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Comment by mattlondon | Hacker News Reader

This whole approach of paying what the local market offers, rather than what the job is worth kinda sucks.

It strikes me that these sort of practices where employers share salary data with each other with the aim of keep salaries low is pretty sketchy and shady. A load of companies get together with the aim of making sure they don't pay a penny more than anyone else etc.

In finance salaries and bonuses are to rocketing to attract and keep talent, yet in tech all the companies get together and basically implicitly agree not to compete. It is a shame that this appears to be legal.

I guess we can vote with our feet/keyboards.

How would a union work here if the company just turn around and say "sorry - your members are already at the top of the rate in this market. Our policy is not to pay more than the market rate. End of discussion."? You could move to another company, but they also only pay market rate etc.

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You will never be paid what a job is "worth". You will (in aggregate) always be paid what the market demands. Value creation needs to be >> value extraction.

I don't believe many companies can compete with Google on salary. Paying "market rate" is well... market rate. The discussion would in fact end there, because if you could easily seek employment for more than that elsewhere then it would no longer be the market rate. The alternative is to settle for the same or less elsewhere which brings into perspective that Google is no more wrong than any other employer.

>I don't believe many companies can compete with Google on salary. Paying "market rate" is well... market rate.

In my broader circle, I see a lot more movement towards the likes of Google than away from--and most of the latter are senior people who don't need the money (or really didn't click with the job). Most companies that can will do creative things to snag or hold onto the people they want but I expect that most people who can land a Bay Area-salaried Google etc. position will just take that if money is the deal-breaker. Because most companies won't match in general.

> You will never be paid what a job is "worth".

Unless you're in sales, a major league sport, or a C-level position. Then you're paid according to the "value" you bring to your team.

You're not. I hold a C level position, I create more value than I capture. These positions are not loss leaders, the organization (in aggregate) ends up ahead.

Even in sales and C-level positions and in major league sports, you are still getting paid based on demand (and supply) for your talent. They are going to pay as little as possible for the value you provide, but at the top talent has a much better negotiating position.

Sales people often have high commissions/bonuses. They're not paid like regular employees. When a company does treat them that way, it shows (all the good sales folks don't work for them).

The commissions are still set based on how much the company wants to keep vs how much they want to compensate and motivate their sales people. They aren’t paid like regular employees, yes, if they don’t sell they don’t get paid. That is a bit more risk than we have to take on, and many sales people don’t make it for very long (as always, the ones we are aware of are filtered via survivor bias).

True, but the pressure on the company to pay high commissions is much more than for a typical employee. And unlike an employee's work, their total compensation is much more correlated with performance.

I can work like crazy and not have an idea on whether I'll get a bonus, and if I do, how much. And I still have to work regular hours.

Someone in sales has a much clearer idea how much extra he can make and how to get there.

And it's a common occurrence that a top performer simply takes it easy for a few weeks (e.g. not come in to the office or work only 3 hours per day) as they made so much money after a big win. Their hours are a lot more flexible. Of course, most are not top performers and do end up working long hours.

As a software engineer working for a FAANG, I’m not really envious if sales people anymore. Perhaps our situation is temporary, but I believe programmers, at least, have reached a parity in sales compensations without the risks.

>> This whole approach of paying what the local market offers, rather than what the job is worth kinda sucks.

I mean, it does and it doesn't. In my limited experience, it works both ways almost exactly the same percentage of time.

- Developers who want to move and work remotely in low cost areas but want to keep high salary

- Employees of any kind who move to a bigger city and want cost-of-living wage increase, even though their job is the same

Further more, "What job is worth" is so incredibly dependent on the market, I don't even know what other feasible (as opposed to theoretical) definition there may be. "Paying what the local market offers" and "what the job is worth" might as well be synonyms in a practical sense.

OTOH, Anybody who wants to say we should pay salaries based on global market, should be aware that vast vast vast majority of developers worldwide get tiny fraction of SV salary. Even up here in frozen Canada, I have zero understanding of the salaries HN team members post. My understanding is that UK is similar - and that's without going to Easter Europe, or any other continent.

> This whole approach of paying what the local market offers, rather than what the job is worth kinda sucks.

What is the job worth? Outside of sales (or dealing with money directly like finance), it becomes hard to pin an exact $ value on the worth of a particular job. The reality is, almost all salaries are market based. What I expect to see over time as more companies move remote, is for the salaries to normalize to a country/region market which means less money in SF, but more if someone lives in the south.

> What is the job worth?

Total profit divided by the number of employees?

That’s a very generous way to calculate it, but that is not market rate.

Of course it's not the market rate... it's generous after all.

what about contractors and vendors?

So, everyone gets paid the same?

It's just an approximation, which should be correct up to an order of magnitude. I guess it's alright if there's a factor of 5 between the highest and lowest paid employees.

Rather it's in average 351-to-1 (in 2020) as the highest paid employee would be the CEO.

So most jobs at Amazon were worth nothing for many years?

