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It's funny that the term "Market Rate" is used but, the actual market is never really mentioned. Ann is paid $170,000 in the Bay Area because that what all the

It's funny that the term "Market Rate" is used but, the actual market is never really mentioned. Ann is paid $170,000 in the Bay Area because that what all the other developers of her caliber are willing to exchange their time and expertise for. A company would pay Ann $50,000 if it could. They only hire people who they think they will eventually make more from their labor than they will pay the person. If you are Google, you will make roughly $1M per employee currently. For Software Developers that number is even higher, for Sr. Software Developers that number is even higher. The fact that how you get paid and how much value you generate don't have much of an effect on each other is basic capitalism. What's smart is to be Ann, get a $170k salary and move to Costa Rica and keep the $170k because at the end of the day, she wouldn't have been hired if she didn't make more than $170k of value for the company.

pravda 11y ago
>Ann is paid $170,000 in the Bay Area because that what all the other developers of her caliber are willing to exchange their time and expertise for. Well...sort of. Ann is paid $170K because Bay-area companies have bid up the cost of Bay-area developers to $170K. Ann doesn't really have a say in this, and it has nothing to do with how much value she adds to the company (although obviously a company wouldn't fork over 170K if she didn't add at least that much value to the company). Now if Ann moves to Costa Rica, she is now a Costa Rica-based remote developer. And I suspect that Costa Rica-based remote developers have not been bid up to the same level as Bay-area based developers. So her employer would certainly be justified in seeking a downward salary adjustment.
- toomuchtodo 11y ago
  An interesting experiment would be a job board that stripped out names and locations, and only listed skills and accomplishments of technical hires. The goal would be an auction system to determine what "market rate" truly is for each role, with externalities filtered out. This would mean hiring companies would need to accommodate remote workers; are they willing to for the cost benefit? My experience says no (except for <100 companies that are remote first).
  - pravda 11y ago
    I would think that if there were a worldwide market for developers, salaries would come down. The Bay area seems to have a positive-feedback loop going on. Highly-paid programmers have bid up the cost of housing to astonishing heights. So when companies want to attract more developers, they have to offer even higher salaries, which lead to housing costs being bid up even more.
    - simoncion 11y ago
      > The Bay area seems to have a positive-feedback loop going on. Highly-paid programmers have bid up the cost of housing to astonishing heights. This... is not the primary driver of the insane housing costs in the area. A survey from a year or two back found that tech workers make up ~8% of SF's population. For a variety of reasons, [0] it's nearly impossible to build new housing in San Francisco. I get the impression that the situation is similar in much of the Bay Area. In San Francisco, for the past decade or so for every new unit of housing created, roughly five people have entered the city. [1] Add supply to take care of the backlog and meet expected medium-term demand, and you'll see prices stabilize (and maybe return to less-insane levels). [0] The least of which is Rent Stabilization. :) [1] You could make the argument that "If noone was able to pay the insane prices, the prices wouldn't be insane." This is true, but -frankly- there are lots of very highly-paid people out there. As far as "highly-paid" people go, tech workers really aren't all that highly-paid. :) (I know of decent-to-good engineering sales [2] folks working at bigcos that make between 2 and 10x what I understand mid-level Google engineers to make.) [2] That is, salesmen that also have a technical background, can handle crunchy sales and configuration questions, and can even do real, deep troubleshooting of the product they're selling.
      - toomuchtodo 11y ago
        > That is, salesmen that also have a technical background, can handle crunchy sales and configuration questions, and can even do real, deep troubleshooting of the product they're selling. I'm in the wrong business.
- crdb 11y ago
  I've seen both: the same rate everywhere, and a location-based delta. The latter was driven by a strong belief in many Bay Area startups and companies that remote work doesn't work well, and that you get more output per head and more productivity if you sit next to your developers. That's what the premium is for in that case, usually with a tech stack that is relatively easy to find people for (e.g. RoR, PHP, Python). The former was driven by rare knowledge with few customers, all of whom have good reasons to be relatively price insensitive to get the job done. Pick your strategy accordingly...
- pavel_lishin 11y ago
  Right. It's not that she's necessarily "worth" $170k, or she brings $170k worth of value to the company - like slackstation said, they'd pay her $50k if they could. She's probably worth quite a bit more. That $170k is what it's worth for her, as a person, to switch jobs for.
kspaans 11y ago
> A company would pay Ann $50,000 if it could. I've always wondered if this is even possible. Imagine you are a Trust Fund Kid who happens to be a skilled developer as well as a giant troll. You could under-bid on salary offers. But would the company still hire you? Would you be able to prove your chops in spite of the negative signal of valuing yourself below market? (Of course, you are probably rare and won't have an effect on the overall market for developers, but I still think it's a fun thought experiment.)
- knughit 11y ago
  Indirectly. You could accept an opening offer instead of negotiating up. Companies decide to make an before they pick a salary offer
knughit 11y ago
I had a coworker literally do that. Company cut compensation to 0.25 of previous for as long as he lived in Costa Rica.
abannin 11y ago
Prices are determined by replacement cost, not potential value. Google has a strong arbitrage opportunity because it can generate more dollars for the same wage as competing companies. While margins allow them to bid higher, the price will always be marginally higher from the second highest bidder. The point of the article is that, assuming equal employees, you are in fact saying that one has a higher economic value to the company based only on where they choose to live.

