Startup Salaries vs Inflation Inflation Is Winning

Startup salaries vs inflation — inflation is winning.

Now, I think inflation is probably winning against salary growth in many different industries, but our data only concerns private tech companies so we'll dig into that.

Here's how to read the chart below:

• Median salary figures at each date by our Carta Total Comp benchmarks for startup job functions. Only includes startups valued at $50 million or above.

• Left half shows how functional salaries have changed over the past 2 years. Some up, some down.

• Right side column shows the change in salary since 2022 PLUS the inflation (which I found as 7.8% over the same period). So this gives us the actual change in purchasing power for employees in that function.

Not fun!

For instance, Engineering salaries are up about 2.3% since Aug 2022 on a median basis. Not amazing but at least some growth. But that growth did not keep pace with inflation, so on a purchasing power basis Eng salaries have actually dropped 5.5% over the whole period.

Of course Eng is one of the functions holding up relatively well. Functions like Marketing, Operations, and Design are all down over 10% in purchasing power once you factor in inflation.

Sure, we can quibble about what inflation figure is correct, I'm sure there are other methodologies, etc. But this chart tells me two things:

1. The downturn in startup employment has fully filtered into compensation. Lots of great candidates available --> more leverage for the employer --> salary (and equity) declines.

2. Compensation is a function of cost of labor, not cost of living. And that can totally suck for startup employees, but the argument that salaries should keep pace with inflation doesn't really hold up to market forces.

Here's hoping we see some salary growth in the latter half of 2024, though candidly I think we need a hiring rebound before compensation begins to change.

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