The work-from-anywhere trend has toppled geographic barriers to hiring, and now tech companies from the coasts are driving up the price of talent here.
Chicago has one of the largest pools of tech workers, and it’s among the most affordable, compared with San Francisco, Seattle, Boston or New York. Tech companies from the coasts have long recruited here. But for the most part, workers had to leave town for the jobs, unless the companies had opened local offices. Even then, many jobs remained on the coasts. That’s no longer true, thanks to the COVID pandemic, which turned most techies into remote workers.
“Gone are the days of Chicago tech companies duking it out with one another,” says Brian Scannell, head of recruiting at Chicago-based Jellyvision, an employee-benefits software company with about 300 workers. “We’re now pitted against the coasts and the tycoons who reside there: Amazon, Google, Apple, Facebook, etc. The landscape has now very much shifted into David vs. Goliath for Jellyvision and others like us. Goliath has deep pockets and now an even longer reach.”
The shift means local companies must pay more for talent, the lifeblood of the tech industry. Shelling out more in salaries could limit their growth or consume precious capital. But those unable or unwilling to match Silicon Valley pay risk losing access to the skills they need to thrive in an intensely competitive business.
But for local tech workers—especially the most talented—the trend offers the best of both worlds: higher pay from more prestigious companies without having to pull up stakes.
“Calls people wouldn’t have taken because their kids are in school and the opportunity would require a move—they’re having those conversations now, from the C-suite all the way down,” says Rona Borre, CEO of Instant Alliance, a recruiting and staffing firm in Chicago.
Many tech companies, from Amazon to Zoom, have been turbocharged by the pandemic. Trading firms and hedge funds, which hire large numbers of tech workers at premium wages, also have flourished. The gap between coastal salaries and the going rate in Chicago is so large that these companies often can save money on talent while still offering substantial raises here.
“We’re seeing coastal firms paying well above what we typically see in Chicago but probably paying less than they’d pay in their home markets,” says Kevin Krumm, chief operating officer of Objective Paradigm, a technology recruiter based here. “It’s a no-brainer for them.”
Software programmers and developers in Chicago were paid an average of $101,000 in 2019, according to federal data compiled by real estate firm CBRE. That compares with $141,785 in San Francisco, $127,067 in Seattle and $112,959 in Boston.
Ira Weiss, a partner at Hyde Park Venture Partners, says one of its Chicago portfolio companies lost a product manager to a West Coast tech company that doubled the worker’s salary. In other cases, salary arbitrage can result in raises of 20 to 30 percent. Recruiters and companies say superstars and senior-level hires are getting signing bonuses of up to one year’s salary.
“People recognize that work can happen from anywhere,” says Lindsay Verstegen, chief people officer at ShopRunner, an e-commerce company based in Chicago. “Companies are doing what they can to get talent. They are willing to throw money at it to get people to make that leap.”
Among those in the highest demand are software developers, product managers and data scientists. Recruiters and CEOs say pay for software developers, especially in hot areas such as e-commerce, is up 10 percent to 20 percent in the past year.
West Coast companies that have been active in Chicago include Disney’s video-streaming unit, Disney Plus, and Zoom. Disney and Zoom decline to comment.
The talent war is about to get even hotter, predicts Chicago tech recruiter Carlton Gates, director of talent acquisition for Yum Brands’ digital and technology group. “You’ll see a spike starting in February. People wait to get their bonuses. They’re talking to recruiters now.”
Employers, meanwhile, “have survived corona, see a vaccine on the horizon and see their competitors hiring.”
Many companies that resisted remote work before the pandemic have come to accept it as a permanent change that will outlast the coronavirus. Facebook CEO Mark Zuckerberg said last spring that half the workers at the tech giant would likely be working remotely within five to 10 years. While Facebook has a large sales office in Chicago, most of its tech jobs have been at its sprawling headquarters in Silicon Valley or offices in Seattle, New York and Boston. “The pandemic has encouraged us to broaden our recruiting strategy,” the company says.
As coastal competitors squeeze an already tight tech-labor market, Chicago companies are spending more and looking elsewhere for talent. Clearcover, an online provider of car insurance, recently increased its recruiting budget, says CEO Kyle Nakatsuji. “We’re not going to win on cash, so it comes down to selling (recruits) on the problem you’re solving as a company and offering equity.”
SpotHero has hired about a dozen tech workers from Milwaukee, Toronto, Pittsburgh and other cities, says CEO Mark Lawrence. Six of Jellyvision’s last 10 hires were from out of state, Scannell says.
Borderless recruiting will change the economics of tech hiring. “This idea of regionally prorated pay is starting to break down,” says Mark Muro, a senior fellow at the Brookings Institution in Washington, D.C. “My sense is we’ll move to a nationalized job market for some in-demand occupations. There are real renegotiations of the big tech map and the talent map going on.”