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Comment by altoz | Hacker News Reader

You have two groups:

1. 5 million unemployed people 2. very highly sought after workers

The employers complaining about people in group 2 being scarce are merely not paying enough. The workers complaining in group 1 need more skills that the market wants. They're at different ends of the spectrum.

Other than that they live in the same country, they really don't have much to do with each other. Whether you can convert people from group 1 to group 2 is an interesting question, but generally if it were easy to be in group 2, a lot more people would be in it.

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Born in Barcelona, living in the US.

I am not sure the real problem is as described in the article. While there is a percentage of the population with no real skills, there are highly skilled people with either no work or working on positions for which they are overqualified (frequently non-permanent employees [1]).

I know people that are doing "fine" by Spanish standards, which is around 30K/year, but the majority of my friends and university classmates are making way below that bar. Most of them with the equivalent undergrad + master.

If the problem was "just" the lack of preparation among the youth, I am pretty sure that migrants would have trouble finding jobs on other countries (UK, Germany are the most frequent "destinations"), which is not the case. In my opinion, there is a big cultural problem; long hours, low salaries (employer) and a lack of culture for optimizing work hours (employee). If we add this cultural problem to the incompetence of the Spanish government, that basically prioritizes building pharaonic public structures (like the high speed train) or taxes technology (solar panels [2]) instead of investing on technology and/or innovation we have the current situation.

[1] http://www.npr.org/sections/parallels/2015/12/18/459854096/s... [2] http://www.renewableenergyworld.com/articles/2015/10/spain-a...

Very true. Just compare salaries of software engineers in most EU countries with salaries in the US.

If you're a good developer, 99% of the time it's better to work remotely from Europe for a US company. It really is a simple problem to solve -- pay talented people in Europe more. And yet, for some reason, this is often dismissed by CEOs as a ridiculous statement. They're probably the same people who think you need 100 software engineers to complete a complex technology project.

I don't think it's that developers are underpaid in Europe. They are just objectively less productive there. After all it's a very specialized job that requires modern, developed economy open to disruptions to be really productive. On the extreme opposite end of a spectrum - a pre-industrial economy - a developer's productivity would be zero.

American nominal GDP per capita is 2.13 times that of Spain's and 1.38x that of Germany's, and the distance keeps increasing. There are many possible causes, but I think lower salaries are a symptom.

GDP per capita seems to be a curious way to estimate if a local dev is likely to be productive. Would a Luxembourgish, Swiss or Norwegian dev be expected to be more productive than one from the US or UK?

It seems to me that the prime determinant of pay is how close the worker's "category" is to the money. So in a start-up intensive environment like the Bay Area, the devs are also sometimes the executives, and executives are often former devs, so devs get paid correspondingly.

Switzerland does have higher average pay CHF 91,374 = $93,703.5 [0] compared to USA $68,082 [1]. Their nominal GDP per capita is 36.62% higher and the pay is 37.6% higher.

Norway interestingly has almost the same pay as USA - $68,737 [2], probably because of high share of oil extraction in GDP (22% [3]) which skews the result. If you subtract oil share from the GDP, you get $56,195.88 nominal GDP per capita, which is almost the same as the American one ($57,220)!

Now Luxembourg is a tax haven/financial center with a population of half a million so I don't think it's a relevant comparison. Just due to population to get something close to true pay average you would have to ask a relatively (to other countries) very big percentage of their developers.

Same site for comparable data

[0] http://www.payscale.com/research/CH/Job=Software_Engineer/Sa...

[1] http://www.payscale.com/research/US/Job=Software_Developer/S...

[2] http://www.payscale.com/research/NO/Job=Software_Developer/S...

[3] https://www.ssb.no/en/befolkning/artikler-og-publikasjoner/_... page 40, graph

Dude. You're not getting the objection. We're not objecting to the numeric ratios, we're objecting to using those numbers in the first place.

> GDP per capita seems to be a curious way to estimate if a local dev is likely to be productive.

Curious is putting it mildly. :) What is being objected to is your _measure_. Stop using the GDP per capita of an entire country as a proxy for software developer productivity. It's frankly stupid. Anyway GDP per capita using PPP (purchasing power parity) is seen as a fairer comparison. But even GDP per capita by PPP is a stupid metric to compare software developer productivity. I'm sorry for using the word stupid. But it's stupid.

