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Decline in real wages for entry-level IT roles in the last five years as outsourcing takes its toll

29 May, 2008

• Little incentive for people to study IT will lead to skills shortages in the UK
• Managers fairing well, with above-inflation pay increase

Offshore outsourcing has pushed real wages for entry-level IT jobs down over the last five years, while IT professionals in management roles have enjoyed inflation-busting pay rises, according to new research by iProfile.org/Association of Technology Staffing Companies (ATSCo) (Q4 2002-Q4 2007).

Over the last five years pay for first-line support staff has remained stuck at £18,000 while pay for second line support staffs has increased by just 0.8% per annum. This means that, after inflation, real pay has actually decreased, as technical support centres have moved from the UK to lower wage centres such as India.

Salaries for managerial-level staff, however, have increased by an average of 20.5%, following the general trend for the UK to specialise in higher value IT work. Salaries for Project Managers, for example, have jumped from £37,500 to £45,000 over the last five years.

Few entry-level jobs discouraging young people from studying IT

According to ATSCo, as low skilled IT jobs leave the UK this acts as a disincentive for people to study IT, which could in the future exacerbate already problematic skill shortages in the industry

Says Ann Swain, Chief Executive of ATSCo: "The outsourcing of entry-level IT jobs has meant fewer graduate-level jobs are available in the UK. It's like removing the bottom rung from the career ladder."

"The shortage now is of candidates with a few years experience looking for second and third jobs. But how do you get that experience if entry level jobs are being sent offshore?"

Ann Swain adds: "Concerns over quality of service and data security in outsourced operations are constantly being voiced. However, these concerns haven't yet prompted organisations to bring their IT support roles back onshore en masse."

According to ATSCo, a turning point will arise when Indian salaries, currently following a very high trend of yearly wage inflation with a 14.4% forecasted rise in 2008, come close to those of UK professionals. As the gap converges, it will make less and less economic sense to outsource support functions to India.

Managerial positions fairing well

According to ATSCo, as IT projects continue to be outsourced offshore, the management of those projects remains in the UK, and managing projects remotely is creating demand for more sophisticated project management skills.

iProfile CEO, Rick Bacon, said: "Whilst entry-level IT positions may be moving offshore, the sophisticated project management jobs remain firmly rooted on UK soil. Senior level IT professionals need to remain in the UK so that they are close to their clients. These managerial positions are as much business focused as they are focused on technology. We're seeing increasing competition for these positions, and its crucial that people looking to secure or switch jobs in this sector are recording and communicating their full range of skills to potential employers."

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