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Report: Talent gaps put pinch on key parts of Austin’s tech sector

FloSports has added 50 employees in the past year, and filling each position at the digital sports media startup was a job in itself.

“It’s a really tight labor market, so I’m getting my hands dirty,” said CEO Martin Floreani, co-founder of the Austin-based company, which covers niche sports such as track and wrestling online. “We tried outside recruiters, but that didn’t work. Now we’re drumming up networks, getting out and talking to people at events and being superfocused when we find a strong candidate.”

The company, which launched as Flocasts in 2006 and now has 100 employees, has become more flexible about hiring, including increasing its salary offers and allowing workers to telecommute. It recently agreed to let a new engineering hire work from his home in Washington, D.C.

“Good engineers are hard to find, so you have to be very competitive,” Floreani said. “And once you have them, you better do all the things you promised in the interview and work to continually groom them.”

Floreani’s hands-on approach underscores a growing challenge for Austin’s established but fast-growing “second stage” companies such as FloSports. These firms are especially important for the region’s economic growth because they create so many new, high-paying jobs.

But this same set of companies might be having the hardest time filling key technical positions, according to a study released Thursday.

The Austin Technology Council report found that local employers will have as many as 3,500 open jobs each year in the region’s 19 core high-tech occupations — but local colleges and universities awarded just 1,539 of the degrees needed for those jobs, fewer than in any other major tech hub in the country.

Furthermore, only a small share of Austin-area tech companies tend to hire those recent graduates and, even when recruiting outside talent, might face an increasingly difficult time paying high enough wages to attract qualified candidates.

The region’s median wage across the 19 core occupations was $80,454 per year, excluding benefits — slightly less than the national median and significantly lower than in other tech hubs, particularly the leading $116,314 median tech wage in San Jose, the study found.

“For two or three decades, we’ve been leaning so heavily … on our culture, our lifestyle piece,” said Julie Huls, the technology council’s executive director. “We’re going to begin to see more and more mature tech market challenges, like salary, begin to be of greater importance.”

Huls stressed that the report included preliminary findings, and she said some underlying questions remain about the state of the tech labor market in Austin. But she said the report underscored two key challenges – the disconnect between the local education pipeline and industry needs; and the disparity in salaries between Austin and other tech hubs.

“Local companies haven’t been forced to compete en masse with outside influences, and I think that will change,” Huls said. “Do I think we’re at a critical point today? No. Do I think some of our companies are starting to feel the pinch? Yes, I do.”

While part of the study looked across the tech industry and the 108,000 jobs it provides in the region — from giants such as Samsung and Dell to midsize software firms and a host of smaller startups — the report focused primarily on the region’s key technology occupations.

The analysis found 67,546 jobs in those 19 core occupations, including anything from software developers to network administrators. About a third of those workers were employed by companies outside the tech industry.

Overall, the data and responses compiled in the council’s report suggest the companies within Austin’s tech sector have managed to expand their business without filling most open positions.

However, 70 percent of respondents said they find it “difficult” to “extremely difficult” to fill job openings. And the hardest hit appeared to be to firms in the “second stage” of growth. Not only did these growth companies report a higher level of difficulty when filling new jobs, they expressed less confidence that the Austin market would be able to meet their workforce demands in the future.

“To the extent that Austin’s economic development is built on a foundation of those growth-stage companies, we need to ensure that those companies can find the skilled technical workers they need to stay here and grow,” said Brian Kelsey, principal of Civic Analytics, which conducted the analysis.

Companies in that rapid-expansion stage tend to create the majority of jobs in the tech industry, Kelsey said. And as technology companies provide 11.1 percent of Austin-area jobs, those expanding companies are a key driver of regional economic and payroll growth.

“That’s really Austin’s sweet spot,” Kelsey said. “We’re not a market here that’s driven, especially in tech, by large companies. … Our market depends on entrepreneurship and the ability of these second-stage companies to grow locally.”

While Austin has had little trouble attracting workers with technical skills, it has struggled to create enough of its own. While many local companies said they hire local workers, provide student internships or employ workers with associate degrees, the survey found that only 12 percent of respondents hire recent college graduates or don’t require previous work experience.

Forty-two percent of respondents said they require applicants have at least five years of work experience to even get consideration.

“This is a significant barrier to getting more entry-level technology workers into the pipeline,” Kelsey said.

And when tech companies pass up less experienced engineers, they end up competing over the same limited pool of experienced workers, said Larry Warnock, a veteran Austin software executive.

“Everyone wants the five to seven years of experience, but the Austin tech community needs to embrace new talent,” said Warnock, who is president of software startup Boundary. “If you ask me to name 20 software companies in Austin that have been around for more than seven years, I can’t. We’re still in adolescence in development as a tech hub, so we don’t have that base of employees yet.”

Yet the region’s emergence as a tech hub has helped spur a sort of virtuous cycle, with companies coming to take advantage of a relatively skilled workforce and more workers coming for jobs and the Austin lifestyle.

In fact, local companies import a larger percentage of talent compared with other markets, according to data compiled by Hired, a tech-focused job site that officially launched in Austin this week. Roughly a third of the hires through the site were relocations to Austin, compared with 1 in 5 for San Francisco, said Chelsea Cooper, general manager of the Austin office.

But boosting salaries might not attract more talent than Austin already gets. Even if local tech companies raised wages by 20 percent, said Warnock, Silicon Valley and the “massive number of opportunities there” remain the primary destination for skilled high-tech workers.

“We need to focus on other regions and universities that are producing great engineering talent,” he said. “That means looking to Illinois, Michigan, Houston and Georgia. To those places, we look like Silicon Valley.”

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