>Stop using the GDP per capita of an entire country as a proxy for software developer productivity. It's frankly stupid.

Outside of entertainment where software is a direct consumer product, the developer's productivity comes from increased efficiency of use of other productive resources. You can't eat code, but you can eat food that comes from higher production due to better software. So software has a multiplicative effect on existing production. That is, GDP.

Now even added value of entertainment software (games etc) depends on total GDP, because people have to pay with something for that entertainment.

So average developer's productivity IS a function of GDP, with different coefficient depending on the structure of a economy.

A primitive non-mechanized agricultural economy would have a coefficient of near zero because there's almost nothing to automate.

>Anyway GDP per capita using PPP (purchasing power parity) is seen as a fairer comparison.

A fundamentally wrong metric because pay is nominal.

This way of estimating a dev's likely productivity would operate independent of their individual ability, as well as be applicable across all worker categories. For example a dairy farmer in Switzerland earns more than one in Poland because people pay more for milk products in Switzerland compared to Poland.

So why would the GDP per capita of their country be a useful tool in deciding who to hire?

>For example a dairy farmer in Switzerland earns more than one in Poland because people pay more for milk products in Switzerland compared to Poland.

A Swiss farmer is much more productive when measured in currency units, but probably not that much in milk volume.

However as we are talking about salary differences it's money that matters.

>So why would the GDP per capita of their country be a useful tool in deciding who to hire?

Why would it be? In this conceptual model the ability of a developer is how much he multiplies the output of whatever he's working on, but his productivity is the absolute value of added output. How could it be counted otherwise, in what? Lines of code?

If productivity didn't depend on location immigration wouldn't exist.

I guess it depends on the sense in which "productivity" is being used.

A remote dev working for a Bay Area company from Spain can be just as productive for his employer as one located in Los Gatos, CA. However the above method would categorize this dev as "objectively less productive", which seems counter-intuitive...

>However the above method would categorize this dev as "objectively less productive", which seems counter-intuitive...

It wouldn't, it purports to explain the differences in local salaries, or more precisely salaries paid by local entities to on-site developers.

It's true I didn't specify that explicitly in the first comment, along with definition of productivity, so your reading of it was a reasonable understanding. It's a good thing you helped me clarify the intended meaning.

One assumption is that foreign demand (for non-local use) for local on-site developers is small enough to not change the workforce demand significantly. So it won't work for India or other common offshore destination, but it seems to explain pay differences between USA and Spain, Norway and Switzerland reasonably.

In other words, pay differentials are more closely related to locale than to the amount or quality of work produced.

I would contest the hidden assumption/assertion in your comment that GDP per capita can be used to compare productivity. Especially averaged out across the entire economy disregarding wealth distribution.

It is a given that GDP per capita is a measure of a country's economic output per person. I know that is the technical definition of GDP per capita. And presumably then you would link economic output to productivity.

You've fudged together too many uncorrelated entities :)

I have worked for a global company for 10 years, and that is false in my view.

Europeans do get paid very, very well, and they are equally as productive as Americans.

It's about the individual, and not much else.

Not all Europeans get well paid for the same job. Changes on function of the European country.

The application I have inherited was written by an agency in Sweden, (where I assume devs are paid a fair bit more than Barcelona). By your reasoning it should be better written than if someone from here had written it. It's not.

> It really is a simple problem to solve -- pay talented people in Europe more. And yet, for some reason, this is often dismissed by CEOs as a ridiculous statement.

I don't think it's European vs American CEOs, it's treating software engineering as cost center vs value creator. Even in the US one would likely have a hard time procuring a large compensation package employed as a software engineer in a utility company, aerospace company or insurance industry, but the attitudes take a drastic 180 turn with tech-centric and tech-oriented companies where software creates new value.

> have a hard time procuring a large compensation package employed as a software engineer in a utility company

in which case, there ought to be market pressure for software engineers to move away from such companies. When the company finds out they actually need a good programmer, they end up having to pay more again for quality (perhaps, indirectly, via consulting companies). But the current anecdotal evidence is that those companies _can_ pay very little, and yet, no catastrophe has happened. The only valid business conclusion is that the highly paid engineers aren't needed there!

