Despite layoffs, tech wages likely to grow in 2023 as demand for talent still high: Analysts

SINGAPORE — Wages in the technology sector are expected to grow slightly this year despite a spate of industry layoffs signalling a slowdown in the sector, because demand for tech talent is still high for non-tech sectors such as finance and even hospitality, economists and human resource experts said. 

Wages for software engineers grew 7.6 per cent last year to an all-time high following a sizzling 22 per cent growth in 2021. This was from a report by tech talent platform NodeFlair and technology accelerator Iterative that was released on Tuesday (March 7). 

Experts said that overall tech sector wages growth in 2023 will likely be in single digits at best, with one saying that they could suffer a slight dip at worst, though it is "difficult to make precise predictions" due to the sector's volatile nature. 

However, one human resource expert warned tech companies against assuming that in the wake of the industry layoffs, they can hire top tech talents for lower wages.

When the tech sector comes roaring back, such penny-pinching firms may not be able to retain their headcount for employees in tech roles, the expert said. 

TECH WAGES LIKELY TO GROW AT SLOWER PACE

Salaries for some tech roles, such as software engineers, skyrocketed between 2021 and 2022. 

The NodeFlair report said that of the top 15 tech companies that jobseekers searched for, six of them pay their employees at least 20 per cent more than the market median, while most others pay at least 10 per cent more.

The increase in wages in recent years means that junior software engineers, for example, now earn a median base salary of S$5,000 a month, mid-level and senior engineers are earning up to S$7,000 and S$8,000 respectively, and managers pull in a median base salary of as high as S$13,750.

The growth came despite a series of high-profile layoffs in the tech sector including high-profile firms such as Google, Twitter, Shopee and Meta.

NodeFlair's co-founder Adrian Goh said: "While there have been high-profile layoffs in the second half of 2022, there were still many growth opportunities in the first half of the year.

"Additionally, it is important to note that not all roles in the tech sector have seen the same growth, with some experiencing a slight dip." 

For example, roles such as quality assurance technicians and system engineers have seen a slight fall in salaries, the report showed.

Mr Goh said that the slowing of salary growth for software engineers from 22 per cent in 2021 to 7.6 per cent in 2022 did not come as a surprise, since the growth in the industry over the course of the Covid-19 pandemic had been “unsustainable”. 

He expects salary growth for tech roles in general to further taper this year. 

“Based on the current market conditions, it's reasonable to expect salaries in the tech industry to stabilise this year.

"At best, there may be single-digit growth, while at worst, there could be a slight dip. The rise in salaries this year is more sustainable and reflects a normalised value," he added.

TECH STILL RELEVANT IN OTHER SECTORS

Economists said that demand for consumer tech may be on the decline, but many other firms outside of the tech sector are still looking to harness the power of technology for their resurgent businesses after the pandemic as they begin the process of "normalisation". 

Economist Song Seng Wun from CIMB bank said that these include sectors such as hospitality, aviation and other services. 

He agreed with other experts that wages in the tech sector are likely to grow this year, albeit at a slower pace than last year. 

"During the pandemic, the demand for services... was very different from today, where you are talking about more in-person service," he said. 

For instance, for a hospitality firm where hotels are quickly filling up with returning tourists, it may need to invest in tech talent to help better manage data and digitalise its check-in system. 

Mr Song added that even in the food-and-beverage sector, there is a need for tech to help serve customers more efficiently as demand rebounds, through self-order kiosks, for instance. 

This will lead to an increased demand for those with tech skills.

"Because we are seeing a normalisation of services... everybody will be doing more tech-related activities," Mr Song said. 

Agreeing, OCBC bank's chief economist Selena Ling said: "There may be a bit of indigestion going on for some big tech companies mainly due to the drop-off in consumer demand, but there remains healthy demand for tech talent from non-tech firms." 

These include banking, and even the private sector, due to "growing cybersecurity and digitalisation needs". 

CAN FIRMS TAKE ADVANTAGE OF TECH SLUMP?

Human resource experts said that employers will find it hard to take advantage of the recent layoffs in the tech sector by offering lower wages, because those employed in technology firms will still be looking for high salaries and stable employment. 

Ms Angela Kuek, director of recruitment firm The Meyer Consulting Group, said that even people who have been recently retrenched from tech firms will be seeking "stability" in the form of competitive wages and a reputable company. 

"They'll want a bigger brand name probably, they will want a place that is more stable, so they tend to prefer to go back to a larger institution such as an established bank." 

She added that even if tech talents who have been laid off accept lower wages, they will likely only do so for the time being. 

"If you hire them cheap now, you are able to get good people at a slightly lower rate, but if the tide turns, and the tech firms come back and are able to throw money, (employees) may leave quickly." 

Ms Kuek also said that this phenomenon is especially pertinent for small tech startups, which are often not able to dole out wages that can compete with established tech giants. 

One such firm is social enterprise Upskillcycle, which was founded by software engineer Max Ong. 

Among other initiatives, the startup seeks to mentor people with disabilities who wish to enter the tech sector.

Mr Ong has been looking to hire for roles such as software engineers and development operations engineers, to help engineer solutions for the firm's internal processes, as well as to act as mentors to both able-bodied people and those with disabilities. 

He sees the slack in the tech labour market as a potential opportunity to hire top tech talent, though he acknowledged that his firm cannot match the eye-watering salaries that large tech firms offer. 

"We are a social enterprise, so to us, it's more impact-focused. We would want to give (employees) as high a salary as possible, but we believe that the social good is more important," Mr Ong added.

"Ultimately, how we attract people comes from the social focus... if they are able to see that, then we will be able to attract them."