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US tech industry’s racial wage gap is widening, report finds

A report on salaries in the tech industry has found that the racial wage gap in the US is widening, despite the average tech worker salary increasing year on year

Sebastian Klovig Skelton
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Published: 24 Jun 2019 9:45

Despite Asian tech workers outearning their white counterparts for the first time ever, black tech workers in the US are experiencing a widening of the wage gap.

According to Hired’s 2019 State of salaries report, black tech workers are now earning $13k less than their Asian counterparts, and $5k less than their white colleagues.

“It’s difficult for us to discern what’s happening underneath the data, but we think the answer is that companies need to be much more disciplined in how they set compensation,” said Mehul Patel, Hired’s CEO. “We’ve found that when these gaps exist, whether its gender or race, it tends to be because candidates are asking for less.”

Patel calls this an “expectation gap”, referring to a trend where under-represented groups broadly ask for less pay.

“Companies should not be looking at what a candidate is requesting at all,” said Patel. “They should just have a compensation philosophy, and then pay that amount irrespective of what a candidate asks for.”

However, Hired’s marketplace platform, where the reports data is derived from, only focuses on in-house employment and does not cater for contracted workers.

Research published in March 2016 by the Everett Program and UC Santa Cruz shows that since 1990, Silicon Valley has seen a 54% increase in contracted employment, compared to an 18% increase in the private sector overall.

The research also found that subcontracted workers made around 70% of the salary of in-house workers, and were much more heavily Hispanic – for example, while 35% of contracted workers were Hispanic, they made up just 8% of directly hired workers.

“I can’t really comment on that from the perspective of our study, but there has been a lot of talk recently in the press about Google’s heavily contracted workforce and how much less they get paid, and should that be the case, and how we should think about that,” said Patel, who added that using contract workers can be a side door for avoiding the kind of salary transparency Hired is pushing for.

The racial wage gap, however, is not confined to the tech industry or the US.

In December 2018, for example, the Resolution Foundation found that black, Asian and ethnic minority employees in the UK are losing out on £3.2bn a year in wages compared to white colleagues doing the same work.

Patel said that a greater emphasis on vocational training over university education could help minimise the racial disparity in wages. “University is very expensive, especially in the US, so you want to have something where people who can’t afford university can still get skills, as well as great opportunities and jobs,” he said.

The future is about skills

The report also found that tech companies are increasingly interested in job applicants with specific, in-demand skills and on-the-job experience that might not be acquired through higher education.

This is reflected in tech workers responses, 31% of whom felt they could have the exact same job without their masters or doctorate.

Hired also found that 54% of workers were not interested in earning a master’s or doctorate degree, with 45% saying on-the-job experience is more valuable than further schooling.

In contrast, 76% felt that joining a bootcamp, where they were taught vocational skills, helped them get an engineering role.

“The future is about skills,” said Patel. “People are starting to realise that when you have a skills shortage, particularly in engineering jobs that are in high demand, you ultimately shouldn’t only look at people with degrees.”

In terms of drawing more diverse pools of talent and skills, Patel said that diversifying the c-suite was critical, implying that it would have a trickle-down effect.

“You can show that [executives] actually do care about a diverse workforce. They will also be looking at candidates that come from more diverse backgrounds, not just someone from university with a computer science degree,” he said.

Unfairly paid?

Although the average salary of tech workers has been increasing year on year (in London, it increased by 6% since last year to $62k), only half of tech workers felt that they were being fairly paid.

Patel said this correlates strongly with an increase in the cost of living. “Places like San Francisco, New York and London are just very expensive places to live, so expectations are going up where people want to be paid more to make it work,” he said.

He cited London as a particularly expensive city, where 71% of the tech talent is renting rather than buying – a significantly higher percentage than in North America or other European cities.

However, relative to other labourers, tech workers are still paid much more. In his book, A people’s history of Silicon Valley, Keith Spencer argues that this contributes to the problem, whereby an influx of specialised, highly paid workers drives up rent prices and reduces the housing supply.

“Generally, long-time residents cannot compete with the newcomers’ financial ability to pay higher rents,” writes Spencer. “The pattern is one of downward pressure. Landlords might not be able to resist the promise of renting a unit for double or triple its current rent, and will evict middle-class tenants to make way for upper-class ones who likely work in tech.”

Patel said that while this is a wider issue tied to housing shortages, limited land and zoning restrictions, there is “a class of people being paid very well whose salaries are increasing and can afford it”.

“I wouldn’t say they are immune, but they are somewhat hedged from it because they’re making so much relatively,” he added.

Read more about the tech workforce

  • Freelancers in the so-called gig economy are increasingly turning to digital labour-sharing platforms because of the autonomy and flexibility they allow, with 45% of gig workers saying the independence provided by these platforms is preferable to full-time salaried work.
  • The UK’s decision to leave the European Union has many tech workers in the UK considering a move elsewhere.
  • The TUI Group is using digital education programmes by Hyper Island to unify its geographically disparate leadership and drive change.

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