Exploring the Silicon Valley Skill & Salary Gap by Race & Ethnicity

The tech industry is booming. Companies like Uber, Pinterest, and Airbnb are examples of tech startups that have exploded into multibillion-dollar investments. They haven’t just changed the professional landscape in Silicon Valley; they’ve also changed the way people see technology and how it works for them.
 

 But how accurately do these companies reflect the population of people who utilize their services or invest in their products? We broke down metrics of 60 different companies and 1,143 different job titles, to examine the prevalence of ethnic diversity in the tech industry. Beyond just looking at a wage gap, we dig into some surprising skill gaps that are having a profound impact on the tech divide.

Diversity Error. Not Found?

When we start by looking at compensation and median salaries by position, the general trend indicates that the less diversity there is in a position, the higher the pay is.

Associate systems engineers or consultants were largely found to be some of the most diverse fields. On average, less than half of the people we found working in those jobs were Caucasian. Associate positions tend to be entry level and were also found to be some of the lowest paid careers in the tech industry.

As we move on to manager and senior-level positions, like technical project manager or senior director of engineering, the presence of non-Caucasian employees narrows. In general, over 70 percent of those positions were held by Caucasian employees. This either indicates that the diversity we see in associate-level positions fails to be promoted up into higher paid manager, senior, and executive spots, or that these non-Caucasian employees are potentially leaving the tech industry altogether.

Breaking Down the Dollars and Sense

By narrowing our research to a smaller subset of companies categorized by their Standard Industrial Classification (SIC) code, some of the top industries for each ethnicity type that we examined come into focus. Beyond just popular job types, we can also see some of the overall differences in pay for those positions based on ethnicity.

For Caucasian employees, one of the highest paid industries included data processing and hosting. Those jobs earned, on average, over $220,000 a year, and that pay was roughly 2 percent higher than the national average. In general, Caucasians tend to earn the least additional compensation when compared with other ethnicities for jobs in their top markets.

Asian-American employees were most likely to earn a higher average salary in the industries we looked at than any other ethnicity. For ride-hailing service jobs, Asian-Americans earned 14 percent higher and an average of $330,000. In the publishing and printing field, they earned over 16.8 percent more, and in the electronic computers industry, they earned almost 14 percent more. These margins help make them the highest paid demographic in the county.

When we looked at a combination of non-Caucasian and non-Asian-American ethnicities, we found that advertising jobs were a popular industry and annually earned that demographic 1.6 percent above the national average. Jobs in music streaming services and computer integrated systems design were also popular industries, where they earned upward of $185,000 or more a year.

Take-Home Pay

In the tech industry, there are varying degrees of skill and positions, from associate-level jobs all the way up to C-level and executive spots. Overwhelmingly across the board, Asian-Americans are making the most in all of these positions, and well above the average compensation. Particularly among higher paid positions like executive, director, and chief, Asian-Americans make the highest percentage salary over the median pay.

This may be attributed to a number of factors, but most research tends to look at education and child care as primary reasons why Asian-Americans have earned the reputation of being exceptionally skilled and compensated as such. According to the U.S. Census Bureau, over 50 percent of Asian-Americans have a bachelor’s degree from a college or university, and over 21 percent have a graduate or professional degree.

Compare that with the reality that only 33 percent of the total U.S. population graduate from college. Asian-Americans have also created a kind of “ethnic-capital“ in their communities, which emphasizes after-school tutoring programs and academic clubs. This cultural focus on education may lead to higher rates of college graduates and ultimately more success in fields like the the tech industry.
 In every level position we looked at (with the exception of chief), Caucasians earned the lowest average salary.

A City View

When it comes to the tech industry, the first place that probably comes to mind is Silicon Valley. Cities like San Francisco, Cupertino, and Sunnyvale house some of the biggest tech headquarters in the country. But those aren’t the only places in the U.S. to find prominent IT-related careers. We looked at some of the top places for tech-related jobs in the country to see where different ethnicities were thriving.

In both Saginaw, Michigan, and Ft. Myers, Florida, Asian-Americans are making almost 16 percent higher salaries in tech jobs. While Asian-Americans don’t necessarily make up a vast majority of the population in each area, they do add to the overall diversity of their populations. When we look at average salaries in these cities by varying degrees of ethnicity, the correlation between diversity and innovation can be responsible for driving up competitive wages.

Morrisville, North Carolina, and Oshkosh, Wisconsin, were also found to have above average pay in tech jobs for non-Asian-American and non-Caucasian ethnicities.

Inclusion Sparking Innovation

Major tech companies like Facebook, Google, and Yahoo have been in the hot seat lately for poor reports on the demographics of their teams. Gender and ethnic diversity remain a struggle for those leading the way in Silicon Valley. But how does the failure to diversify impact these companies where it really hurts?

Research has shown that diversity has the power to drive innovation. Different perspectives have the ability to challenge the status quo in a way that compels growth and development. From a profits standpoint, companies with increased diversity are more likely to report year-over-year growth and to grow their market share. Simply put, companies that make deliberate efforts to increase diversity among their staff may make more money.

In some of the prominent tech industry cities that we looked at like Boston, Massachusetts, and Sioux Falls, South Dakota, we found substantial correlation between high percentages of Caucasian employees and lower overall annual salaries. Comparatively, cities like San Francisco, California, and Bellevue, Washington, that reported higher rates of diversity also reported higher earnings.

Conclusion

Unfortunately, ethnic wage gaps in the U.S. haven’t changed much in the last 35 years, even with the introduction of the tech industry and the way it has evolved the workforce landscape.

However, the gaps in ethnic diversity where IT jobs are considered are largely traced back to a cultural skills gap. With the incredible growth of the tech industry over the last two decades, there has been little educational growth to match. There is an alarming lack of diversity in young people taking STEM (science, technology, engineering, and mathematics) subjects at schools and universities today, which will only continue to restrict the talent pipeline as the industry grows.

Thankfully, tech giants are starting to recognize this issue and are bringing transparency to ethnic diversity. Apple recently published a section on its website highlighting diversity and inclusion, in which they clarified their hiring trends, current diversity landscape, and educational opportunities for young people interested in technology.

At the end of the day, increasing diversity in the tech industry only makes what is possible through technology better. As we continue to close this skills gap and grow our ethnic diversity, there’s no limit to the incredible things we can accomplish.

Methodology

Average salary and ethnicity composition (i.e., percentage of employees of a specific ethnicity that comprise the workforce) was detailed for 61 companies and 1,143 job titles according to Paysa.com. Job titles consist of founder and C-level titles for early-stage companies only. Companies were categorized into industries according to their Standard Industrial Classification code via SICCODE.com. Percentage difference in salary was calculated against total average salary. Job title analysis was limited to associate, chief, vice president, executive, director, manager, and senior-level positions. Redmond, Washington, was omitted from Average Salary and Diversity, by City analysis with an average salary of $289,000 and 75 percent Caucasian ethnicity composition).

Sources

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Originally published at www.paysa.com on November 5, 2016.