form of compensation, encouraging staff to work hard to help the stock price," said another. "Smaller companies won't be able to afford this benefit for their employees and that will make it tougher to retain skilled staff."
"It will hinder [the industry] significantly, especially in Silicon Valley," one San Jose area respondent wrote. "Without the stock options in the area, it will be much less attractive to work for."
One manager sees options as a key driver of innovation. "By awarding options, engineers are given an 'all or nothing' incentive to innovate. Expensing options will result in the elimination of these programs. It debases the entrepreneurial spirit by removing its direct reward."
Expensing options "will hurt a company," wrote one manager. "There is very little incentive for an employee to stay with a company if long-term stock options are not provided. Employees at my company are already jumping around to other companies because of this. They basically go wherever the base pay and bonuses are highest for those couple of years. Our company then loses continuity on projects. Also, morale is lowered. There is not a sense of ownership."
Another who sees expensing of options as "dramatically" hurting entrepreneurialism noted that "startup employees trade benefits, security, bonus plans and an 8-to-5 day for this [options]."
Others favor posting options on the balance sheet. "They represent real future liabilities and should be accounted for. Besides, as compensation, they depress salaries. They're only marginally better than giving me 10 percent of my base in lottery tickets."
As one reader notes: "Many engineers got burned and have shied away from [options] for a more stable approach." He was referring to the options' linkage to stock market. If the company stock goes down, then the options essentially are worthless; no one wants to cash in an option that requires them to pay more than the stock is going for on the open market.
Expensing options, says another designer, "will ultimately be helpful as it brings some integrity into what has become a corrupt and abused system."
A key complaint about options is that they've been primarily weighted toward management and executives. "Options have always been a way to pay under the table with little or no accountability. If the system has been applied in a fair and equitable fashion in the past and is justifiable, there should be no effect on future operations. . . . The wheelbarrows given the executive groups could be embarrassing if full accounting is required," one respondent said.
"This change was made to add controls for large companies that have executives making big salaries and use options as a perk," another reader observed. CEOs, chairmen and corporate-level executives sometimes receive options that ultimately can be worth millions of dollars. That's OK, proponents said, if a chairman drives his company's stock upward. That helps not only him, but every stockholder.
Another reader thinks options give the "little guy" a chance at ownership of a company: "The average worker is excluded from acquiring the IPO [initial public offering] of their company it all goes to the owners or other big stock purchasers."
One reader suggested, "Stock options should be expensed at the time the employee exercises the option. . . . The exercised option actually impacts the company's capitalization. Prior to this point in time, the option could represent a paper liability to the company, but it has no real value. Since many options are not exercised by lower-level technical people (due to quitting, layoffs and not vesting for other reasons), having the company expense these at any time prior to vesting is ridiculous."
In the end, said one reader, entrepreneurialism won't suffer. "I think there will be much complaining but little real impact. Engineers want to work on the leading edge. It's not all about the money."
Bounce-back: Salaries recover from 2003 dip
Top earners: By job title, education and job function
Top earners: By country of origin, gender, region and end product