Electronic Design
2010 Design Engineering Salary Survey: How Much Financial Bounce In The Rebound?

2010 Design Engineering Salary Survey: How Much Financial Bounce In The Rebound?

Electronic Design has once again surveyed its audience of design engineers and engineering managers and presents the results here. As in past surveys, we collected information from more than 2500 engineers representing a cross-section of industries, job functions, and company sizes.

Information like this is especially important during times of uncertainty. Just ask a pilot flying through a fog—or an investor trying to make a profit in today’s volatile markets.

The same holds true for engineering professionals. With all the uncertainty in the industry and the employment outlook, it’s more important than ever to get solid information about current salary and compensation trends. That way, you can make informed career decisions and get an accurate perspective on your present job situation.

That’s why We also expanded our survey this year to include questions about component shortages, so we could assess the extent of the shortage problem in different corners of the industry—as well as which particular components are especially problematic, the effect that shortages are having on your company’s ability to launch new products, and whether the situation is improving or getting worse.

In addition, we asked you about your experience with counterfeit parts, including where they were purchased, how the problem was discovered, and any safeguards your organization has put in place to prevent similar incidents.

Finally, for the first time we extended our survey across the Atlantic to include our readers in leading design centers in Europe (see “Engineering Employment—The European View”). We think you’ll find some of the responses of your European colleagues fascinating.

We thank everyone around the globe who participated in this year’s survey. We think this is our most ambitious survey yet, and we hope the results are helpful to you.

Back from the bottom
The news this year on compensation isn’t very good, but at least it’s not very bad. The pay increases that electronic OEMs are doling out to their engineering employees are paltry, averaging just 1.2%. That’s certainly a lot better than the 3.6% decrease that the average engineer saw last year.

But with persistent unemployment, HR managers seem to believe they can pay new hires less than those they laid off during the recession. Of course, many companies expect to end this year better off than they were in 2009. Yet they still tend to budget salaries based on last year’s economic conditions, rather than on the current year’s promise.

If stock options were the sign of the times 10 years ago, the salary freeze appears to be emblematic of today’s economy. Employers are being tightfisted with base salaries for engineers, because they believe they can be. Like housing, engineering is a buyer’s market.

What little gains in total wages occurred this year were often the result of increases in stock options, bonuses, and other sources of income. Bonuses made a comeback in 2010, representing 3% of the average design & development engineer’s compensation and 4% of take-home pay for engineering managers and executives. In fact, since salaries have flatlined, compensation other than base pay now accounts for 8% to 9% of the average engineering professional’s paycheck.

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The good news is that nearly half (47%) of the companies surveyed are giving at least some raises this year, compared to only about a third of companies last year, and some firms are managing to give raises above the industry average for certain kinds of positions.

It’s also important to note that engineering is still a well-paying profession. Across the U.S., survey respondents report an average total compensation in 2010 of $103,680—a slight increase over last year’s $102,443, but still below the 2008 average of $106,271.

For design & development engineers, the average base salary is $91,691 and total compensation is $99,665. Engineering managers earn an average base salary of $114,103 and total compensation is $125,221. Corporate executives take home an average base salary of $117,957 and total compensation of $130,221.

By title, the best-paid engineers continue to be VPs of engineering (earning total compensation of $135,932) and technical directors and directors of engineering or R&D ($119,731). A notable change this year is that software engineering managers gained significant ground, going from $114,797 in 2009 to $122,464.

As always, regional differences abound. The Pacific states remain the place to be, with total compensation averaging $114,709. Next up is the New England region at $107,452, followed by the Mountain and Mid-Atlantic regions (both at about $114,600).

Individual pay is also significantly influenced by market segment. The semiconductor industry is back on top of the engineering pay scale in 2010—not that it ever fell too far. After slipping behind the computer product design industry last year, chip houses led the way once again at $139,947. Computer OEMs are second, averaging $124,977 in total pay.

Declining expectations clearly affected respondents’ perspectives. This year, only 35% of respondents said they felt underpaid, compared to 40% in 2009. Yet only 15% said their compensation packages were superior to what they thought they could get elsewhere.

“Career paths in engineering haven’t and probably never will be as financially rewarding as other careers,” an engineer in Michigan surmised. “While engineers make a very decent living, they’ve never been rewarded proportionately to their contributions. You learn early on that you don’t go into engineering strictly for the money. And the engineering ranks have been devastated in this last downturn, particularly here.”