pravda 11y ago

>Ann is paid $170,000 in the Bay Area because that what all the other developers of her caliber are willing to exchange their time and expertise for. Well...sort of. Ann is paid $170K because Bay-area companies have bid up the cost of Bay-area developers to $170K. Ann doesn't really have a say in this, and it has nothing to do with how much value she adds to the company (although obviously a company wouldn't fork over 170K if she didn't add at least that much value to the company). Now if Ann moves to Costa Rica, she is now a Costa Rica-based remote developer. And I suspect that Costa Rica-based remote developers have not been bid up to the same level as Bay-area based developers. So her employer would certainly be justified in seeking a downward salary adjustment.

toomuchtodo 11y ago
An interesting experiment would be a job board that stripped out names and locations, and only listed skills and accomplishments of technical hires. The goal would be an auction system to determine what "market rate" truly is for each role, with externalities filtered out. This would mean hiring companies would need to accommodate remote workers; are they willing to for the cost benefit? My experience says no (except for <100 companies that are remote first).
- pravda 11y ago
  I would think that if there were a worldwide market for developers, salaries would come down. The Bay area seems to have a positive-feedback loop going on. Highly-paid programmers have bid up the cost of housing to astonishing heights. So when companies want to attract more developers, they have to offer even higher salaries, which lead to housing costs being bid up even more.
  - simoncion 11y ago
    > The Bay area seems to have a positive-feedback loop going on. Highly-paid programmers have bid up the cost of housing to astonishing heights. This... is not the primary driver of the insane housing costs in the area. A survey from a year or two back found that tech workers make up ~8% of SF's population. For a variety of reasons, [0] it's nearly impossible to build new housing in San Francisco. I get the impression that the situation is similar in much of the Bay Area. In San Francisco, for the past decade or so for every new unit of housing created, roughly five people have entered the city. [1] Add supply to take care of the backlog and meet expected medium-term demand, and you'll see prices stabilize (and maybe return to less-insane levels). [0] The least of which is Rent Stabilization. :) [1] You could make the argument that "If noone was able to pay the insane prices, the prices wouldn't be insane." This is true, but -frankly- there are lots of very highly-paid people out there. As far as "highly-paid" people go, tech workers really aren't all that highly-paid. :) (I know of decent-to-good engineering sales [2] folks working at bigcos that make between 2 and 10x what I understand mid-level Google engineers to make.) [2] That is, salesmen that also have a technical background, can handle crunchy sales and configuration questions, and can even do real, deep troubleshooting of the product they're selling.
    - toomuchtodo 11y ago
      > That is, salesmen that also have a technical background, can handle crunchy sales and configuration questions, and can even do real, deep troubleshooting of the product they're selling. I'm in the wrong business.
crdb 11y ago
I've seen both: the same rate everywhere, and a location-based delta. The latter was driven by a strong belief in many Bay Area startups and companies that remote work doesn't work well, and that you get more output per head and more productivity if you sit next to your developers. That's what the premium is for in that case, usually with a tech stack that is relatively easy to find people for (e.g. RoR, PHP, Python). The former was driven by rare knowledge with few customers, all of whom have good reasons to be relatively price insensitive to get the job done. Pick your strategy accordingly...
pavel_lishin 11y ago
Right. It's not that she's necessarily "worth" $170k, or she brings $170k worth of value to the company - like slackstation said, they'd pay her $50k if they could. She's probably worth quite a bit more. That $170k is what it's worth for her, as a person, to switch jobs for.

kspaans 11y ago

> A company would pay Ann $50,000 if it could. I've always wondered if this is even possible. Imagine you are a Trust Fund Kid who happens to be a skilled developer as well as a giant troll. You could under-bid on salary offers. But would the company still hire you? Would you be able to prove your chops in spite of the negative signal of valuing yourself below market? (Of course, you are probably rare and won't have an effect on the overall market for developers, but I still think it's a fun thought experiment.)

knughit 11y ago
Indirectly. You could accept an opening offer instead of negotiating up. Companies decide to make an before they pick a salary offer

knughit 11y ago

I had a coworker literally do that. Company cut compensation to 0.25 of previous for as long as he lived in Costa Rica.

abannin 11y ago

Prices are determined by replacement cost, not potential value. Google has a strong arbitrage opportunity because it can generate more dollars for the same wage as competing companies. While margins allow them to bid higher, the price will always be marginally higher from the second highest bidder. The point of the article is that, assuming equal employees, you are in fact saying that one has a higher economic value to the company based only on where they choose to live.