Tommy York grew up in San Francisco but was far from his goal of saving enough money to buy a home in the pricey market—until he landed an engineering job at Google.
Photographs by for The Wall Street Journal
It was December 2021, and the shares of Google parent Alphabet had just hit a record high. Mr. York’s pay package included a $175,000 stock grant to be paid out over four years. The success of the $2 trillion company would be his, too.
Then, the Federal Reserve started raising interest rates. Tech stocks crashed. Alphabet GOOG 0.96%increase; green up pointing triangle ended 2022 down 39%.
For years, tech jobs were a ticket to riches. Much of that wealth has evaporated along with tech companies’ boom-time gains.
Stock typically makes up a large portion of tech workers’ generous pay. Compensation soared when a pivot to remote everything made tech companies the market’s darlings. The reverse, in turn, sent tech shares down sharply. While they have recovered some this year, they are still well below their 2021 heights.
The rout has wiped out a big chunk of the wealth employees had planned to tap for big-ticket expenses such as houses and college tuition. It has frozen the initial public offerings business, putting startup employees’ windfall hopes on hold indefinitely. And it has cost hundreds of thousands of tech workers their jobs.
In January, days after he returned from bereavement leave following his mother’s death, Mr. York, 33 years old, was laid off alongside thousands of other Google employees. In the end, he got about $46,000 from the stock grant. The dreary market for tech talent means he will probably have to take a pay cut in his next job.
“I just wanted to put a down payment on a home in San Francisco,” he said.
Employees at publicly traded tech companies are typically paid with restricted stock units, or RSUs, which are doled out over a number of years. The awards are based on the company’s stock price at the time they are awarded. A grant of Facebook parent Meta Platforms stock valued at $50,000 when awarded at the end of 2021, for instance, is now worth one-third less.
Amazon.com’s stock slump has shaved 15% to 50% off 2023 compensation, The Wall Street Journal previously reported. Under a new arrangement with a mortgage lender intended to ease the pinch of the share-price decline, employees in some cities will soon be able to use their stock as collateral when buying homes.
Company stock often makes up a sizable share of a tech employees’ total wealth. Many resisted selling shares once they vested, betting that the price would keep going up. Laid-off employees with multiyear stock grants were typically only given the portion covering the period they worked at the company.
“During this great long-term run where tech stocks are just going up, equity compensation was a fantastic feature,” said Brandon Welch, a financial adviser in San Diego. “Then all of a sudden in 2022, it becomes a bug.”
A portfolio that invested equally in each of the so-called FAANG stocks—Meta Platforms, Apple, Amazon, Netflix and Google parent Alphabet—would have increased more than fourfold in the five years through 2021. At that time, Mr. Welch’s young tech clients were laying plans to tap their ballooning company equity to buy homes for their parents or second homes for themselves in locations such as Hawaii.
“The conversations were almost like what you would have with a young athlete after they got drafted into a sports league,” Mr. Welch said. Now the conversation often revolves around layoffs or belt-tightening, he said.
Samantha Voigt took a software engineering job at Square, now known as Block, in 2017 after graduating from college. The company’s stock increased ninefold during her time there, affording Ms. Voigt a level of financial security she never expected to have so early in her career. She typically sold her shares as soon as they vested.
Ms. Voigt, 27, paid off her student loans and bought a car in cash. She maxed out her 401(k) and socked $500,000 away in a brokerage account. She easily covered twice-weekly therapy sessions and costly visits to the hair salon every few months. When she felt burned out by the pandemic, she took a year off from work.
In a group chat with about a dozen friends mostly in the tech industry, people would share stories of elaborate trips to Japan and second homes near Lake Tahoe.
Her new job at a startup pays a higher salary, but her public-company stock payouts are gone. In their place, she receives options in a private company with an uncertain payout.
“I used to be able to kind of spend whatever, and it would be fine,” Ms. Voigt said. “Now I’m having to think about it a lot more.”
She recently started using Mint to track spending and is making small lifestyle changes such as bathing her dog herself instead of relying on groomer. The group chat discussion has turned to talk of whose company is doing layoffs.
The tech rout has put startup employees in an especially tough spot, denting the value of their employers and indefinitely delaying their IPOs.
Ryan Stevens, 39, worked at a Verizon call center in Tennessee before switching to the tech industry in 2009, drawn by workplace perks and higher pay. He was employed in product- operations roles at Google, Meta and the question and answer site Quora.
“It was a culture shock in a good way,” Mr. Stevens said of his move to the Bay Area.
The stock and options Mr. Stevens collected over the years were less generous than what his software- engineering peers earned, but he still hoped they would help him buy a house when he started a family. His goal was to put a 20% down payment on a $1.5 million property—about $300,000.
Now the father of a 2-year-old, Mr. Stevens can’t tap the stock options from his six years at Quora, which remains private.
Meta gave him a grant worth $80,000 over four years when he started at the firm in August 2021. Last November, Meta laid him off along with thousands of others. After cashing out some shares to cover expenses, Mr. Stevens has stock valued at about $10,000 left.
“All of that was just supposed to come together magically down the road and set us up for homeownership,” Mr. Stevens said, “and make us feel like we made it.”
Originally Published On: https://www.wsj.com/articles/tech-workers-arent-as-rich-as-they-used-to-be-d2292d64