Is 400k/yr overpaid for a SWE?
context: https://twitter.com/typesfast/status/1536406121249796096
I'm new to this field and always thought that SWE (at least the good ones) most definitely add value in exponential multiples over the 400k value but maybe I'm delusional by all the VC speak over twitter. Does he have a point and that we're mostly overpaid? Hope to hear some good points from experienced devs.
106 comments
[ 1.9 ms ] story [ 154 ms ] threadIf your company can afford to pay $400k and the market is competitive - great, hope they pay you even more in the future. From a personal point of view, you're never overpaid - the more, the better. But what makes sense for the company is a different question, and only some companies will be able to afford those salaries.
Businesses don't pay more than they have to. If a company offers 400k for a job it means they think the person is worth it. If not, the person will likely be fired at some point...
That's all there is to it in a free market, really.
Edit:
The conclusion is that either:
1. They know what they are doing, which means you will generate more value than they pay you whatever they offer (as mentioned I PaulHoule's reply below).
2. They don't. If you think the pay is massively inflated then enjoy it whilst it lasts, because it won't.
https://www.epi.org/publication/charting-wage-stagnation/
The US middle class is not the same, 1975 vs 2022.
Show me the demographics of 1975 for the US middle class and lower middle class. Then show me the same demo for 2022.
Next show me the wealth and income figures for each demographic, 1975 vs 2022.
Hint: the US middle class is no longer entirely white; and the white people that used to dominate the US middle class have moved up. Meanwhile first and second generation Hispanic Americans have moved into the US middle class, coming from largely impoverished backgrounds and third world countries. Does that document account for any of that? Of course not.
You can trivially see this in the Fed's demographic data for wealth and income (white household income and wealth figures are well above the median figure for example; which was not true in 1975, back then they were close to one and the same), and by comparing present demographics vs past demographics.
Hispanics were 4-5% of the population in 1975.
If the white demographic moves up, and formerly poor Hispanics move into and take over the US middle class (which is exactly what's occurring), the document you linked to pretends nothing changed, there was no improvement. There was in fact vast improvement for the actual people in question.
The only time you are “overpaid” is when the payments department makes and error and wires more money to your account than your contract entails you too.
Baring that corner case you are paid whatever amount you negotiated. If the employer feels like they’re not getting a good deal, they’re welcome to seek recourse within in confines of the law.
The market is saying that those business models shouldn't exist.
This is true no matter what the number is. Slave labor enabled the American South to deploy business models that are impossible today. Doesn't mean it was good.
It's simply that tech was and still is an exploding sector and a ton of resources are poured into it. People who are experienced programmers now are just lucky enough to ride the wave. It won't last forever. But it's certainly real for now.
No he isn't. His point is that some potential business models need $X amount of software engineering work to have a viable product, has a potential customer base of $Y, and the market will bear a price of $P for the software. Gross income is $Y * $P.
All else being equal as SWEs get more expensive the amount of $X you can get drops. If that puts you below the threshold for a viable product and your business doesn't have the power to raise $P then you don't have a viable business.
This is obviously a simplistic example but the principle still holds.
I'm not sure where you're trying to go with that.
I assume that guy is among those who views everyone earning above average at any time as part of the problem.
And yes, some workers earning significantly above average are literally, mechanically, the problem of income inequality. Return on capital is mostly not income; taxing unrealized gains is a fringe idea. In the current moment, worker vs. worker inequality (including worker vs. manager) is much more salient than worker vs. owner. Even if you think of yourself as aligned with Marx.
My personal philosophy about money is often ridiculed, but the way I see it, if you have enough money to live happily and healthily (and support your family, if you have one), then you're being paid enough, and anything above that is just a bonus cherry on top. I know my salary is lower than some devs would ever accept, but I'm a single guy, so it's more than enough for me to pay my bills, have a house and food, and even some luxuries, and still save for emergencies and the future. Everything on top of that I donate to charity because others need that money far more than I do.
But as I said, it's a personal thing, and many people would call me crazy for it, so... it's up to you to decide what you think a fair payment is and then find an employer who's willing to negotiate a comparable salary with you.
Plenty of people live under their means and dedicate their extra money to effective causes.