One thing that hasn’t changed is that women in engineering get paid less than men—a statistic that’s been consistent in every one of our annual surveys, in good times and bad. Up until two years ago, the gap in pay had been narrowing year over year. However, that’s no longer the case. This year, that gap rose to more than 20%. While many factors (like age and experience) may contribute to the discrepancy, there’s no getting around the fact that there remains a huge disparity in the earning power of men and women in engineering.

On the upside, however, 29% of engineers surveyed say their company plans to increase the number of engineering jobs in the coming year (compared to just 20% a year ago). Also, 42% say their organization is having difficulty finding qualified candidates for open engineering positions (compared to 38% in 2009). And, 32% say their organization is more focused on employee retention this year as compared to a year ago (versus 27% last year)

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Surviving the Great Recession
Like most people, engineers understand that there won’t be any big pay raises anytime soon. But in today’s rotten job market, dissatisfaction with compensation doesn’t seem to be enough to turn people against their profession. Engineers seem happy just to have jobs.

Most of our respondents (54%) said they were either extremely satisfied or very satisfied with their current positions—up slightly for the second year in a row. Engineers had better be at least somewhat happy about their work, since they now put in an average of more than 55 hours a week on the job. That’s about an hour and a half more than they reported a year ago.

Also, despite a gloomy overall employment picture, engineers have some confidence that their services are still needed as we enter the second decade of the new millennium.

“There is still a lot of demand for highly skilled engineers and engineering managers,” observed one survey respondent. “While it is true that a lot of manufacturing has shifted offshore, the jobs that were lost to these moves were more manufacturing, operations, and product engineering oriented. Core engineering R&D continues to be at a premium.”

That said, the recession continues to test the faith engineering professionals have in the future of their career path. Last year, fewer than half said that a career in engineering and the potential for salary growth was as promising as it was five years ago. This year, that pessimism remains.

“The current recession and worldwide economic downturn have severely hurt engineering as a career,” one reader said. “Engineers have never been properly compensated for their education, experience, and contributions to their employers by way of innovative designs and patents. Sales and marketing careers generally offer much higher compensation than engineering. Moreover, engineers have traditionally had to work overtime on a regular basis without additional compensation.”

Others expressed similar sentiments: “Unlike many foreign countries that have invested in manufacturing and R&D, the U.S. has maintained its focus on the service sector with the fleeting hopes that intellectual property licensing will somehow save them. The fact is, China doesn’t care about our IP laws or agreements. Look in your local Walmart. See anything there from the U.S.? We need to get back to manufacturing in this country.”

Some respondents are more optimistic. “With the advancements in technology and the need for modernizing our existing energy infrastructure, engineers throughout the world will have a great opportunity to excel in the next five to 10 years in areas such as smart grids, power conservation and storage, control and monitoring of electrical systems,” predicted one hopeful survey respondent.

It’s also interesting to note that, despite their concerns about their own careers and the industry in general, an overwhelming 84% of engineers are bullish on engineering as a career path for young people to pursue.

“For the right young person, engineering can be a great profession. The puzzles and challenges bring forward fresh thinking on a daily basis,” wrote one typical reader. “What the world sees as a disaster, such as the Gulf oil spill, we see as a challenge. Being able to solve those challenges fills one with pride and a feeling of making a mark on the world for those who want that. And from a financial perspective, many of the engineering fields pay quite well, especially when compared to other fields of employment.”

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One of the reasons engineers remain enthusiastic about their profession is the satisfaction they get from the challenge of designing and delivering new products that can benefit society. More than half of those surveyed (58%) still find themselves sufficiently challenged intellectually by the projects they work on. Only 10% claim they are not.

“Creating new medical products to help people is a very satisfying career,” explained one engineer. “The rewards come from knowing that others are living a better life and getting paid to have fun inventing, designing, and seeing these products through production. Healthcare is still a rapidly growing field, even with Obamacare. The challenge will be to improve care and lower overall costs of treatment.”

Another respondent to this year’s survey shared similar sentiments: “Engineering is an exciting career field with a large number of opportunities and a wide variety of work. I’ve never been bored or tired of being an engineer and my mind is always stimulated. Engineers are highly respected as professionals and their contribution to mankind is indispensable.”

