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A good answer to why software pays more than industries like law or medicine is that profit per employee in software is enormous. Of the 12 American companies o

A good answer to why software pays more than industries like law or medicine is that profit per employee in software is enormous. Of the 12 American companies on this chart of the highest profit per employee, 6 are software companies: http://www.businessinsider.com/apple-facebook-alphabet-most-profitable-companies-per-employee-2017-12 http://www.businessinsider.com/apple-facebook-alphabet-most-... I would love to hear an economist explain why this might or might not lead to higher salaries. My hypothesis is there is an element of human nature: if you're rolling in cash you don't have to be stingy.

MagnumOpus 9y ago
High profit per employee leads to a higher divergence in salaries - same as it does for industries like financial trading and research. If profit per "average" developer is $1 million, then the company is way better off paying $100k extra (i.e. double) to get developers that are 20% more productive than the average - and if the company doesn't do that, then their best people get poached by companies who do. And while it is impossible to hire the mythical "10x developer", it is not all that hard to find the "1.2x developers" if you are willing to pay double to get them...
TwoFactor 9y ago
I'm not sure that list is a fair way to determine an industry's profit per employee. Law firms aren't allowed to form C corps, which limits their size and would keep them off that list. I would expect top law firms to be in those ranges in for profit per employee, but they're much smaller so it isn't a fair comparison. 2 of the top 6 in that list are in medicine.
- heedlessly2 9y ago
  at my university's law school, which is a T14, the average starting salary is 125-150k. Which is a lot, but not as much when considering that most law grads have mountains of debt plus the opportunity cost of not being the workforce for 3 years. Plus they average 55+ hours per week. And usually cannot work from home. You're better off doing CS undergrad and working for a Big 10. The hours are on average and can be flexible if you're an efficient worker.
  - regulation_d 9y ago
    I do get the impression that the ceiling for attorneys is higher.
  - torstenvl 9y ago
    That's likely the mean salary. Median starting salary in that space is likely $160k. Some market leaders have recently moved to $180k. But yes. The debt burden is incredible. I am nine years out of school and - albeit primarily due to working in the public sector - I still have six figures in federal student loan debt. And 55 hours/week is on the low end. Most firms require around 2100 billable hours. If you figure 50 weeks worth of working days, that's 42 hours of real, substantive work per week, which you have to account for in six-minute increments, plus all of your normal basic admin and staff meeting nonsense. During busy times, we were told to aim for as much as 300 hours/month. There's a reason burnout is so high among lawyers at large firms.
bobzibub 9y ago
Not an economist but B.A. Econ here. (Comp sci degree/career came later.) The difference is the product. In the products these companies sell, especially for us, with web based software, the marginal cost of selling to one more customer is very low. An EE could design an excellent device, but the marginal cost of selling that device is still high. As are the services offered by Lawyers etc. It is the efficient scaling of products that make them so valuable. Those companies that have scaled (or have the potential to scale) their product typically have a lot of money to throw at building it. Those individuals which have the capacity to build scale-able products are in high demand and hence have high pay. My two cents anyway.

MagnumOpus 9y ago

High profit per employee leads to a higher divergence in salaries - same as it does for industries like financial trading and research. If profit per "average" developer is $1 million, then the company is way better off paying $100k extra (i.e. double) to get developers that are 20% more productive than the average - and if the company doesn't do that, then their best people get poached by companies who do. And while it is impossible to hire the mythical "10x developer", it is not all that hard to find the "1.2x developers" if you are willing to pay double to get them...

TwoFactor 9y ago

I'm not sure that list is a fair way to determine an industry's profit per employee. Law firms aren't allowed to form C corps, which limits their size and would keep them off that list. I would expect top law firms to be in those ranges in for profit per employee, but they're much smaller so it isn't a fair comparison. 2 of the top 6 in that list are in medicine.

heedlessly2 9y ago
at my university's law school, which is a T14, the average starting salary is 125-150k. Which is a lot, but not as much when considering that most law grads have mountains of debt plus the opportunity cost of not being the workforce for 3 years. Plus they average 55+ hours per week. And usually cannot work from home. You're better off doing CS undergrad and working for a Big 10. The hours are on average and can be flexible if you're an efficient worker.
- regulation_d 9y ago
  I do get the impression that the ceiling for attorneys is higher.
- torstenvl 9y ago
  That's likely the mean salary. Median starting salary in that space is likely $160k. Some market leaders have recently moved to $180k. But yes. The debt burden is incredible. I am nine years out of school and - albeit primarily due to working in the public sector - I still have six figures in federal student loan debt. And 55 hours/week is on the low end. Most firms require around 2100 billable hours. If you figure 50 weeks worth of working days, that's 42 hours of real, substantive work per week, which you have to account for in six-minute increments, plus all of your normal basic admin and staff meeting nonsense. During busy times, we were told to aim for as much as 300 hours/month. There's a reason burnout is so high among lawyers at large firms.

bobzibub 9y ago

Not an economist but B.A. Econ here. (Comp sci degree/career came later.) The difference is the product. In the products these companies sell, especially for us, with web based software, the marginal cost of selling to one more customer is very low. An EE could design an excellent device, but the marginal cost of selling that device is still high. As are the services offered by Lawyers etc. It is the efficient scaling of products that make them so valuable. Those companies that have scaled (or have the potential to scale) their product typically have a lot of money to throw at building it. Those individuals which have the capacity to build scale-able products are in high demand and hence have high pay. My two cents anyway.