Are Silicon Valley’s Engineers Underpaid?
fastcompany.com
fastcompany.com
Now, let's move to another country: Spain in this case. A normal salary for a junior engineer is around 15K/year (euro) up to 30K for a senior developer. A big house (for europeans, 950sq ft) in a normal neighbor in Barcelona costs around 400K (euro), which would be like... 26 years of salary?
And I have compared different houses, for what I have seen, in general the price $/sq.ft. is pretty similar between both cities.
As I said, I understand that the engineers might not get back what they produce (and I agree) but I just wanted to give another point of view.
http://www.economist.com/blogs/freeexchange/2010/10/global_h...
Next, how many hours per week and weeks per year are you working? The typical american engineer is probably working 50+ hours per week, with only 2 or 3 weeks of vacation per year.
Finally, you should consider international consulting if you're being paid $30k/year while working 50 hour weeks. email me if you know ruby :)
I was not talking about myself. I worked in Barcelona for a while and moved to the US on 2009. Usually engineers don't have a 8-6 working schedule; in the company where I worked it was more normal a 8AM-9PM. 1h for lunch. And during deadlines it was "normal" to stay until 1-2AM. And back at 8, of course. All that for 15K. Sounds great, doesn't it? I left the job after 6 months because I considered that it was not a "good deal". It is true that I could be close to 30K in 1-2 years but...
I can't talk for all american engineers, but people that I know are close to the 100-120K without working 50+ hours. The difference on holidays is one of the biggest differences, that's true. And social benefits. As for your last comment, foreign engineers should definitely consider that!! Spain universities are pretty good (our engineering undergrads were 5 years until the current Bologna system) and engineering programs are considered really tough.
PS: is there no direct messaging system on HN? Or am I just too stupid to discover it?
As you probably should know by now it's a really beautiful city. And probably the city with more entrepreneurs on the country, which unfortunately doesn't say much (given the country that we are talking about).
1) Exciting work
2) Large potential impact
3) Financial compensation
Notice that money is third, and that isn't an accident. I probably make less than many of my classmates who went into finance (although the difference is likely smaller that one might assume based on comparing "averages"). However, most of them don't really seem to like their jobs all that much. I get to work on interesting things that will hopefully have a large impact, and get paid pretty well for it (I've usually made significantly above the Silicon Valley "average").
In addition, I think that many people in finance are likely overpaid relative to the value they generate, and that there will be a correction at some point in the future.
1). Does the market clear? Can every company wanting to hire someone for $100k find someone?
2). Do different firms routinely value the sane person consistently, such that switching jobs results in no significant salary increase?
3). Do developers routinely capture gains made as a result of productivity increases? For example, has the adoption of frameworks which make web sites about 10x faster to build in ten years resulted in 10x increases in salary?
...
Well, look on the bright side: you're not Japanese engineers.
If we're truly creating so much more wealth for these companies than we take in salary, it should be easy (ish) to turn that into more money for ourselves, even if large companies don't want to do that.
And if working for ourselves doesn't instantly turn into way more cash, perhaps we're not creating as many billions in actual value as we think we are?
Reading HN a lot can make us forget that being a great programmer doesn't make you great at business.
Nobody admits it, but a lot of the secret of creating a sustainable business boils down to luck, not being a "great business guy". Our industry is set up to reward risk-takers disproportionately...when they succeed. It's a lottery, but we like to justify the disparity in compensation post hoc by assuming that there's corresponding disparity in skill that somehow created most of the value.
But then we're back to square one: why don't you become a risk-taker yourself? It's easy to paint oneself as an underpaid creator of millions of dollars in value, but for this to be possible someone had first to take a risk and then succeed.
And in case of failure - would you, an employee who gets such a dispropotionately small share of generated value, be so eager to increase your share in the generated loss?
I wouldn't and that's why I don't see much value in the "created value" argument.
Who says I'm not? Most of the time that people take risks, they fail. That's why it's called "risk", and not "guarantee".
" would you, an employee who gets such a dispropotionately small share of generated value, be so eager to increase your share in the generated loss?"
That's a straw man. Created value isn't allocated in strict proportion to risk of loss, and you don't have to take more risks to get paid more. If that were true, the people who funded a startup would get 99% of the upside, because they had the most to lose. (Also, doctors and lawyers wouldn't get paid squat. Anybody who knows a doctor or lawyer will tell you that that they're just about the most risk-averse people on earth.)
The real answer is that compensation is about market forces. The people with the money are only willing to pay as much as the people who create value demand to be paid.
If we (the serfs) are truly creating so much more wealth for these lords than we take in salary, it should be easy (ish) to turn that into more money for ourselves, even if the lords don't want us to do that.