> But the current anecdotal evidence is that those companies _can_ pay very little, and yet, no catastrophe has happened. The only valid business conclusion is that the highly paid engineers aren't needed there!

They pay in other ways: increased layers of management, decreased development speed, decreased software quality. One argument is that they manage to stay in business anyway — but I think we're actually seeing places like that start to go out of business, or at least be surpassed, by nimbler firms. The world is all about information, and those that can do more, faster with it are at a tremendous advantage.

> But the current anecdotal evidence is that those companies _can_ pay very little, and yet, no catastrophe has happened.

Healthcare.gov?

> If you're a good developer, 99% of the time it's better to work remotely from Europe for a US company

Again, how do people get those jobs? I have a lot of friends in the underpaid situation and they applied for stuff on HN; most of them don't hear anything back or have problems with the interviews. They are very good devs though. Loyal too; don't think they would ever leave once on board.

> It really is a simple problem to solve -- pay talented people in Europe more.

Playing devil's advocate: If we limit the discussion to pure tech companies that target a global market, then yes, it is that simple. But there is a vast majority of companies that do not belong to that category, yet require software developers.

I'm thinking primarily of Spanish software agencies that have other Spanish companies as clients.

You only "require" the things you can afford. If a company does not have the revenue to afford paying real market rates for developers, they might want a dev, or even need one, but that doesn't mean they can have one any less than a homeless man can have shelter when he needs it but doesn't have the means to afford it.

I always hate the mindset that because developers are in demand for some reason lower wages are acceptable. The opposite is true, exclusively, than when developers are in demand you should demand more money, and accept no less. It is extraordinarily rare for a worker to have any leverage over their employer, to such a degree that there is this systemic culture of employers being unable to stomach the concept of a developer being a skilled professional that demands a professional wage above and beyond what someone driving a truck or working in Excel makes.

I think you're missing the point. No one is saying that developers should be ok with getting less money when they can get more. The point is that as an employee, you bring certain value to the company. And that value is often capped not by your skills and productivity but by the type of company you work for. And there are less companies in Europe of the type that can afford to pay very well.

There's often still significant leeway. I'm based in Belgium - most senior developers probably make between €3-4000/mo (before tax) here. That's for guys in their mid 30s, early 40s. So a bit better than Spain.

My cousin's husband owns a small agency (15-20 people) and sells one developer at €2.000 a day on €500k-1m projects. I think on average they're billed out around 150 days a year, so grossing around €300k per developer, per annum. Paying developers more would mean less profits ending up in his pocket.

I'm surprised Belgium isn't better paid, even in Berlin you'd earn better than that (aside from maybe game-dev) and in western Germany you'll earn better than in Berlin.

Part of that is because employer contributions (tax + social security) are quite high on wages. Total cost to the company is probably double, i.e. €6.5-8k. In addition, income tax is also very high, so employees are left with <2-2.5k after tax on average.

There are ways to reduce the tax rate a bit to an acceptable level, but this depends on the goodwill of your employer. Most just don't care, even though it could mean an extra €1,000 - €1,500 in after tax salary for their employees, without increasing cost to the company. You can even ask the tax authority for a free tax ruling, meaning they approve this and can't challenge it later on.

I know what I'd do if I wanted to hire great local developers.. starting by offering a salary that is 1/3rd higher of most other local companies probably isn't a bad starting point.

As junior, I get 1800€/mo (before taxes). I'm Spanish and I live on Madrid.

1. 5 million unemployed people 2. very highly sought after workers

"If there was excess of people in group 2, then there'd be no upward pressure on wages, in the fashion that there is none in group 1. If we import or train enough of group 2, perhaps we can make this happen..."

Basically, the message for each group - "we want to pay less".

That's the way I read it. Employers don't want to pay enough to motivate people to develop skills for which they have openings. They'd rather hire foreigners than hire locals and train them.

So they put pressure on the government to swamp the market with newly trained/educated people as well as loosen restrictions on the hiring of foreign nationals.

Don't forget among the 5M unemployed, the employed who don't want to pay taxes, so are not declared. I don't know the number, but Spain seems to have high tax rates.

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