Funny enough, the Wikipedia article about Earn To Give mentions something that reminds me of my father. It says that David Brooks and John Humphrys have criticized the movement by claiming that once people start earning wealth, they will inevitably become less altruistic over time. My father always used to say, "When you're young, you're a liberal, because you have a heart; but when you're older, you're a conservative, because you have a brain". (That is, of course, not something he made up, but a parroted quote that's been said for many years.) And it always struck me as not only odd, but cruel, to draw a dichotomy between empathy and rationality, as though it's literally stupid to care about other people.
Anyway, thank you for letting me know about something new! :)
That's not what the quote means. It's generally understood to describe how young people are well-intentioned but naive, and that you come to understand your limitations and get wiser as you get older, which causes you to adopt more philosophically conservative views (see Leo Strauss for a good example).
I am not saying young people or leftists are dumb, or that right-wingers are smart.
I wouldn't call you crazy. I think that settling for an amount that allows you to live the way you like and not asking for more is a sensible thing.
The only thing I am not ageeing with is being underpaid. If you can make 2x working full-time, why settle for x? It would be nicer to only work half the time and make x, if x is what you need. Time is at least as valuable as money, if not more.
1. market consolidation. A lot of cashflow-negative tech companies are going away.
2. automation. This is still out there, but eventually industry will find a way out of the software swamp.
3. competition. At some point, the US and China are going to square off. Instead of WW3, an agreement will be hammered out that likely results in Chinese tech companies getting back their access to US markets. And, the world is very busy graduation devs.
add these up and its buh-bye to the golden age of dev comp, its more amazing that it has lasted so long
devs in the future will make less than tree trimmers
In relation to your question: no, 400k/yr is not overpaid. Software is an extremely scalable business where the marginal cost of every copy beyond the first is nearly zero. Lots of companies selling software (or relying on custom software as their competitive advantage) make far in excess of 400k off each engineer's labor. Plenty make millions per engineer, even after subtracting all other costs and non-engineer compensation. Companies don't pay 400k, 800k, or more to engineers out of charity. They do it because it is profitable.
and
> If you can drive the cost of doing business and your inputs toward zero almost any business idea could theoretically make a profit... but real markets are not so accommodating.
I agree with many of your points, but these vary by product. For example, FAANGs sometimes have applications where some inputs don’t scale well, e.g. the local knowledge that goes into mapping apps. But the company often provides the service for free and benefits from volunteers (free labour) adding valuable information like “this road is closed”. That product feeds into the ads part of the business, which does scale really well.
I’ve also noticed that FAANGs sometimes outsource work that doesn’t scale as easily. The contracting companies are either in cheaper countries or they’ll accept a smaller profit margin. Or both. The devs and analysts at those companies indirectly contribute to the FAANG’s product, but don’t get the bumper salaries.
Put another way, I think big tech companies do often try to “drive their inputs toward zero” (to paraphrase a little) but US-based devs don’t often experience it.
It's also lower complexity tasks.
Cleaning-up training data or monitoring a manual test pipeline isn't really work that would make sense to be done by a team of 400K/y US-based team.
I’d guess (and it is a guess) that big companies like to outsource that kind of work so their devs only have to deal with the tidier data? And perhaps also because dev salaries in the UK are so much lower.
So they aren't outsourcing dev work, they are basically buying access to the data feed.
> And perhaps also because dev salaries in the UK are so much lower.
Not for SV caliber talent.
Or they open subsidiaries in other countries. Google are developing Fit Bit in Romania and they are paying 10x smaller wages.
Everybody is currently so desperate for this talent, there's been a big shift toward remote work meaning competition that used to be highly localized is now everywhere, and giant companies are on hiring tears so it's driving up the market rate for the talent and companies that can't afford that are having a huge problem hiring.
We're already seeing the knock on effects of this as contracts with IT vendors come up for renewal and we're being charged XX% more this year for no marginal benefit from what we had last year.
At some point the customers of those companies can no longer afford their products at the rates they have to charge to pay engineers that much and hiring freezes, layoffs and pay cuts will start happening. Until then everybody's trying to suck as much money out of the system as they can - that's just capitalism.
Were we better organized, we engineers would take a much greater portion of the profits we generate. After unionizing, professional athletes are paid about half of what they directly generate. Before unionizing they got peanuts.
A lot of our innovation these days is coming up with new ways of extracting rent. The programmers don't directly do that but they make it possible at scale. Google, VISA, Yelp, etc.
