Employers Will Have to Raise Wages. They Just Don’t Know It Yet. – NYTimes.com

Employers Will Have to Raise Wages. They Just Don’t Know It Yet. – NYTimes.com.

Yes, painful for any employer. The last 7 years have been a time where productivity has risen significantly. We are more productive than ever before. However, just like anything there are limits.

In our industry, two big factors have driven productivity; the ever-improving software and hardware tools and systems that we leverage in our work, and access to new sources of expert engineers, mostly from China and India but also many other countries. While the first driver is running hot and shows no sign of capping, the latter is beginning to weaken or at least change significantly.

When we started to run short on tech-savvy candidates, we increased our intake of engineers from outside of the United States. High tech companies have really leveraged the offshore and visa worker phenomenon. This is great for populations that have been economically denied for so long. It is also challenging for tech workers born in the US though. Starting salaries had been flat due to the influx of workers who are boggled at how much they can earn here and who are all too happy to accept offers that are lower than what a person raised in the US might accept.

However, even universities in Asia can’t crank out high quality engineers fast enough, and that is beginning to show. The scramble to cash in on the disruption of the advertising industry has driven thousands of online start ups, each with potential upsides that make those new companies irresistible to those who know how to get in, and that’s getting easier and easier, just ask any good developer how many headhunter calls she’s gotten in the last month. This is showing no sign of slowing for at least another several years, and it is pulling talent away from other, less lucrative job offers from established companies.

Outsourcing with non-US engineers based outside of the US is also seen as a no-brainer but anyone who has set up and run these programs can tell you that the supervision requirements really cut into the cost savings. It is hard to get productivity when large chunks of your staff are not able to communicate in real time. Ignoring language issues, just the time differences undercut the benefits of new software development processes like Agile or Scrum, frequently making them as cumbersome as old fashioned waterfall methods.

If incomes can’t be pushed lower by going outside of the US, what other factors can be seen to improve productivity? In the high tech sector more and more companies have been cutting corners to get to market more quickly. Some of these corners are caused by outmoded practices and by improving them companies can not just cut corners, but they can also realize significant improvements in the quality of their products. The hottest area for this is in the field of DevOps, where waste, errors and bureaucracy are being beaten down. Again though, there are factors that slow this down, mostly due to the newness of both the technology and the people producing it. Adopting Open Source DevOps tools is a lot of work..a LOT of work.

Other corners being cut are actually undercutting the quality of the products coming onto market. Documentation is often entirely omitted, relying on user forums instead. Quality control is frequently limited to simple feature verification and then released to users either in A/B mode, beta releases, or just dumped out there. Enterprise products are being sold with “checkbox functionality”, meaning the product will technically fulfill some requirements incompletely or unreliably, but the functionality exists and will be cited in the company’s marketing. This is a huge suck of productivity for every customer that purchases the product for those features, and finds out that they are out of luck and on their own only after work-months of investigation. In these cases what increased the productivity of one company actually decreased the productivity of others.

So the big unknown is whether we are seeing a crest in overall capacity. Productivity will increase due to the factors I noted above, but is the number of people able to do the work flattening out? While there is a deep well of improvements still to go there is a finite amount of people and time.

We could start seeing a renewed interest by employers in more than just pay raises though. Training might also get a boost as technologies change so fast that it becomes impossible to hire people with deep experience in them. Companies will be forced to grow their own skilled staffs and take the risk of trained employees leaving. To mitigate that risk we could also see a resurgence in attention on “leadership” instead of simple “management”.

Creating a friendly, interesting and fulfilling work environment will be come more and more important as this generation of young, talented and energetic engineers begin to age and acquire wisdom. Some of that wisdom will include an aversion to sacrificing their health and happiness for their employers’ demands, but also a refined savvy about getting things done, and the resulting increase in their own productivity in their jobs.

It should be an interesting couple of years coming up while this tide turns.