The Tech Talent Landscape in Austin, TX

Austin continues to land in the “Best Of” news for it’s continued growth. The population growth rate currently stands at roughly 120 people per day (157 gross, ~35 people leave each day too). The lower historical cost of living in Austin led to a reputation of affordability. Combining this with a relaxed lifestyle, attractive climate, and plenty of activities produced a people magnet. Austin evolved into a destination city, and the momentum isn’t slowing down.

This progression has a significant impact on the talent pool. Austin continues to approach talent without consideration of the local impact or the manifestation of national talent concerns. Startups and smaller companies tend to feel it most intensely.

The same banter often flows in HR circles, but three common assumptions of the Austin talent pool stand out:

1. Tech talent is widely available.
2. Tech talent is world-class.
3. Tech talent costs less in Austin.

Examining each of these assumptions yields interesting insights that can be applied to employment activities at local and national levels.

Tech Talent Availability

If you’re among those who believe the abundance of technology and entrepreneurship makes Austin a great place to find tech talent, you’d be absolutely right. You’ll find tons of people — who are already employed or building their own company.

Translation: The abundance of talent does not mean it is available.

In fact, the global labor market for tech talent grows more fierce each day. 89% of US developers (including students) are already employed. Of the 89%, only 13% are actively seeking new work. 59% of US developers would consider taking a new job if it was offered. This shows people are ready for new jobs, but very few advertise their availability. This is known as a passive talent pool.

All statistics retrieved from StackOverflow Talent.

World Class Talent

Austin is lucky to be called home by a significant number of world-class tech minds. However; this is only a small portion of the local talent pool.

Austin is affected by the great divide in the global tech people economy. A review of the 2017 StackOverflow developer survey (which received 64,000 responses), helps break down how the world (and Austin) is impacted.

StackOverflow.com

The math shows 50.1% of the talent pool has less than 5yrs of professional coding experience. 74% of the talent pool has 10 or fewer years of professional coding experience. This leaves approximately one quarter of the total talent pool actually qualifying as “senior level”.

True “senior level” tech jobs usually require 10 or more years of experience. The terms “Senior” or “Lead” are sometimes misapplied to job titles in a gimmicky effort to attract candidates. This practice sets the employer and candidate up for failure, and often annoys candidates who see through it.

There’s also a short lifespan for experienced tech talent. Once talent reaches roughly 15 years of experience, retention becomes a problem.

Someone with 15yrs experience who started programming professionally right out of an undergraduate program is (on average) around 34–37yrs old. This means they’ve dedicated over 40% of their life to a demanding career. When talent reaches these levels, they’re often attracted to higher-paying management or independent consulting roles, making them less accessible for hands-on work.

Since management roles often soak up the most experienced talent, the more realistic senior level global talent pool is around 11.3% of total supply (10–15yrs experience).

This disparity between entry and senior level talent will continue to grow in Austin over the next few years. It will become increasingly difficult to find experienced talent among the crowd.

In fact, the problem of finding qualified talent reaches beyond technology — and beyond Austin. In April 2017, job openings reached a record high even though hiring decreased. The Labor Department’s JOLTS report suggests a skills mismatch driving this (in)action.

“These data underscore the difficulty in hiring new workers, which we think is increasingly likely to be a factor restraining payroll growth going forward.”

- John Ryding, Chief Economist at RDQ Economics

While Austin has world-class talent, the numbers & trends clearly indicate it’s not all world class talent.

The Modern Cost of Tech Talent

The longstanding notion of Austin’s lower cost of living often leads people to believe everything is cheaper — including talent. However, Austin’s cost of living has rapidly increased with its growth. This will persist as housing shortages, rising costs, and longer commute times increase.

It’s true that day-to-day costs are on par and sometimes cheaper than other parts of the country. Nonetheless, the local real estate market is a very real and intense force in the lives of local tech talent (and everyone else). In July 2017, the Austin Board of Realtors released their quarterly report indicating a very low 2.5 months of inventory and a median home price of $369K+. Expanding this to the Greater Austin area only increases inventory to 3.2 months and drops the median price to just $301K. These prices are well above the 2017 national median price of $245K.

Austin Board of Realtors

(Image found by my favorite Austin real estate consultants at BirdHome).

If you’re unfamiliar with real estate metrics, this translates to low supply. A “balanced” market consists of approximately 6.5 months of inventory. With such low supply and high demand, real estate forces continue to drive costs of living up.

Property taxes add to the problem. The median property tax in Texas is 1.81%, which ranks the state as the #3 highest US property taxes. In Austin, property taxes are roughly 2.1-2.4%. Furthermore, property values continue to appreciate, which means the actual amount of tax paid each month grows every year.

Another frequently overlooked factor is how HOA-happy Austin is. While this is expected in downtown condo buildings, the planned communities and neighborhood associations outside of downtown continue to see increased monthly expenses. It may still seem cheap by Silicon Valley standards, but Austin companies need to recognize this upward trend and plan accordingly.

Housing shortages, rising prices, and longer commutes to physically get to affordable housing have already increased the experienced cost of living. Even talent that once was cheap feels the pressure of these forces, inevitably leading to pursuit of compensation that affords a quality life in Austin.

Only 30% of Austinites call themselves homeowners, while the other 70% rent. This imbalance highlights the difficulty/apprehension people face when attempting to establish roots in the city. The struggle is a direct result from compensation-to-lifestyle imbalances, meaning wages aren’t keeping up with rising costs of living.

High cost of living for a primarily passive talent pool creates high talent acquisition costs. Any recruiter will tell you passive talent pools are the hardest to reach, and the most expensive.

The Bottom Line: Austin’s low cost of living is a thing of the past. Recruiting costs are rising. Employers will face “attrition to the highest bidder” as employees attempt to maintain the Austin lifestyle.

Beyond Assumptions: Attracting Talent

While this may not be the rosy picture some people paint of Austin, it is a realistic view. Talent is not as accessible as it may appear. There are a variety of talent levels, but the global skills gap applies as equally to Austin as it does the rest of the world. Talent costs may be less than Silicon Valley, but they aren’t cheap and will continue to rise.

Understanding the impact of these factors — both globally and locally — provides a foundation for successful hiring and job seeking.

Attracting talent and finding gainful employment is all about understanding motivations. For more specific details about the motivations of the top tech talent in Austin, stay tuned for the followup: How to Attract Austin’s Top Tech Talent.

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Corey can be found on Twitter at @goldglovecb.