No. People who worked there then and left are being robbed today of the fruit of their work.

> What is the job worth?

Doesn't matter.

Pay is set by what they need to pay you to keep you in that seat. Company will (rationally, from their perspective) pay you the least possible that won't make you walk out.

Viewed that way, it is inherently location-based. I'd be more than happy to stay for, say, 100K if I live in a very cheap area since that's enough to live very very well.

But if I'm in silicon valley it'd better be more like 300K due to cost of living.

> A load of companies get together with the aim of making sure they don't pay a penny more than anyone else etc.

Are you referring to a general suspicion you have, or a specific case? Because this is categorically illegal, and has been punished before [1] to the tune of $415 million.

[1] https://www.latimes.com/business/technology/la-fi-tn-tech-jo...

Lots of companies engage third party companies that give "industry averages" or "comparable company averages". The company pays them with dollars and also their own average pay information.

None of the companies are explicitly getting together and saying "let's keep pay at this level", but there's definitely some fishy stuff going on.

Since forever, there has been a huge industry of essentially information middlemen who act as a conduit for information companies can't directly ask a competitor for and wouldn't be given it if they could.

Totally outside of the HR realm, when I was a computer system product manager pre-Web, we had a consulting firm that we paid way too much money to and when we were going to have a product launch, we asked them to, yes, fax us data sheets on various products we were positioning against. Later, there was another firm that collected pricing information which we needed for our pricing proposals.

The companies will call it differently - they all share salary data with a third party, which for a discount shares numbers (probably aggregated by role, experience etc) back to the all those companies. Thus, they do "research" to understand the market rate, which they then use for salary negotiations.

Implicitly agree? They explicitly colluded once already.

Expect a fine for their current behaviour that's a tenth of the money they saved, in ten years time.

> How would a union work here if the company just turn around and say "sorry - your members are already at the top of the rate in this market. Our policy is not to pay more than the market rate. End of discussion."?

Then you have to change the market rate by withdrawing supply. That's essentially how strikes work. Sure, if they can sack everyone and find and onboard several hundred programmers overnight at the same rate, it's not going to work. Tends not to be that easy.

Of course, the main reason programmers are already paid quite well is that the supply is short and the market rate is pretty high.

Geographical pay in any industry with a geographically stable product pricing is wage suppression. If the product is a SaaS offering and it is sold from state to state for the same price then employees in each of those states should get the same amount of money for their work. Companies should not get to hand $300k in RSU's plus a $200k salary to someone in Mountain View, CA and only offer $150k in cash benefits plus a dental plan to someone in Texas. This contributes to the problem that I colloquially call state-to-state income inequality.

> rather than what the job is worth kinda sucks.

Outside of things like sales, no one knows what your job is worth. Not you, and not your employer. It's incredibly hard to figure out how much your contributions affected the bottom line. Your accomplishments are dependent on many other employee's efforts. There's no good way to disentangle that.

That's why everyone just looks at the market value.

> I guess we can vote with our feet/keyboards.

If Facebook or Apple offer more money than Google in North Carolina, isn't that what would happen? If Google is already the top, and is just offering less than it is in other markets, it's not like they have much competition for top talent. Actually, it also works out that someone might be able to get a position at Google in one market and not another because more open headcount is available in the former market...and I don't think many people would complain about gaming the system that way.

> This whole approach of paying what the local market offers, rather than what the job is worth kinda sucks.

Yes, it kinda sucks. The alternative though, seems worse.

It's nice to be able to move to a low cost area and still have a very good salary vs. local cost of living even if it is lower than in silicon valley. It's also nice to be able to live in silicon valley or NYC and get a living wage (much higher since it's needed).

What's the alternative? Same pay scale everywhere? Sure, but it won't be the silicon valley scale. It would be based on the lowest cost of living location the company cares to cater to, making it impossible to live in silicon valley. That's worse.

The union could organize a strike and demand different policies. Choosing not to work is the one piece of pressure that employees can leverage. Of course if you ask politely it won't change things. AWU does not yet have the scale to really make that happen yet, though.

I dont know when or how people got the idea that salaries are based on what a job is "worth" (a perfect tautology). Standard econ theory would predict salaries are based on supply and demand like everything else, not some metaphysical property called "value". If you don't like that, you need an economic system that doesn't base people's incomes on the market.

Has it ever been common to pay people by the value they create as opposed to their replacement cost?

It’s a market. You can create millions in value but if someone else can create the same value and will take the job for $100k, why not just hire them?

Meh, the alternative is Google closes their North Carolina office and moves back to Mountain View. You're right, it does suck, but you can't have it both ways.

> I guess we can vote with our feet

In this case, both options are available: switching employees or switching to a city with higher pay

They would just strike, no?

What would they be striking for? Collective bargaining is just that – a bargain. At the end of the day, the goal is to come to some kind of agreement.

I guess the answer is that, assuming the union were national, they would try to set nationwide salaries and enforce them across the board.

There are sites like levels.fyi where employees can work together to also see what companies are paying.

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