The problem with this logic, of course, is that it's tough for a salary-worker to build a company that makes "way more cash" than they can get working for a salary.
As a programmer, you don't have quite the same issues. Where do you see the monopolized resources and/or forced prevention of exit being for us? We're not exactly medieval serfs that way, and starting a software-based company is, as pg repeatedly mentions, way cheaper than it's ever been.
Suppose you have two options, A and B (seen below):
A: Work for large company Z which reaches 100 million people already through a $10 product. You make an incremental improvement that improves sales 1%. You have now made $10m contribution to the company.
B: Work for yourself. You found a startup that is getting half a million unit sales a year (pretty good, right?), and you double sales somehow. You've only produced a $5m value despite doubling the output.
The answer is that often big companies are much more levered and each unit of input can create much more output (primarily because of breadth of resources and reach) than if you were to work by yourself. Your value is how much you can contribute. Your highest value is your value at the company where you can contribute the most. By a reasonable application of some auction theory, you would expect that your market pay (including costs you can't see like payroll taxes) should be approximately what your second-highest value is. (Because if it were higher, the highest-value place can lower it and you'd still be working there, and if it were lower, the highest value place may not have you)
American programmer salaries are so far above the country average that complaining is just ridiculous.
How much the janitor makes doesn't figure into the salary for a programmer, except as an indirect consequence.
The software industry is one of the few industries where a single person can create mountains of value all by themselves. Comparing software engineer salaries to janitor salaries makes no sense as janitors aren't creating multiples of their salary in value for their employer.
The best solution I can come up with is options/stock and salary... That way creating more value DOES help them get more income, subject to the vagaries of the stock market.
Unfortunately, as wonderful as it would be for everyone to receive their exact value in return as a percentage, that's HARD... It's hard to quantify and it's hard to justify.
If you're too lazy to cross the street than 100k probably is overpaid for you.
I shall call this phenomenon occupational narcissism.
The only thing I can think of is "mother", but that's a cheeky answer.
Plus, everyone on all sides could be accused of whining, because the entire technology industry is well off compared to most people. When a VC complains about terms on a deal, you could ask, why are they whining when they're already well off?
http://www.numbeo.com/cost-of-living/compare_cities.jsp?coun...
Rent Per Month
Apartment (1 bedroom) in City Centre 1,202.29 $ 2,433.33 $ +102.39 %
Apartment (1 bedroom) Outside of Centre 1,093.54 $ 1,500.00 $ +37.17 %
Apartment (3 bedrooms) in City Centre 2,660.64 $ 3,965.49 $ +49.04 %
Apartment (3 bedrooms) Outside of Centre 1,754.56 $ 2,692.00 $ +53.43 %
Buy Apartment Price
Price per Square Meter to Buy Apartment in City Centre 5,897.44 $ 8,250.00 $ +39.89 %
Price per Square Meter to Buy Apartment Outside of Centre 4,376.52 $ 6,000.00 $ +37.10 %When the idea behind a device is more like, "Here's how we're going to use magnets to align the polarization of water molecules in the body, measure those changes, and map those back to construct an accurate image of the inside of someone's body. Now program it for me.", the original inventor creates a whole lot more value than someone who says, "It's like Facebook for dogs. That uses PHP, right? Now program it for me."
Explain how any developer has done this recently.
We're hardwired to respect individual stories, not tales of aggregate success (affecting millions of lives in a small positive way)... which is why it's only when those small effects are made tangible by specific personal stories does it sink in.
This is why politicians talk about how the impacted the life of some small child or working mother, etc etc..
I make it my mission in my professional life to capture as much of that value as I can and do with it as I see fit. Which usually means spending it in productive ways with businesses that enrich the community.
I can definitely appreciate the work, as I'm a business owner. I know this kind of objectivity is a bit strange, but I have both employees and clients, so I see both sides of the table on a regular basis. I'm just calling it like I see it.
So if you could be getting more elsewhere, then the others who are splitting up the profits are getting more compensation than they created value - others who are getting far less than their market value aren't part of the negotiation, unless your employer is thinking of hiring them.
In short: If you're thinking of working in Finance, and your employer has no intention of hiring a starving programmer from another country, then you're underpaid. If your employer is looking into outsourcing, and you're not searching for jobs, you're overpaid.
Employers will only pay as much as it takes to keep you from leaving. At 150k a year the ratio of people who would be willing and capable of replacing you is pretty high.
The point is that if you don't take it, people above you do.
It's not returned to some global pool of good-will.
