Why IT will go the way of Accounting

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This was written for us by a guest writer.

Where Salaries Will Go

I think it would be useful to write an article commenting on where IT salaries are likely to go in the next 5 to 10 years. I think one of the reasons contractors end up out of work for quite a long time is because agencies, and even ‘direct contact’ employers, are reluctant to employ a person for less than they got at their previous contract or less than what they think they are worth.

Well, maybe if contractors want jobs, or permies for that matter, they should start saying their previous job paid less than it did.

Nearly twenty years ago, when I returned to Australia, I got a job paying $26K p.a. I remember there was a friend of mine on $45K. The going rate for permanent accountants was from $25K –> $70K. From 1986 to 2003 this rate has NEVER changed. Not through the 1990/91 recession. Not through the normalisation of the job market that started a couple of years later.

Needless to say, the effect of inflation means that accountants today earn very much less, in real terms, than they did 15 or 20 years ago. I think we will see something, if not already, very similar now in IT. A downwards pressure on rates. Maybe not down to the rates of £4 to £6.50 per hour than you see in factories and the supermarket, but maybe down to £12 per hour to £15 per hour.

And these are rates that won’t recover from those levels for the next 15 to 20 years.

Returning to Britain

I was recently made redundant here, and have decided to return to Britain – 18 years since the last visit. I‘m 44. I had a package of $114K. This would be equivalent to £42K, except that the relatively low tax in Britain means I‘d only need to earn £36K to get the equivalent cash. Then it turns out that the quoted rates in Britain are always the cash component, so exclude car, bonus and incentive.

To earn my cash component (£1,800 a month after tax) I‘d only need to earn £26K per annum. And I would probably count myself lucky to earn that, In fact, I‘d probably work for £1,000 after tax a month, just to get started. Whether established Britons like this or not it‘s the reality of migration. We‘ll work for whatever rate it takes to get started.

I may be from Britain, sure, but I‘ve been away a long time. A returning Briton may as well be a migrant with a slight advantage of no immigration issues. Never mind £45 an hour. Or competing with workers from India.

If I were contracting in Britain I would be more worried about Australians, New Zealanders and South Africans. £20 an hour is equivalent to AUD$104,000 per year. These rates, nowadays in Australia or NZ, are practically unheard of for the average IT worker.

If I factor in the fact of the ridiculously low tax rates in Britain – God only knows how they pay for their infrastructure to be replaced or upgraded – compared to Australia or NZ, that £20 an hour is more likely equivalent to $120K per annum. And this at a time when IT workers in Australia are lucky to be earning $20 an hour. That‘s £8 an hour – gross!

Career Choices

I read some of the recent comments on the namesfacesplaces website. I even replied to one article (the one about the IT recruiter saying he was sick of being blamed). They say things like “”I have a degree”” or “”I have 19 years experience””.

SO WHAT?

Education may well be a way to improve your income ….. from factory and supermarket rates. But from what I can see, even if I have worked in IT for 15 years, and accounting for 10 years previous to that, both of these career choices suffer from being overhead activities, not seen to be directly contributing to the bottom line.

Basically, IT and accounting are there to enable a company to meet their compliance obligations. I am not saying this activity isn‘t necessary – it‘s the law – but profitable it usually isn‘t.

I‘ve seen some interesting things trawling through the web. When I was in Britain, kids who went to comprehensives were kids who couldn‘t pass the 11+ to get into grammar schools, and had little or no access to higher education. Now those same kids are getting A levels.

IT is just like accounting – operating in a demand and supply market.

Every year more and more IT and accounting specialists come onto the market. Available for cheap rates. And in 5 years time they‘ll be experienced, as senior and experienced as someone like me who has been working for 25 years.

Education

Education, in countries like Australia and NZ where, probably not unlike Britain, everyone gets an education, where the vast majority of people go onto some kind of higher education, ceases to be a way of maximising income by piggybacking off the lack of supply in a high demand market. Instead, it just becomes a way to do something reasonably interesting in a day, to avoid a monotonous career (e.g. check out chick, factory worker on an assembly line).

Why do most, if not all, of the correspondents to these articles seem to think that their work should be valued any more than a carpenter, painter and decorator, plumber or electrician? Maybe they only net £20,000 per annum. One thing for sure though, they don’t have ANY problem proving that they have added value to someone’s property. There are farmers out there who don’t even net £10,000 per annum. £5 an hour!! They work in terrible conditions, but do any of you doubt what they contribute to the people?

Higher Costs

And before you say that living costs in London are much much higher than in Australia, sure, than Australia in Wagga Wagga, or Bega (regional towns). In Melbourne, and certainly in Sydney, the costs rival London. A two bedroom flat in Sydney, in a nice area, costs $450 to $700 a week in rent.

I can rent a house in Cambridge, all be it not that salubrious maybe, but a house even so, and only an hour out of London, for £580 a month. Books are twice the price of Britain, i.e. after conversion at $2.50 = £1. Petrol is $0.80 a litre – a lot less than Britain. What a pity cars cost the earth in Australia!

Wake up, everyone! The days of high paid knowledge workers are over.

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