As a whole, the engineering profession in the U.S. remains in a state of flux as globalization continues to move jobs offshore. For some, that means loss of work and flat wages. For others, it means new opportunities and higher income.
According to the latest data compiled by the U.S. Department of Labor's Bureau of Labor Statistics (BLS), the number of employed electrical and electronicsengineers shrank by 101,000 from 444,000 in 2000 to 343,000 last year, a decrease of nearly 23%. Computer programmers took a slightly bigger hit during the period with a drop of 181,000 jobs, or more than 24%. According to BLS, however, substantial employment increases for technical managers, computer hardware engineers, and computer software engineers offset these declines. "The drop in computer programmers and rise in managers reflects the trend toward offshoring and the resulting need for professionals to manage outsourced projects," said IEEE-USA president Gerard A. Alphonse.
That assessment is borne out by this year's salary survey. Although total engineering incomes remained relatively flat in 2005, wages for those in engineering management and senior engineering positions actually outpaced inflation. Department heads and section heads, for example, saw their incomes rise just over 4%. Those with management titles, such as technical director, director of engineering, head of R&D, and engineering manager, increased their incomes by an average of 3.9%. Those with VP engineering titles had the highest total compensation overall—averaging just over $120,300—for an increase of nearly 3% over last year. So while lower-level jobs travel overseas, engineers who can move up the food chain reap the appropriate rewards.
The IEEE isn't alone in stressing the growing impact of outsourcing on U.S. high-tech workers. According to an analysis by the Department for Professional Employees (DPE), recently revised downward projections for white-collar job growth for 2002-2012 released by BLS contrast sharply with earlier government estimates, clearly indicating that more and more jobs are being shipped offshore.
BLS says that over the next decade, most job growth will be generated by low-paying positions in the service sector. This is a major shift from earlier estimates, which projected domestic job growth from engineering and other white-collar/high-tech segments.
"The changing job projections show that outsourcing has reduced the nation's ability to create high-skill, well-compensated jobs that are the backbone of our middle class," said DPE President Paul Almeida. " Government and business economists promised that high-tech and knowledge jobs would replace the offshored manufacturing jobs—but now jobs are being exported, too. This is dramatically changing the nature of employment in our country. The figures are hard to deny."
As a result, instead of an average of 152,800 high-tech jobs being added annually to the economy, the most rapidly growing professional/technical occupations are projected to add only 10,600 tech jobs annually between 2002 and 2012—an astounding 90% downward revision.
"The increasing exodus of highly skilled jobs overseas—similar to the disappearance of factory jobs—means diminished opportunities for those who spent years preparing for high-tech and knowledge jobs, and for our society," added Almeida, an electrical engineer who was formerly president of the International Federation of Professional and Technical Engineers.
The base salary of the average engineering professional in 2005 was $85,015, up just three-tenths of one percent over last year. Bonuses helped pick up some of the slack, growing 3.7%, but these gains were offset by a 6.6% drop in stock/stock-option compensation. Total income (base salary plus bonuses and all other sources of income) was $93,056. Last year, that number stood at $92, 837.
Despite these meager gains, engineers who participated in our survey said they expected to see their total compensation grow 2.7% on average in 2005.
"A shift has been made to give more bonuses for work done, rather than higher permanent salary increases," stated one engineer. "This will lower base salaries in the long run but also reward engineering for meeting company objectives. In the end, it will probably increase pay—it'll just make you work harder for it."
A growing number of corporate engineering managers who took part in the survey tend to work for startups or spin-offs. More than half work for companies with fewer than 25 employees and less than $5 million in revenue. Total compensation for members of this group averaged just over $105,000.
On the other hand, executives and operating managers at larger organizations (those with 1000 or more employees) averaged $131,727, which goes to show that bigger is better—at least when it comes to high-tech salaries. Engineers involved in design and development brought in $90,158 annually, compared to the $78,790 earned by engineers involved in other functions. Engineering managers averaged $114,182.
Job options expand
Like last year, the three industries that were tops in doling out compensation to engineers were semiconductor houses ($110,082), computer manufacturers ($101,770), and communications companies ($100,298). Designers at medical electronics firms saw the greatest gains this year (up 7% to $97,873), which may reflect the fact that these companies are among the most active in looking to hire new engineering talent (see the chart, "Who's Hiring By Type Of Industry," on page 51).
Indeed, one of the most interesting aspects of the engineering profession today is the tremendous diversity of options available to designers. This means that engineers seeking better job opportunities should probably consider hopping over to other markets as they heat up.
As one engineer observed, "The field of engineering encompasses many different industries. With the proper education and motivation, an engineer can choose where to work, how long to work each week, and the compensation for the work. Good engineers will always be in demand."
Does the prospect of losing your job to outsourcing make you apprehensive? There's one more reason to feel uneasy. Engineers working in contract manufacturing earn the lowest salaries ($63,783) and receive the lowest total compensation ($71,116) of any OEM industry. Clearly, one way EMS organizations help OEM companies cut costs is by suppressing their own engineering salaries.
"I cannot blame a company for getting the engineering services they need at the lowest possible price," one engineer conceded. "What else can they do and still compete with other companies who are saving money as a result of outsourcing?"
Another engineer was more cynical. "I do not approve of outsourcing to companies that pay substandard wages. This appears to be the case with China."
West beats east
So where's the best place to earn a living? As in past years, engineers in the Pacific states (AL, WA, OR, CA, and HI) outpaced engineers in other parts of the country in earnings, averaging just over $103,000—despite the fact that their average earnings dropped 2.4% in 2005.