News at 11.
Upward pressure on our salaries is in large part driven by the compensation packages given at Google and Facebook, etc.
Those compensation packages can be that high because they've tapped into (and in large part monopolized) absolute firehoses of revenue in the form of online advertising. Those companies do "other" things than advertising, but advertising makes up the vast majority of their revenue.
Without it, they could not compensate so highly.
The problem comes from the fact that these companies eagerly hoover up all the engineers they can get. And rarely to actually work on the core advertising and ad-tech portions of their business, but literally almost anything. There's very little that Google doesn't do. And they're always starting to do new things.
So upward pressure is applied on compensation across the whole job market. And Google at least seems to always be hiring.
Also, Google will happily pay $400k for a SWE if it means that SWE is not creating new revenue sources for potential / future competitors. The cost to them is minimal compared to the revenue they make.
I leave it as an exercise for the reader what this does to the health of the industry as a whole.
The value you deliver depends strongly on the company but can easily be orders of magnitude above $400k.
Everything in between is a matter of negotiation, supply and demand. If there are enough companies that can make their business model work at $400k to hire all the capable engineers at $400k, then the business models that can only pay less won't work, just like many other unprofitable business ideas don't. That is not a sign of a problem.
Quite the opposite, actually. If that is the limiting factor, it means that the demand is very elastic, i.e. if there is an increase in supply, prices (salaries) will not drop too much.
followed by
"TIL some software engineers making $400k view themselves as Marx's proletariat."
I'm getting the feeling that most devs here agree that SWEs don't need to make that much.
Doing the rough math, 60 euros/h, 8 hrs per day at 48 weeks > 100k. So yeah. I just don't know what to say any more when this question comes up. It seems to be random to me what is going to be an acceptable answer. Usually I want to continue the conversation and discuss it, but instead it just seems to cut things off immediately.
I find it really frustrating that they make you guess what they are thinking and then either laugh or act like you're some kind of high roller. I mean, I need a job, so like, if you're going to choose me based on my ability to pick a random number you are thinking in your head, how about we do that at the beginning of the interview instead of talking for an hour first and giving me the impression that things are going well?
In any case, just ranting. What's a good rate for a senior SWE or ML engineer in Europe these days? What can I get away with asking for without getting this reaction?
Also, what's up with people asking this question in the first conversation? I feel like in the past you would go through a couple of rounds and then get to discussing what they could offer you but now it seems to be the other way around, and they are not willing to counteroffer if you guess wrong. Maybe just my perception, but I find it weird and difficult. I'm always fine and more or less comfortable in interviews until this question comes up.
Sometimes companies are looking to hire super cheap only and you gave your expectations as higher than they budgeted, so no point interviewing you, but also from your perspective, probably no point in being underpaid.
I'm sure we've all seen job ads where they talk about the mountains of experience and skills you need and then list near poverty wages as restitution, if they list salary range at all.
So I think the confusion is due to the fact that the interviewer interpreted as you expecting a full time regular employment contract, which gives you plenty of legal protection. In that case I have seen 45k/yr as typical for jr level developers, while 65k being an average and towards 80k for seniors.
> That said I find it crazy how big the difference is on these two conditions and am struggling a bit now to justify why I would want to go back to being an employee
As an American, I gotta say it seems like the benefits of being a full-time employee in Europe only really make sense if you plan on slacking off. It's very difficult to fire you as a full-time employee (at least in France which I am somewhat familiar with). You can skate by for years doing very little work if you want. If you are hard-working and want to deliver high quality work, I think you might be better off staying as a contractor. Or trying to get a job & a visa to come work in the US if you have any opportunities to.
It's a wide range and it varies a lot, figure out what you want to be happy and try to find a company that can make it happen. This company might be used to skating by with cheaper engineers.
For the rates I’ve seen first hand, 90€/hour of freelance corresponds to 70-80k hired salary
When people are posting US salaries, they are usually quoting the gross amount. In Europe people are usually quoting the net amount because people care what they can spend, not some sum written on the paper.
So, I find that net vs. gross is this weird thing where people become convinced that there is some default that is always implied, but different people think the default is different. Don't know how that happened, but in the future I will always be clarifying that as early as possible, otherwise it can be a major source of miscommunication.
