Jun Group CTO Fears Salary Bubble Pushing Tech Sector to the Brink

8/30/12Follow @jpruth

Concerns about a rising shortage of developers and engineers may be driving somewhat unrealistic expectations among entry-level tech hires. And that will make it all that more difficult for small companies to lure in talent. David Wood, chief technology officer for Jun Group in New York, says his company—the developer of an opt-in, social video ad platform—faces a conundrum shared by many growing companies looking to hire. He spoke to Xconomy about his concerns, ranging from the pressure to pay new hires top dollar, to the need to offer juicy perks to compete with incentives offered by the likes of Google, Microsoft, and Facebook, to an increasingly inflated salary bubble that he fears may explode with devastating force.

Xconomy: How do the expectations you see from entry-level tech workers compare with the reality of the sector?

Wood: It feels like déjà vu. The early 1990s was the first New York tech boom based on the emergence of the Web. People were investing in this space all over the place. That started the first big hiring frenzy. Jun Group has been around, in its current form, since 2005. Right around 2009, I started to see this trend that felt familiar in terms of tightness in the job market. Something happened in 2009 through 2011. The 1990s were crazy but this was crazier. The sheer volume of jobs coming into the city was enormous—far more than could ever be filled.

Then we saw upward pressure on salaries. Looking at want ads, we realized senior developers with five to ten years of experience, who had been offered $100,000, were suddenly being offered $150,000. That’s a 50 percent jump in the space of 24 months. Referral and signing bonuses, which were around in the 1990s, are a lot bigger. You could get $20,000 for referring someone. That can look like a bargain to a company paying a recruiter. One thing that blew my mind: a free iPod just for coming in for an interview. Extended vacation times have been advertized in job postings. Late last year I saw job posts for Java architects and senior Python engineers, with salaries ranges of $175,000 to $200,000, plus a 25 percent bonus for signing and an immediate stock grant.

X: Are you seeing this more in New York or is this happening in other parts of the country?

W: My friends on the west coast claim it is worse there. Even smaller high-tech hubs, like Minneapolis and Boston, all seem to be experiencing the same thing. You can go on salary survey websites and watch this trend, not just in New York, but nationwide.

There are a couple of factors at work. There is an awful lot of money being invested in this space; it is very easy to do fundraising. We find people doing investments with money they can’t hold onto. That is reminiscent of the 1990s—that enormous drive to go into this industry and get returns back. This isn’t a new industry so now you have giant players such as Amazon, Facebook, Google, Apple, and Microsoft in this big dogfight for talent.

Google pays very well and they also have a staggeringly gorgeous space they built in West Chelsea. They have ball pits, slides, a four-day work week, and gourmet chefs in the cafeteria. I think Google saw there was an enormous economic upside with … Next Page »

João-Pierre S. Ruth is the editor of Xconomy New York. He can be reached at jpruth@xconomy.com and followed on Twitter @jpruth. Follow @jpruth

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