It depends on the class of workers. I'd agree with you w/r/t most wage earners being paid in transparent manner. But I think the GP comment was referring to technology workers (given the context of HN.) In the case of tech workers, many are paid in very complex ways.
If you have illiquid stock options in a private company, and especially if you have taken a below-market salary as many startup employees have, your compensation is about as complex as a CDO. Just like a CDO there are multiple tiers above you that need to be paid out before you ever get paid.
Unlike a CDO, where you can actually pull up the details on the tiers above you (tranches), at startups as employees, you dont get to see the cap table, so the whole maze is invisible too!
Worse, unlike a CDO where you can sell at any time, here you have to exercise and hold stock for some far-away liquidity event that usually doesnt happen. So you have an invisible maze, and then a pot of gold at the end, perhaps. Or not.
I think this is part of the startup mythos. At the three startups I've worked at (~10 people), none of us had to sacrifice competitive salaries for stock options. The options were on top to incentivize staying at the company longer.
I wonder how common it actually is for people to take significant paycuts in 2020 for a startup opportunity (founders aside)
I don’t know where you’re from, but in SF amongst my circles, senior engineer market rate is about 300-500k but most startups will only pay 150-225k salary so that’s a huge pay cut. However, the base salaries are same, but you can pay your rent, mortgage, or student loans with the public company RSUs.
That’s why it’s bullshit when employees get told they get common shares while investors get preferred because employees take salary and therefore less risk. If you’re walking away from 200k per year of public stock that you could instantly sell on the public market and buy real estate with, you are in fact taking a huge risk and a pay cut. Trying to pretend like you’re not and that the startup is paying a “competitive salary” is a sleight of hand used in 2020 to fool naive engineers.
1. Level up your career / role flexibility. 2. Big companies suck (but [big] startups can suck too). 3. Burning idea you want to get done / tech is interesting. 4. Lottery tickets (options).
The big difference is that the publicly traded companies can pay RSUs worth money NOW.
Given that so many of the hot startups are in the Bay, I'd say only fresh college grads are looking at remotely similar comp between the two. Everyone else is playing the options lottery.
I think it's still super common in general, although perhaps not in the bay area.
Does this map to reality? Are you saying that if you were at Google making 250K in TC the Startups were paying you 250K Base salary + stock options? That seems ludicrous.
There are no competitively paid senior+ swes that keep their comp going to a startup. Full stop.
Illiquid equity makes a significant difference too. We’re talking total realizable dollars earned in a year.
It’s worth noting that I’m not saying this is fundamentally broken - that’s just the design of the system.
I've never heard it adequately explained why employees should accept this state of affairs. Not only is the cap table invisible, but the fully-diluted cap table and terms of dilution and many other terms and conditions are also hidden from non-founders/investors at most startups I've read about. I've heard so many stories of shares getting diluted right out from under employees immediately before a liquidity event that it has become a trope. IMHO that's not investing into a startup; that's buying a lottery ticket.
What am I missing here about typical startup stock options where the same terms and conditions founders and investors see are not accessible to employees?
There is always the chance you’ll get super lucky, but investors and founders have become experts at extracting the maximum possible portion of the value created. To the point where there isn’t a whole lot left for anyone else. Workers included.
It is the same as acting and sports -- people look the handful of winners, ignore the field of dropouts, and think they too can become a winner. They see AirBNB and think their startup is the next AirBNB.
Also much like acting and sports, there are a constant stream of new entrants who have not learned the lessons.
I want to be fair here -- I work at a startup and I love it. But I value my equity at zero and nothing more. I chose to work at a startup because I get to do cross-functional work rather than get stuck into a silo of a silo at a large company. I took a significant paycut from a large company salary and a significant upside cut from when I was a founder in exchange for more accelerated learning and exposure to all parts of the company.
That sounds like the general software startup industry has built their own version of video game industry goggles; glamorize the startup lifestyle and culture so much millions of kids will compete with each other into a race to the bottom. There's probably some succinct German compound word for this dynamic and if there isn't, I hope some German speakers can suggest some here so I can add it to my lexicon.
Anecdotally, in the Software field there is a lot of "price anchoring" where a large employer decides that a software engineer makes ~125k, and both smaller/peer employers decide that a software engineer makes 125k +/- 10%.
From past experience the base "going rate" in a given market doesn't seem to change all that much unless a large employer decides to change the going rate because a higher or lower price point better suits their business - other companies will set their salaries to the baseline. Big Tech has recently been dragging wages up across the board by both hiring in volume, and paying more than everyone else.