Avoid those shops like the plague. If a company still doesn't understand that you get what you pay for in *current year*, they're not going to treat you well in non-monetary ways either.
Tying in with the original post, what companies pay seems to be as much about the company’s business model and profit margin as it is about the developer.
Thinking about the dreaded “What salary are you looking for?” question, I wonder if it’s worth specifically asking the manager / recruiter about the salary range. E.g. “Other companies I’ve spoken to are offering £n-m. What’s the salary range for this position?”
Of course I am interested in money, otherwise I would work for a charity, not a company.
I don't see anything wrong in being interested in getting money. Companies are not interested in the candidate, but in the amount of money a candidate can generate for them.
Exchanging work for money is business, not a romantic affair. And in a business you optimize for profit. More so when it is your only income, taking a huge part of your time and life and you have a family to take care of.
> And in a business you optimize for profit.
This is why it's in the employer's best interest to say that you're family, or that loyalty is a virtue. It makes it easier to low-ball your salary and keep it from rising too much.
The only company that was reluctant to discuss wages was Microsoft, but I was still able to convince the interviewer to verify that my asking salary was within their range.
And btw i think you can make 90k+ eur as a contractor in europe, even more in companies with homogeneous pay across regions.
"the scale and scope of responsibilities for the type of work I do have so much variation that it is impossible for me to tell you what I would expect to be paid for this position this early in the process"
You dodged a bullet. If they can't afford talent it's either that the business isn't doing good or that they voluntarily don't want to pay for talent (meaning they are going to go to competitors eating their lunch).
> In any case, just ranting. What's a good rate for a senior SWE or ML engineer in Europe these days? What can I get away with asking for without getting this reaction?
Same as in SV for SV caliber talent. The run of the mill recruiter isn't authorized to sign a contract with these numbers but it's getting incredibly common.
> Also, what's up with people asking this question in the first conversation?
Honestly, you want to have it as early as possible and not waste time with low balling firms. They can hires from body shops if they think they can get away with cheap devs.
In Europe when being contacted to work as a freelancer or contractor, they ask for a gross rate per hour.
The company aren't going to pay anything else and you are responsible for taxes, health insurance, social services, pension funds and so on.
The highest rate I was offered in Romania is 50 EUR / hour and I refused. I am not going to work with a B2B contract for less than 65 per EUR per hour.
For working contracts, with all taxes payed, contributions to social services, unemployment funds, health insurance and pension funds, as a SWE you can reach a 4000 to 5000 EUR in Romania and about 7000 to 8000 in Germany. These are net, not gross.
If you are employed as an architect instead of SWE, you can make a bit more, so now I am waiting to find a good SW architect position.
At least here in the USA, there's a lot of advice about deflecting that question. Things like, countering with "What are your pay ranges?", or "Let's wait to negotiate the salary until we're sure we're a good fit." and so on.
I believe the common reasoning that they ask early is to cut out overpriced developers. When a company gets lots of applicants this probably makes sense to them. I think generally, if you're a good fit they'll go a little above their max pay to try and bring you in.
What should we do? Educate/Train more SWEs!
$400k is also way way more than any engineer will earn in most countries except USA, and maybe it's exceptional in most US states too? For context, it's about twice what the Swedish prime minister makes, and $70k per year is considered a high salary for senior developers in Stockholm.
https://www.unionen.se/rad-och-stod/om-lon/marknadsloner/sys...
i don't believe Ryan is saying SWE shouldn't get 400k. some business model just can't afford it and i agree.
i work for a "traditional" mid size company. a small/mid size company will have a hard time offering 400k for a SWE
I made $75,000 / year, in a major US tech hub.
So my point is - get it man. Enjoy the remote work and the big salaries and RSUs and all of it, because the generations that came before you worked darn hard to push so that you'd get all of this.
Yes, in the sense that most businesses can't justify that cost and that lots of SWE's make more than enough for their desired lifestyles at much lower TC.
But it's nothing new. 20-30 years ago, there was a comparable spread between SWE's who took jobs in finance companies vs the rest of us. A new top-school grad could get a job at Goldman Sachs out of college for 2-4x what someone working in most other software fields would earn because technical innovation in that space was intensely competitive and they desperately needed more hands on deck. Eventually, that divide largely evened out and the ostensibly "overpaid" sector moved to new technical frontiers.