Business

SLO County’s tech sector keeps growing, but wages lag far behind Silicon Valley

From left: Lea Brandy, account director, leads a conference call with Chris Zacker, Amanda Peterson and Kristen Kumagai at Matchfire. The San Luis Obispo-based firm offers creative services, data analytics, branding, design, digital marketing, mobile app development and nonprofit fundraising.
From left: Lea Brandy, account director, leads a conference call with Chris Zacker, Amanda Peterson and Kristen Kumagai at Matchfire. The San Luis Obispo-based firm offers creative services, data analytics, branding, design, digital marketing, mobile app development and nonprofit fundraising. dmiddlecamp@thetribunenews.com

It’s no secret that technology firms in major metro areas like San Francisco and the Silicon Valley, where the median home price tops $1 million, pay exceedingly well. Salaries are routinely in the six-figure range, with stock options and signing bonuses rounding out generous compensation packages.

For many tech workers in San Luis Obispo County, however, wages lag significantly behind that of their peers in those technology hotspots. In some sectors, annual average wages in the California tech powerhouses are more than double those found locally.

Tech professionals and others familiar with the tech industry here say there are many reasons for the wage gap and believe it’s just one factor affecting employee recruitment and retention. Salaries at such firms in the county vary widely depending on the kind of tech company, its size, and how competitive the jobs are that need to be filled.

“Smaller local companies often do not have the capability to come close to compensation offered in the bigger metros,” said Mike Manchak, president and CEO of the Economic Vitality Corp. of San Luis Obispo County, a regional nonprofit economic development organization. “Many Cal Poly grads leave the area after graduating to go after the highest paying jobs, however, many are also not aware of the companies located here that are competitive with compensation.”

 

San Luis Obispo County tech companies offer a range of salaries, with those in information technology in high demand, said Joshua Erdman, president of Softec, a nonprofit Central Coast software and technology association. Some of the larger companies can afford to offer wages on par with the Bay Area; other businesses haven’t caught up yet, he said.

“We’re in a balancing act,” Erdman said, noting that many companies have struggled with retention.

Another ongoing concern, he said, is whether the larger companies such as Shopatron that are sold or merged will contract and flood the market with jobs.

“That won’t bring up wages,” he said.

Addressing the wage disparity

One solution is for San Luis Obispo County to raise its profile as a technology region.

“Even within the community, there’s a lack of awareness of tech companies here, and that is a problem,” Erdman explained. “The students don’t feel that this is a place they could stay. As far as they are concerned, their future has to be out of the area because there’s no tech here. If the community is not aware of the tech companies, how is an employee supposed to find a competitive wage and know that it’s available?”

Housing costs are another issue that accounts for much of the wage disparity, said Robert Kleinhenz, economist and executive director of research at Beacon Economics, which produces the county’s economic forecast.

The median price of an existing, single-family home in San Luis Obispo in February 2017 was $518,000. That compares to $1.2 million in San Mateo County and $942,500 in Santa Clara County, respectively.

In addition to housing costs, the concentrations of highly-paid technology jobs in places like the Bay Area are much higher, as is the labor pool of available workers competing for jobs, Kleinhenz said.

“There’s one thing that you just can’t escape and that is the fact that so much of this industry’s vitality depends on exactly what we see in Silicon Valley, where you’ve got a very large dense network of businesses and dense labor pool of people in that industry and related industries that feed off each other,” Kleinhenz said. “There’s a synergy they take advantage of, and no matter what, that confers a huge advantage on those areas, both for the firms and workers.”

Judy Mahan, director of both Cal Poly’s Center for Innovation and Entrepreneurship Incubator and its Small Business Development Center, said it takes time to grow a thriving tech center, but she is confident San Luis Obispo County is on its way.

“We are building that tech ecosystem,” said Mahan, adding that the area is now home to larger companies like Amazon and Transunion. Some of the companies in the incubator program, she said, aren’t able to afford salaries, but they can give equity and stock options.

“I think we’re on the cusp of seeing some growth with tech companies, and then they can offer those salaries,” Mahan said. “They are getting funding from all over, and they can bring that funding into SLO and use that to offer the right salaries to the right people. We’re in a really good phase of growth, and I can only imagine that is going to improve over time.”

More tech jobs needed

SLO County has experienced some decent technology job gains in recent years, according to Kleinhenz. The area saw an increase of about 800 jobs over a three-year period from 2012 to 2015 in management and technical consulting, scientific research and development, and computer systems and design.

The information category, which includes internet service providers and software publishers, saw an increase of 300 jobs over that time period. In 2015, the county also showed a slightly higher concentration of jobs in certain sectors, such as management technical consulting services, scientific research and development services, and computer systems design, than it did in 2012.

Even with the encouraging steady growth of tech jobs, some say there are still not enough to go around.

“There are a good amount of people, especially engineers that aren’t software engineers, who come out of Poly and would like to stick around, but there just isn’t the opportunity,” said Bob Crockett, chairman of the biomedical engineering department at Cal Poly and a co-founder of AxonVR, a SLO startup company that uses a type of technology that makes virtual reality feel more realistic. “The industrial base isn’t broad enough to keep them here.”

AxonVR, which recently raised nearly $8 million, employs about 25 engineers, almost all of them Cal Poly graduates. Most can expect to earn about $70,000 or more as a starting salary, which would likely be higher if they were working in a larger market, Crockett said.

The lower wages are a function of not having that “same critical mass of commerce in an urban area that would inflate wages that much,” he said.

“It’s really hard for us on the income side to be as competitive as those companies in other areas,” Crockett said.

Salary also isn’t necessarily the main driver behind an employee’s decision to stay, he added.

“We’ve lost a couple of people not because of the wages, but because there was more interest being in an urban area, and that’s not something wages would have changed,” Crockett said. “I do hear from some employees that it is hard to be a 25-year-old or 30-year-old and single in this town.”

Few tech companies in the county have executive level positions that younger employees can aspire to, said Joey Leslie, president of Matchfire, a San Luis Obispo marketing and technology company for businesses and nonprofits. Overall, the company employs just over 40 people. There are 22 employees in San Luis Obispo, including about two or three Cal Poly interns.

Leslie declined to give specific salary information, but he described wages in some positions here as lower than the Bay Area but competitive with other metros like New York, Washington, D.C., and Dallas, where it has offices.

“The larger shops in town like Mindbody and Level...those companies have more specific growth paths,” Leslie said. “We’re not quite that big. There are no executive positions in front of them.”

The future for smaller tech firms may be in generating more tech innovation in the county, as well as improving the community’s cultural amenities and family activities to make it more attractive for someone starting a family or a seasoned professional looking to retire.

In higher-priced markets like the Bay Area, it can be a tough road for entrepreneurs, who must contend with the hustle of the rat race, higher expenses and not necessarily the same level of support found in a place like San Luis Obispo, said Mikka Olsson, CEO of Ebbex LLC and an adviser to startups through Cal Poly’s CIE.

Olsson, who built and sold a company, said startups here can also find strong, local and even outside resources — such as venture-capital funding and personnel — to build their businesses, without the hassles.

“If they truly want to stay here, they can definitely stay here, that’s not the question,” Olsson said. “But if they stay, they’re staying here for more than just their career.”

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