If engineers are constant and opportunities are constant? What are some strategies for reasoning about this using sound economic principles?
Taking a stab at it, based on really nothing. If the number of candidates and opportunities are constant, than the market could absorb everyone fine, but I don't think this is the case. I believe that covid created more opportunities, so more opportunities and same amount of workers created a scarcity of workers driving salaries up. With the recession opportunities are shrinking, but workers are staying constant, trigger a return back to pre-covid salaries??
Anecdotally, I saw an increase ~25% pre covid to peak covid for my market and role!! It's hard to imagine that this is still the case with the current influx? WDYT?
Thank you!
Salaries, like real estate prices can be quite static, except when it's a bubble of someone trying to sell something to the next sucker. If someone can't hire someone at a specific budget, they're more likely to not hire anyone instead of increasing the budget. Similarly, if someone can't get the same job at the same salary, they end up getting other jobs. We see cases where actors without work become waiters instead of taking a poorly paid acting role.
There's probably some point of desperation, but even then, some people are likely to take jobs at shitty startups that work them 12 hours/day, 6 days/week than take a pay cut.
My prediction is average salaries will go down very slowly. Probably 0%, a decrease compared against inflation. Maybe around 5% this year. What will most likely happen is work conditions will become worse and benefits will be cut. Many people will simply change careers. It might be like the telco boom, where people with a telco degree and experience just ended up making apps in 2010.
That means, when you are looking for a job you still have negotiation power when it comes to salary (but usually, negotiation, is an skill on itself and depends on many other things).
Found a bunch of statistics regarding this topic. Just linking one:
https://www.forbes.com/sites/stuartanderson/2022/09/27/tech-...
They appear to think they can get away with 10 or 15 percent RIF to restore profitability.
The rest of the industry seems to think so as well.
Higher interest rates means expensive financing and poorer stock performance, meaning in addition to reduced profits - overhead just went up a lot for companies using debt rotation to finance operations to preserve equity.
However, the shift to remote work is real - so companies providing those services are going to stay. That's an entire market segment that simply didn't exist before 2019.
My prediction is that maximum pain is 4 or 5 months out, then we will start seeing salaries rise again and the labor market tightening back up as the companies that make it through see the light at the end of the tunnel.