Tech Companies Moving Jobs Out of US Due to Great Resignation, Remote Work – Business Insider

The payroll startup Deel is headquartered in San Francisco, but the 21 engineering jobs it’s looking to fill aren’t based there. They probably won’t even be based in the US. Deel has an idea of where it wants to fill these positions — some in Latin America, some in Europe, Africa, and the Middle East — but the company says it’s flexible because it wants to prioritize hiring the best candidates regardless of location. Since launching in 2019, Deel has built out what might be the most global technology company of its size: 1,100 employees scattered across more than 75 countries, including Nigeria, Colombia, and Belarus. US employees make up only 18% of the company’s workforce — and only 1% in engineering, data, and product. 

That’s a radical departure from the way tech companies have always done business. From the start, Silicon Valley was committed to keeping its top jobs in Silicon Valley, so everyone could bond over foosball and free sushi. The perks weren’t there to please employees: Companies wanted their teams to be together, 24/7. “It was all about face-to-face collaboration,” Duri Chitayat, a longtime executive in the tech industry, told me. “That’s where the creativity came from.”

But now, more and more tech companies are following Deel’s lead. Last month, on the tech-recruiting platform Laskie, 75% of companies that were hiring engineers in the US were also looking for engineers in Latin America. That’s up from 55% a year ago. And before the pandemic, CEO Chris Bakke estimates, only 25% of employers were open to hiring engineers in the region.

The rapid and sweeping shift in tech employment is being fueled by a confluence of two factors: remote work and the Great Resignation. Once companies started allowing employees to work from home, they realized they could hire not only across the US but also abroad. Coding, in fact, is the most remote-friendly job in America: In a recent analysis of job postings on Indeed, across 51 occupational categories, the people most likely to be permitted to work from home were software developers. All you need is a decent laptop and a stable internet connection. 

But even as tech companies hire coders in places like Boise, Idaho, and Memphis, Tennessee, they still can’t find enough Americans to fill their top engineering jobs. And thanks to the Great Resignation, they’re being forced to pay higher and higher salaries. So why not look elsewhere for tech talent — especially when it can be had for a fraction of the cost? “US tech companies are saying, ‘We can hire an engineer in the United States for $300,000 or we can hire somebody great internationally with very similar experience for $75,000,'” Bakke told me. “If nobody needs to come into an office anymore, does it continue to be worth it to hire the top US tech workers?”

Now, as more tech companies move jobs abroad, the best and the brightest in Silicon Valley are no longer competing only among themselves. They’re being evaluated against their peers all over the world. What started as a steadfastly local job market is turning, at long last, into an international job market. Globalization started with factory work, and then it spread to support staff. Now it has come for the last remaining bastion of American tech jobs: the elite ranks of engineers.

0.6% unemployment

With remote work becoming so widespread, it’s weird to remember that there was a time — only a few years ago — when Silicon Valley’s culture was predicated on in-person interaction at the office. When tech companies wanted to tap the skills of foreign coders, they built offices in big cities overseas that were known tech hubs. Or they spotted people in other countries who showed extraordinary talent and moved them to the US, arranging visas for them and their families. But only big companies could afford to build offices abroad. And in the Trump era, visas became almost impossible to secure. That limited the tech industry’s ability to hire foreign talent — even as the demand for engineers was hitting an all-time high.

Then came the coronavirus pandemic. For the first time, tech companies realized that people didn’t have to see one another every day to work well together. With everyone stuck at home, people still collaborated, and products still got built. Everyone from the tech giants to the smallest startups started hiring engineers across America, far beyond the cities where they had offices. That enabled them to tap a much larger talent pool — and pay lower salaries. The average software engineer with at least 10 years of experience, according to Salary.com, currently earns $199,000 in the San Francisco Bay Area but only $185,000 in Chicago, $183,000 in Phoenix, and $177,000 in Salt Lake City.

But even after expanding their searches nationally, companies still weren’t able to find enough engineers to fill their openings. Last quarter, the unemployment rate for software developers was only 0.6% — among the lowest across the hundreds of occupations tracked by the Bureau of Labor Statistics. Basically, the US ran out of engineers who were waiting around to get a job. So if a company wanted one, it had to poach the worker from other businesses — fueling fierce competition that drove already high salaries even higher.

