Research Note—Comparing IT Workers’ Compensation Across Country Contexts: Demographic, Human Capital, and Institutional Factors

Abstract

As the IT workforce becomes global, it is increasingly important to understand the factors affecting IT workers’ compensation in labor markets distributed across the globe. Ang et al. (2002) published the first in-depth analysis of compensation for IT professionals juxtaposing human capital endowment (education and experience) and institutional determinants (firm’s size, industry, and sector) of compensation in the Singaporean economy. In this paper, we explore the influence of particular national economies on IT workers’ compensation. We draw on research into the roots of wage differentials in labor economics and build on the Ang et al. research to present a multilevel analysis of IT workers’ compensation in the United States, analyzing the U.S. Bureau of Labor Statistics’ Current Population Survey (CPS) data for 1997, 2001, and 2003. We find that, while institutional differences in Singapore mattered only in conjunction with individual factors, in the U.S. institutional differences had a direct effect on IT workers’ wages. As tightness of IT labor supply decreased in the United States in the early 2000s, the influence of a firm’s size on wages became more pronounced. Also, female IT workers and workers without a college degree fared worse than their male and college-educated counterparts as the IT job market slowed down. We suggest that factors such as presence of job search friction, diversity in the educational system, geographical differences in cost of living, labor mobility, and shortages in IT labor supply vis-à-vis demand help explain the differences among countries. We conclude by outlining the implications of these findings for IT workers, firms, and policy makers.