This year, engineers in the Mid-Atlantic states (NY, NJ, PA, DE, and MD) jumped past those in the New England states (ME, NH, VT, MA, RI, and CT) to take the number two spot on the earnings scale, averaging $96,252. But engineers working in New England weren't too far behind, averaging $94,235. Engineers in the East South Central states (KY, TN, AL, and MS) ranked last again this year, averaging $84,079.
Who saw the largest percentage gains? Check out engineers located in the West North Central states (MN, IA, MO, ND, SC, NE, and KA), whose salaries went up by a very healthy 6.9%. Such a number likely reflects the success of these states in attracting a new wave of high-tech investment.
Chip designers took home the most pay in 2005, averaging $110,659. A small sample of respondents said they worked on MEMS projects, a specialization that no doubt helped this elite group average just over $109,000. Rounding out the top five earners by design discipline were computer product designers ($101,269), military product designers ($98,903), and communications systems and equipment designers ($98,732).
Back to school
Some of our survey findings confirmed reasonable assumptions. On average, bigger companies offer bigger salaries and bigger bonuses, and engineering experience generally translates into higher pay. The older you are, the more you make (at least until you reach the age of 60). And if you want to earn more than the average engineer, you'll need to tack on some graduate courses to your bachelor's degree, assuming you have one.
"Engineering, especially research engineering, is an emotionally rewarding field," said one engineer. "It has longevity if you keep your academic skills refreshed. Engineering training and the skills acquired never age."
Indeed, continuing education is an ongoing process for most engineers. Two-thirds say they stay fresh by attending seminars and reading engineering textbooks, and about half depend on white papers, industry trade shows and conferences, and vendor-sponsored education (such as webcasts) to keep up-to-date.
Electronic engineering has long been a man's game, and our survey shows that little has changed in that regard. Only 3% of our survey respondents this year were female. The good news for women, however, is that salaries for female engineers are on the rise, and the gap between men's and women's earnings is closing. Last year, for example, women averaged $74,027 in base salary and $82,867 in total compensation. This year, base salaries grew 5.6% to $78,179 and total earnings grew 4.5% to $86,660. Today, male engineers on average earn $93,170 or 7.5% more than women. The difference last year was more than 12%.
When you examine earnings by race, Asian engineers outpace all other groups in base salary and total compensation, averaging close to six-figure incomes ($99,169). (Approximately 80% of the Asian respondents to our survey were born in the Asia/Pacific region.) Caucasians were next ($93,712), followed by African-Americans ($89,499), those of mixed race ($85,732), and Hispanics ($75,067). (For more insight into the relationship between race and employment, see "Challenges Persist For Minorities And Women," page 59.)
Engineers are working longer hours—53 hours a week, in fact, when you factor in work done at home or other locations and time spent on call. That represents an hour more on the job than a year ago. The good news is that longer hours also usually translate into more dollars in the paycheck.
"Somewhere along the line, engineering went from being a respected profession to being one where the company, because it pays you a salary, expects you to work weekends and nights without any extra consideration or compensation," lamented one engineer. "I haven't had more than a day or two of vacation at a time in five years now."
With salaries remaining flat, engineers depend more on bonuses and non-cash rewards to pick up the slack. Slightly more engineers are receiving bonuses based on personal performance this year than a year ago, but fewer receive company profit-sharing. The number of engineers who said they were receiving stock options dropped 10% this year. Similar declines were seen in the number of engineers in 401(k) match plans (down 12%) and stock-purchase plans (down 18%).
As one engineer noted, "Benefits and bonuses are being scaled back. More health costs are being passed on to employees. Stock options are being limited due to expensing. Patent award bonuses have been greatly reduced. In general, costs are being reduced all the time, and people are constantly asked to do more with less. Even though our company had a very good year, we received 3% pay increases. The days of 5% to 10% raises are gone for good."
The number of engineers receiving health benefits also took a bit of a hit this year. Now, only two-thirds of engineers say they receive health benefits. That's down from 70% a year ago.
"Recent changes to the healthcare program are a real concern," complained one engineer. "We currently pay a large percentage of the cost for the health insurance provided. Other benefit programs, such as 401(k) matching, have been reduced or totally eliminated to help make the bottom line. Because these were permanent changes, many highly skilled people have chosen to leave the organization for better opportunities."
Smart organizations are recognizing the need to balance fiscal realities with the need to care appropriately for its valuable engineering staff. One engineer commented that his company "has asked its employees to shoulder a small portion of the cost of healthcare. The company is very concerned and proactive in determining how this affects the employees. Prior to making changes, it has been the policy of the company to put together focus groups for all levels of employees to discuss the options—for example, eliminating benefits versus increasing employee contributions."
Some of the non-cash or indirect cash rewards that saw an uptick this year include further education and training, tuition reimbursement, and certification reimbursement. Therefore, certain companies are clearly willing to spend in areas where they see some near-or long-term benefit for themselves.
Not all of the news on the compensation front is grim. "With the gradual improvement of the U.S. and global economies, our company has greatly improved its profitability over the last year and a half," said one engineer. "Compensation packages have been improved to reflect that. Hopefully, these changes will be permanent."
It's also important to keep all of these numbers in context. With inflation and interest rates low, engineers don't need large salary increases to maintain their lifestyles. Moreover, this profession isn't alone in its flux status, as many other industries are feeling the pinch of offshore job loss and spiraling healthcare costs.
The fact is that well-trained, highly experienced engineers still do very well for themselves relative to most other professions. The personal rewards of solving tough problems and creating innovative products must be factored into the job satisfaction equation, too.
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Salaries by Title
Salaries by Industry
Salaries by Gender
Marital Status vs. Age
Salaries by Level of Education
Salaries by Geographic Region
Salaries by Years of Engineering Experience
Salaries by Size of Company
See associated factoid