Which is why companies have begun widening their searches even more. If we’re willing to hire someone to work remotely in Kansas City, they thought, is it really that different to hire someone to work remotely in Mexico City? There was of course the added benefit that the engineer in Mexico City would be a lot cheaper. For a senior software engineer who would earn about $190,000 working remotely in the US, according to Laskie, you could hire someone with a similar level of experience and an excellent command of English for about $91,000 in Latin America. According to Deel, which helps companies hire and pay employees internationally, median salaries for senior software engineers are $60,000 in Argentina, $76,000 in the Philippines, $81,000 in Brazil and Mexico, and $85,000 in Poland.

So where are tech companies hiring? The answer is everywhere — from Lahore to Lagos to Lisbon. And because they no longer have to limit their searches to major tech hubs, companies can be agnostic when it comes to a candidate’s city or nationality. That’s how Deel has gone from having three engineers to about 140, in just two years. “If you need to scale fast, hiring globally is for sure the way to go,” says Yaron Lavi, Deel’s chief technology officer.

Safeguard Global, a payroll and workforce management company in Austin, Texas, that competes with Deel, has taken a similar approach. “I needed to have the best talent, and I couldn’t possibly do that from one location, because the competition for top talent is too high,” says Chitayat, who is Safeguard’s chief technology officer. “The way we approached it was: Go global, keep the bar as high as possible, and don’t go to the normal places that everyone else has already gone.” 

The unintended consequences 

Nowhere has the boom been bigger than in Latin America. The region shares similar working hours as the US, and salaries there are comparatively low. But thanks to the recruiting rush, they’re starting to rise. That $91,000 average salary for senior engineers in Latin America? In May 2021, according to Laskie, it was just $65,000 — a spike of nearly 40% in barely a year.

That creates a huge opportunity for engineers in developing economies, who no longer have to uproot their families and move to the US to earn a life-transforming salary. But driving up local wages is likely to pose a huge challenge for foreign tech companies. If American businesses are swooping in and hoovering up all the engineers in, say, Uruguay, what will Uruguayan startups do? How will they afford engineers of their own? And does that mean the world might miss out on a company that could become the next Google or Amazon? Hiring talent abroad, at higher wages, will only serve to solidify the dominance of Silicon Valley even more.

“It’s very cool to see folks being able to access salaries that they otherwise wouldn’t be able to,” Jim Conti, a talent partner at the venture-capital firm Hyde Park Venture Partners, told me. “But at the same time, is it damaging to the local ecosystem for these types of salaries to come in? And if so, is there a responsibility for us to think critically about that impact?”

If you’re a software engineer in the US, your biggest concern is probably what this means for your job prospects. When American companies outsource jobs, it often fuels a protectionist, “made in America” backlash. But before you pull out your baseball bat and start bashing your computer in a display of patriotic fury, keep this in mind: No one I spoke with in the tech industry thinks the new trend has even the remotest chance of taking jobs away from American tech workers in the immediate future. As I wrote the other week, tech jobs are still booming in America, even as tech stocks have cratered and a handful of companies in Silicon Valley have put a freeze on hiring. In an economic age that runs almost entirely on tech, there are plenty of tech jobs for everyone — even if everyone is starting to mean everyone around the world.

“If the past decades have proven anything, it is that the growth potential of building new technology companies continues to far exceed the capacity of our labor markets to supply it,” says Adam Nash, a longtime Silicon Valley executive who serves as the CEO of Daffy, a charitable-giving startup. Many of Daffy’s engineers live in Latin America. 

Nash added that the boom in international hiring should bode well for US engineers’ paychecks as well, because a big portion of tech salaries consists of company equity. What’s good for their employers — being able to actually fill more of their engineering roles — is probably good for employees as well: As the company staffs up and becomes more productive, all of its employees will benefit from the rising value of their shares.

But in the long run, does the outsourcing of tech jobs pose a risk to American workers? The job market won’t stay hot forever. And if a recession hits, who are companies most likely to lay off — their low-wage coders in Peru, or their high-priced engineers in Portland? The more that the tech industry starts to resemble the auto industry — the more Silicon Valley follows in the globalizing footsteps of Detroit — the more incentive it will have to send jobs abroad. 

The moment represents a profound pivot in the mythos of Silicon Valley. From Larry Page to Mark Zuckerberg, tech has fostered the notion that computer engineers are akin to gods — beings so rarified and magical that companies must cling to them at any cost. But that exalted status has always depended on an extraordinary imbalance between supply and demand. As more and more US companies tap the global supply of tech talent, America’s coders may face a humbling prospect: that their skills aren’t so rare after all. 


Aki Ito is a senior correspondent at Insider. 

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