Salaries will affect the price of your service. That price is paid by everyone else who doesn't work for your company and passed along. You are taking a bigger share from everyone.
Neither is any more immoral than the other and neither captures more than their fair share of value.
But in reality, in any organization of sufficient size, you have a lot of people who don't actually do anything creative clamoring to capture that excess value generated by the people at the bottom (and at the top!). These are the people you are trying to push out, not the productive, well compensated people.
Suppose the toolmaker maintains these profits by keeping his thumb on the wood-seller who can barely support his family selling 80 cent pieces of wood. If the toolmaker paid the wood-seller $1 or $1.30, this would be more in line with what the wood is worth. The fairness of these price points can be argued.
Now we're back to considering whether engineers are underpaid!
Maybe it means engineering isn't as valuable as we think. Or maybe it means engineers aren't as good at wielding their power.
I think it means more engineers do it for love of the work. And there's no gating body/cartel to protect it.
The free enterprise system - the American way - is also about bringing down the price of goods. If you work, you just happen to be one of those goods.
In Sacramento you could probably get away with being the only wage earner in your family too, because the cost of living is just cheaper. In Palo Alto there is simply no way that you could live comfortably on that money if you have a partner and child, unless your partner also works and makes a high income.
Now granted, at the end of the day you have live in Sacramento -- which is a cultural backwater, scores R+6 on the Cook PVI, and has 4 ultra-conservative talk radio stations -- to stretch your dollar like that. And it's questionable whether there are any jobs that would even pay so much for a similarly experienced engineer.
But the point is that you can't say whether $120k is too much or not enough until you consider all the costs incurred to make that salary.
Moreover, so what if people in Kansas or North Dakota have less purchasing power than me? I live in a place that is cosmopolitan, diverse and has a higher average IQ -- and there's a higher cost associated with living here. This is like telling someone who drives a Mercedes that he can't complain about his engine needing service because someone, somewhere else in the world, is driving a Ford.
In fact, you might even want to start a placement agency! On one side, you recruit young starry-eyed talent, and feed them a constant stream of images/rhetoric about how tough everyone but them has it, so their salary expectations stay low. On the other side, you hook them up with "Google, Apple, and others" who "generate enough revenue to pay people more" but are looking for bargains.
Everybody wins! (Except the developers.)
BTW, I am an employee and not a employer. I would certainly like to make more. But at some point (certainly at 150k) you just become an out of touch complainer if you're still unhappy with your wage.
Depending on where you are, 100k barely supports paying for a house to raise a family without a 60 minute each way commute. Many of the places that have very high paying programming jobs just so happen to also have astronomical costs of living. SF? Check. NYC? Check. If you know C++ stupidly well, I know a very high paying job in a relatively low cost of living city (Atlanta) working for a bank. Can they find enough people at those astronomical payouts? Nope. They're constantly looking, less than 1/100th of the applicants can even get through the programming test.
People are simply paid what they can get demand given their skills, inclination to negotiate, and a motivated company to hire.
Additionally speaking, many of the people who demand the 150-450k salaries have run their own businesses, have skills other than programming that are very valuable to the employer (I know my fees are justified due to lots more than my not inconsiderable programming ability), and could do considerably better than 100k out running a business.
If a corporation wants to keep them, they should pay them what it takes.
Or are you saying no one should ever make more than 100k, including brain surgeons and law partners? Cause they're whiners?
I'm saying if you make 100-150k a year, sitting on your ass, doing something you enjoy then perhaps you should feel pretty fortunate. Stop thinking about the few % above you and consider the vast population below you.
This isn't about average programmers. This is about this tiny pocket filled with overachievers who work stupidly long days for a jackpot and have a very high exposure to running their own businesses.
100k in silicon valley puts you in the top 47% of the people who live there, which means you're in the commute forever or live in a dinky house dialemma. (The average salary there is $96,299). It's one of the few cities in the world worse than where you live for housing, and housing there costs 2x as much for little places (rentals) and 1.4x for buying as Vancouver. How do you enjoy your 4 bedroom home? Oh wait, you can't even afford that where you live (most likely). Now imagine being able to afford 1/2 of what you DO have in housing.
So you live in vancouver, should we tell you to stop bitching at $54k?
Relative salary is important for purchasing some goods, namely housing. As a person who lives in a city almost as bad in that respect, I'm surprised you don't have a better feel for that.
(Note I keep saying "there" etc. I live in Atlanta, a much more reasonable cost city for businesses that don't need stupidly good people to really work).
Raising your threshold a little – to 150K! – doesn't fix the problem. If your work is worth 500K – generating more than that for someone else – and you're paid 150K, you're being cheated. You have the right to be angry, complain, point out the discrepancy to others, and vigorously pursue competitive alternatives.