It’s also worth noting that the economic downturn hasn’t impacted the particular types of skills that OEMs value most. Employers continue to place a premium put on engineers and technical managers involved in power design, medical systems, military and avionics, safety and security, software engineering, and certain types of communications systems. Wage and salary increases in each of these areas were well above the industry average for 2010.

Is the job picture brightening?
Recent indicators suggest that the U.S. is slowly shaking off the effects of the recession. Smart OEMs know that postponing hiring until the recovery is well under way—and competition for top candidates is in full swing—could be risky. Yet some may find it surprising that, despite the theoretical availability of a large pool of candidates, 42% of firms continue to have difficulty finding qualified contenders for their open engineering positions (up from 38% in 2009).

This recruiting challenge is likely to intensify as economic conditions improve and employers compete for the technical personnel needed to carry out both entirely new design initiatives and those that were simply delayed by the downturn.

Accordingly, companies are starting to demonstrate a bit more diligence about holding onto seasoned engineering talent, perhaps realizing that once the market turns around, they will need that talent to support the growth of the business. Many of these companies have spent the past few years squeezing their engineering operations to the bare minimum, so this positive expectation about the future is a significant change.

Last year, 73% of those surveyed believed their organization was less focused on employee retention than it had been a year earlier. This year, only about two-thirds of survey respondents feel that way.

“At most companies, with the salary freezes that occurred in 2009, engineers tend to be underpaid,” commented one department manager. “As the economy picks up, it will be important to have retention efforts in place to keep engineers. The cost associated with re-training and inefficiencies is too great to ignore.”

Also, nearly a third of those responding this year said their company plans to increase the number of engineering jobs next year. That’s a 50% jump from 2009. Yet only 10% said their company plans to scale back engineering staff in the coming year, down from about 17% in 2009.

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“A year ago, the economy was in the toilet and we were facing pay cuts and layoffs to maintain profitability,” said one reader. “Losing one or two people wouldn’t hurt. Now, business is back, and every person is needed to keep product moving and help generate sales.”

Competition for skilled engineering professionals could inspire companies to focus not only on retention, but also on building morale and loyalty. A majority of those surveyed (58%) say that, while they might not be actively seeking new employment, they would follow up if they heard about or were approached with an interesting opportunity.

Fewer than a third said they cannot envision changing jobs in the foreseeable future. These responses underscore the fact that the ability to retain top performers and quickly bring new ones on board could be key in post-recession success or failure at many companies.

Outsourcing stays steady
Outsourcing has always been a flashpoint for controversy, but it can be particularly contentious during recessions. It gets blamed for killing or saving jobs, reducing or creating opportunities, and making skills less valued or more treasured. Outsourcing continues to present challenges to engineers and corporate management alike as organizations seek to balance cost and capabilities to compete successfully in today’s global business environment.

Overall, however, responses to our outsourcing questions have remained largely unchanged over the past few years. Most companies, it seems, are adjusting and adapting their use of outsourcing incrementally, rather than radically rethinking their outsourcing strategies.

The majority of OEMs (55%) continue to engage in outsourcing. The type of engineering work being contracted out includes manufacturing and assembly (57%), design (50%), software development (49%), and R&D (26%). The leading destinations for outsourcing are other locations in the U.S. (63%), China (28%), India (26%) and Europe (16%).

Shortages Impacting Output
As product cycles get shorter and products themselves require increasingly sophisticated technology, it has become almost impossible for component suppliers to keep up with demand. The resulting shortages are forcing companies to take all kinds of measures, including changing components in mid-cycle.

According to our annual reader survey, 41% of engineers are experiencing shortages in semiconductors or other components and equipment needed for their designs. The biggest hangup is with digital ICs (58%), followed by analog mixed-signal devices (46%) and passive components (41%).

“The product shortage problem, especially with semiconductors, is very troublesome,” said one engineer. “Lead times can be longer than our forecast window, and we have to commit to larger volumes than we’re comfortable with.”

Component shortages are clearly having a measurable impact on the ability of some OEMs to get their products off the launch pad. Nearly two-thirds of those surveyed say the inability to get some of the components they need is contributing to longer lead times, while 43% say it forces them to come up with design workarounds. And, better than one in four say shortages have led to increased time-to-market for some of their products.