I'd be curious if anyone has a formal study on price anchoring in wage negotiations.
If you combine this with one employer bordering on a monopsony for buying a particular category of labor - then pay won't move in proportion to productivity.
Even at the low end, six months of tooling work from a $100k coder can often put a handful of $50k/year white collar employees permanently out of work (or make them twice as productive as before). If one company doesn't realize that, another eventually will. It's not too tough to pull in ~50-100k/year running a SaaS business or freelancing
Things in the USA are really broken in the retail sector. Companies pay the absolute bare minimum that will keep them in business, and make up for a lot of the terrible morale issues that come along with that using Orwellian management systems
Could achieve financial independence in 2 years
The unfortunate consequence of the taboo of salary discussions is young software engineers not knowing how much they can actually make.
I wouldn’t be surprised if one of the reasons you simply can’t survive on one person per household working, as in the 60s and 70s, is simply that two people are willing to work now and spend all their free cash on mortgage payments.
No one talks about this. I’d love to hear the debates. I’d love to be proved wrong.
It seems to be completely FUBAR to me. In Japan, housing ISN'T a glamorous investment, and I think that helps the house pricing situation a lot.. You can get a nice apartment in the fanciest part of downtown Tokyo for cheaper than a dangerous hole in the wall in San Jose
You can't live in a share of stock, though it may appreciate faster than a house. (You also generally speaking can't use leverage to purchase shares). But even if shares appreciate faster than homes, they don't feed into conspicuous consumption: and that matters to some segment of the population.
[1] Raze, rebuild, repeat: why Japan knocks down its houses after 30 years: https://www.theguardian.com/cities/2017/nov/16/japan-reusabl...
I wouldn't say it has no influence, but it's probably difficult to state with much precision how great the effect is.
Why would you love that? It's 100% a factor. One of the key drivers of house price increases has been two-income households, with the nice double personal tax allowances, that allow much higher offers. Additionally in the UK I think it became illegal for mortgage companies to offer a lower multiplier on the second income, so it's a huge boost.
Are you insinuating it has nothing to do with executive wages ballooning (CEO compensation growing nearly 1,000% since the 1970's) and is instead because women are working?
Its US women vs the global S&P list, but it is interesting to compare, now that you mention it.
[1]https://aflcio.org/paywatch
[2]https://www.catalyst.org/research/womens-earnings-the-pay-ga....
[3]https://www.catalyst.org/research/women-in-the-workforce-uni....
That is $7 billion to CEOs vs $3.5 Trillion for women.
For example Tim Cook earns 133M/yr which is $976 per employee. ... and this probably massively overstates the figure due to contractors.
Or Sundar Pichai with $86M/yr which is $676 per employee (again... not counting contractors).
Obviously it's more if you include more executives, but the number of top executive companies is basically a constant and at large companies it still ends up being not very large per employee.
This isn't to say that it isn't a concern but I don't see how to justify the belief that the executive compensation at large companies is a major factor in the overall wage market.
In the USA, there has been a (relative) decrease in labor supply due to women leaving the work force. Women's participation in the labor force by percentage has decreased over the past twenty years.
I don't think the point has anything to do with the complexity of the wages, but how workers are generally hired and paid, and how work is now structured, compared to the 70s, e.g. nowadays there are more contractors than ever, taking a good chunk of the wages as they act as intermediaries between customers and the workers who, otherwise, would have to be hired directly by the customers themselves.
I'm curious though about why would you think that illegal immigration is driving wages down. Undocumented immigrants make barely for 3% of the total US population [1], and that does not account for those who cannot work (elderly, children, disabled, etc.) Same goes for women, as the general issue is that household income is in decline, in relative terms to the economy [2].
Automation should also be making consumer products cheaper and more available, but prices are not going down at the same speed as wages need to go up.
[1] https://www.brookings.edu/policy2020/votervital/how-many-und...
[2] https://www.mckinsey.com/~/media/McKinsey/Featured%20Insight...
If you were born before between 1935 and 1955, this might have affected your career progression. Maybe. Because the more workers meant a bigger economy and therefore more jobs overall. If you were born before 1925 or after 1975, it had zero effect.
I think the damning thing is that it has. Just not for the workers. wages for high level executives for example not only kept up, it's gone so high that they can't even invest their money anymore. they're complaining about the lack of got investment opportunities instead, sitting on their billions which destroys their society even more by keeping the money from circulation.