Yes, this may appear ungrateful to those making do with far less. But their remote estimations aren't relevant to the intimate dyadic relationship between an employer and employed, where both fairness and efficiency require salaries to be set by negotiation over value delivered each direction. Let third-parties express their displeasure through progressive taxation schemes or the construction of alternative economic systems... not by telling developers to be happy with a lower share of their own output.
I was with you up until this point. You and the person paying you both agreed to the compensation you get. If you don't like it then you have no right to "be angry".
You can however try to renegotiate your compensation.
s/paid 150K/offered 150K/No really. They told us during salary reviews that "Financial Forecasts aren't looking good!" and "There's going to be another GFC and that's why you're only getting a $1K raise". That's when I decided to quit.
Then they made a big song and dance at a company event about how we'd made 13M in profit. Yeah, VERY convincing guys.
Throughout history there has been areas that excel in certain trades. Steel Work and boat building moved from highly talented areas in the UK pre-WW2 where workers were underpaid compared to their skills. As wages rose, this era ended and the steel work and boat building jumped straight to post-WW2 Japan. Similar things transpired as wages rose and it shifted to South Korea that the government suppressed unionization and allowed its steel industry to flourish and still only appears to be in the declining phase of its ship-building.
Whilst the elite of the worlds technology reside in the valley, good developers will be underpaid. When the workers get stupid and want to be overpaid for their work (IE unionise) then there work will move to the third world overnight.
Then there's the other valuation of income. I always make less than I should, simply because if I worked for myself doing whatever job I do I will be making more. If you're an employee, you'll never make what you would as an employer or as a self-employed.
It's not fair, or glamorous, or even particularly PC. But it's true.
The only way to afford to live well in a California tech center as an engineer has been to have a big startup exit or a very senior job.
I managed a team at Google, and had 4 direct reports ask to work from home 50% of the time, or even to work 100% remotely, mostly so they could live somewhere cheaper.
This comes out in "work/life balance" - when your commute gets too long so you can afford a big enough house in your 30s, spouse gets mad, you get overtaxed, and it's not a good scene.
But to make this post more than just noise, much of the Google culture for a long time revolved around personal relationships and being in peoples cubes to get their attention. Not something you could do from home anyway. The Anybot experiment would have been interesting to see.
So either we're all underpaid compared to the value we generate, or we all overvalue everything we create.
Strange that there are no reliable metrics in a field filled with zeros and ones.
I think your implication that the value of trades are somehow worth less than the value programming brings to society is unwarranted.
edit: prepended "sufficient" with "in," which makes a big difference
At my company welders are paid less than programmers, but you can probably blame that on the welder's being in a union more than anything else.
The Bureau of Labor Statistics actually has a really nice website with more info: http://www.bls.gov/oco/ocos226.htm
I know for a fact that the younger guys resent the older guys (and the union that protects the older guys) far more than they resent the non-union or even at times the company itself.
Now I don't know much about non-union welders other than two friends I know. One started his own business making railings and fences and things like that and makes a good amount of money working for himself. He's non-union but also a small business owner so maybe that is a bad data point.
If we eliminated the union at my company, the welders would get paid on merit. It would be a very good thing for most of the younger guys who work their butt off. It would be a bad thing for most of the guys who have been here for 30 years.
Edited to add: nepotism and "good ol boy" networks are pretty much how business gets done everywhere, regardless of industry. A lot of people have this knee jerk reaction against such things and don't stop to consider this is the working end of "Networking".
1) No state income tax. Read that again. 2) Cost of living is at least HALF of SF/SV/NYC 3) Real estate is actually affordable, even close in.
Now, I know there is the argument for needing to be in SF/SV for startups and tech, but Austin is a hotbed of tech activity and with more and more companies allowing remote work, it's worth a shot.
But we have a weird mix here. Houston and Dallas have the rich people, but Austin has all the nerds. We need more cross pollination of both to ever be as attractive as Silicon Valley. That, and a lot less hardcore conservatives.
The developers' attitudes are relevant only insofar as they influence their actions in this case. If it's making it difficult for companies to hold on to talent, that's a big deal. If it's causing developers to grumble on IRC, not so much.
I'm still surprised at the number of Tech startups still locating themselves in Silicon Valley. I would figure if they started up in a cheaper city like Atlanta it would be more economical for them. But I guess they want to be near the talented people.
Although I would think if you build it, the talent will follow.
This observation isn't new, cf: "Career Guide for Engineers and Computer Scientists" ~ http://philip.greenspun.com/careers/