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Comment by freehunter | Hacker News Reader

They're inflated due to the extremely high cost of living in the areas where these jobs are common: Austin, San Francisco, Seattle, Vancouver. If someone at Google in SF is making $250k, their peer in Ann Arbor, MI (a small city with a Google office) could have the same purchasing power with maybe $80k. If the companies weren't located in SF, the salaries could be a lot lower for the same work, and the employees wouldn't really be making any less even with a lower salary.

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Actually, I sort of think the cost of living is high because tech workers make so much money. So you have your cause and effect reversed. They do seem to be the primary reason why rents and housing prices are going up so much in the bay area.

E.g. I've read about landlords who raise their rent because of the presence of a google bus stop nearby.

> [Tech workers] do seem to be the primary reason why rents and housing prices are going up so much in the bay area.

In 1998 (at about the height of the dotcom bubble) a 1-bedroom apartment in my apartment building was renting for ~$500/month. In 2010 (shortly after the real-estate bubble collapse) that same apartment rented out for ~$1500/month.

Does it seem to you that tech worker salaries explain that 3x increase? Remember that as of last year, tech workers made up ~8% of SF's population.

> In 1998 (at about the height of the dotcom bubble) a 1-bedroom apartment in my apartment building was renting for ~$500/month.

That is very low according to my memory. I was in Santa Clara in that time and my rent was over $1000/mo.

Now, I wasn't down in SF with all the cool kids. I do remember that SF in that time frame was right at a gentrification inflection where there were really expensive places right next to buildings that should have been condemned, so I'm willing to concede your point.

> Does it seem to you that tech worker salaries explain that 3x increase? Remember that as of last year, tech workers made up ~8% of SF's population.

Yes. That one is easy. Nobody wants to rent to the 92% combined with highly restricted supply.

Even back in the DotBomb days, there was a reason why people were commuting from the Fresno area. (152 would be bumper to bumper at 4:30AM in the morning!)

I could not imagine a worse fate than commuting from Fresno to the bay daily, let alone doing so in bumper to bumper traffic in the middle of the night.

You forgot 40-60mph wind gusts because those are passes through the mountains.

It was stupid, but that demonstrates how bad things are in the central valley.

In the case of San Francisco it is the combination of high salaries for tech workers and incredibly limited supply.

The marginal cost of living in the Bay Area vs Ann Arbor is maybe 40k/year, most of which is housing. It's reasonable to compare $80k in Ann Arbor to $120k in SF, but $250k is ridiculous.

Inflated implies bubble, deflatable. I think it's just the market rate for living in those places. There's no bubble to pop here. Yes, it's true the cost of living are high in these areas, but I don't think that means the wages are inflated. How would you derive a non-inflated base pay eliminating cost of living?

Okay, so salaries in developer hubs aren't inflated. They're correct.

So then developer salaries in other parts of the country that are 40-50% lower due to correspondingly low costs of living on this areas are what, then?

While I don't doubt that they pay more because of the Bay Area, the best developers are worth more money, and I think the best developers tend to flock to the Bay Area for the network effects.

Inflated implies larger than normal. "Bubble", when it comes to tech, has a negative connotation. SF could totally deflate. Imagine if Google and Apple moved away. Boom, there goes the neighborhood. If those people are gone, the prices go down.

Imagine if all those people abandoned by Google and Apple stayed put and started new companies.

Imagine if all those people were paid by Google and Apple to move.

Yes, I can imagine them then going to have a friendly lunch with their friends working for Facebook and Twitter. Offer letter by end of week, problem solved.

This is patently false. Some things cost a lot more in SF, like rent; most other things are slightly more expensive or the same in price, like a car or a trip to Europe. So really, a $250k salary in SF is like a $225k salary in Michigan, allowing $2k more a month for rent, which I think is generous, but I don't know the market right now.

Is rent tax deductible now? :P

Also remember all your local services are done by employees that have to pay rent too, and businesses have to pay rent (that one actually is tax deductible).

I've lived in the bay area, it was more expensive than say SLC, but not incredibly so. Your food, your clothes, much of what you need to live, is actually sourced outside of the area. Starbucks was cheaper than SLC, for some strange reason I can't really understand. Maybe competition?

These days, I visit Seattle and Spokane a lot. Seattle is of course, a lot more expensive than Spokane, or it is supposed to be. But restaurants are much more expensive in Spokane than Seattle. Heck, across the border in Idaho where minimum wage is a lot less than WA, they are even more expensive than Spokane.

I've lived in Switzerland and now live in China. These places are much more expensive in some goods (like cars, clothes, china is cheap in eating out at least). The differentials are much greater than anything you would encounter in the states.

In New Jersey, at least up to a couple years ago, you could indeed deduct part of your rent (10%?) on the presumption that it had already gone towards property taxes.

$250k/yr doesn't allow for $2k/mo more spending than $225k/yr after factoring in federal taxes.

California state income tax is also more than double that of Michigan's at those income levels.

Fine, then increase that to $4k/mo (so your Michigander is making $200k vs. SF $250k), which doesn't pan out in my experience but we are still far away from $80k.

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