“There always seems to be at least one or two components that have extremely long lead times for anything more than sample quantities,” grumbled one of our respondents.

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Another put it this way: “I’ve tried to design out the companies that have hit us with shortages over and over, but the ‘good’ list is getting mighty small. Our customers want shorter lead times and our suppliers want longer lead times. It’s funny that engineering samples are available almost overnight, but production quantities take forever. I had one supplier quote 80 weeks! How can you make and sell a product like that?”

More troubling, only 11% of engineers see the situation getting better, and one in four says the situation is getting worse. One engineer summed it up this way: “We have a group meeting every morning to go over work plans and problems. And almost every day there are discussions about parts shortages that will slow down the throughput of the manufacturing cell, despite a lot of effort by management/purchasing to get parts in on time. We also have problems getting circuit boards and electronic components. It seems the electronics sector is recovering from the 2009 recession a lot slower than other manufacturing industries.”

One of the fallouts of the component shortage problem is the simultaneous increase in the appearance of counterfeit parts. Today, knockoffs are causing real problems, according to nearly one in five engineers. “The counterfeit parts problem is the worst I have seen in my almost 40 years in this business,” noted one engineer. “Parts shortages usually cycle every few years, but this is very severe right now.”

Nearly half of those who have had to deal with phony parts say they purchased them directly from manufacturers that were not on their qualified vendor list, while 27% say they came from an independent distributor. “Counterfeit parts are a big worry,” complained one engineer. “With component shortages, we have had to buy parts from brokers for shipment direct to our factory in China. There has been little effort to validate the parts in some cases.”

Only about a third of manufacturers who fall victim to counterfeit parts detect the problem themselves, through product testing or other means, while 14% said they only wind up identifying the problem because of customer returns.

Looking forward, looking up
Assuming that the worst of the recession is behind us—and that the recovery, as weak as it may be, will get companies to think in terms of growth instead of retrenchment—job conditions for engineers in the U.S. and Europe alike will change once again.

Companies that have gone too far in trying to squeeze more value out of their employees may find themselves struggling to retain them. Resentments and a hankering to make up for a couple of years of inadequate compensation may drive engineers to start looking for greener pastures. And if the recovery causes those pastures to materialize, retention may become a real problem.

By the same token, engineers may have to re-evaluate their own career strategies. If the disparity between product cycles and supplier responsiveness continues, for example, engineers may find it increasingly important to be able to demonstrate their ability to design their way out of component availability problems, as opposed to just figuring out how to make their products work better and cheaper.

Ongoing investment in skill development also remains an important strategic consideration for engineers who want to maximize their long-term income prospects. Technology continues to evolve at an astonishing pace, and those who can’t adapt are going to find themselves in a far less competitive position, especially with young engineers and offshore outsourcers ready, willing, and able to perform commodified tasks at bargain-basement prices.

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Like so many other professionals, engineers will also have to control their expectations. The paralyzing fear of the past couple of years may pass away, but it is unlikely that we will return to the go-go days of the previous decade anytime soon. So, while the good news may be that the industry’s bottom is behind us, it remains reasonable to cut personal expenses, save more aggressively, and carefully consider the health and stability of one’s employer.

Engineering still offers lots of opportunities to make money, do rewarding work, and increase one’s market value. It’s just that there are a lot more of us now competing for a smaller pie. That means we all have to be smarter about how we compete—and perhaps we’ll have to learn how to be content with a little less pie.

List of Tables

Salaries table
Average Salaries By Geographic Region table
Average Salaries By Job Function table
Average Salaries By Size Of Company table
Average Salaries By Type Of Design Work You Do table
Average Salaries By Years Of Engineering Experience table
Average Salaries By Industry table
Average Salaries By Level Of Education table
Average Salaries By Age table
Average Salaries By Gender table
The Top 10 Professional Issues That Keep You Up At Night table
The Factors That Influence Your Job Satisfaction Most table
Non-Cash and Indirect Cash Rewards You Expect In 2010 table
Factors That Affect Your Bonuses/ Other Direct Cash Payments table
Product Shortages and Counterfeit Parts table
Second Product Shortages and Counterfeit Parts table
Unemployment Rate In Selected Engineering And Computer Occupations table

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