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Is it a structural underpayment of tech workers in Europe, or a structural overpayment in the USA? Software engineers in the USA are paid an abnormally high am

Is it a structural underpayment of tech workers in Europe, or a structural overpayment in the USA? Software engineers in the USA are paid an abnormally high amount compared to similarly qualified professionals in different fields. The median wage for a software engineer in the USA is about $20k higher than that of a mechanical engineer, despite having the same level of qualification and a similar qualification (in my opinion, mechanical engineering actually is a lot harder than software). If you're a software engineer in Western or Northern Europe, it's not like you're hard done by and struggle to make ends meet. You make a perfectly acceptable wage, similar to any other professional. You also get the benefit of superior social services, more time off, and job security, which are certainly not to be sniffed at. One of my friends was offered a year of salary to leave her job (not in tech) because they couldn't make her redundant. I know of plenty of Europeans who have been able to take anywhere from 6 to 18 months off work for a sabbatical/backpacking trip around the world, knowing that their job will be waiting for them when they come back. Income disparity is just a lot lower in Europe than in the USA. German mechanical engineers make similar wages to software engineers. German software engineers make roughly twice the median income, compared to 3 times the median for the USA. In Australia, software engineers only make roughly 1.5x the median income, as Australia is a high wage economy.

baybal2 8y ago
I totally agree with you. I myself made my entry into "big tech" with a web dev gig at $84k. At the time I was just another jQuery monkey whose only sellable skill was making mind bending (and CPU melting) javascript animations which were proudly called "web 2.0" At the same time, I had an alternative "entry level" embedded developer gig at $50k and $65k after 1 year. Thank god I went for a hipsterized web dev position. It was like gliding in butter for a year. Only later, I finally managed to get things straight and come into engineering consulting on my own terms.
adventured 8y ago
The reason software engineers are so valuable in the US, is because the homogenous US market enables a massive, rapid catapult scaling into the rest of the global economy. Europe has nothing even remotely like that to offer. It's why the US has over 100 tech companies worth $10b+, and Europe has so few. The US market alone would be more than considerable, it's far easier to scale into/across that one $20.5 trillion market (~$22.3t with Canada), than it is to scale across all of Europe in a comparable fashion. US software engineers are worth so much, because of that concept. They're underpaid if anything.
skgoa 8y ago
Software engineer compensation is the extreme example. When you compare other technical jobs, the difference is less extreme, but it is still there. I can only talk about Germany, but here we see that all types of highly qualified employees get lower compensation across the board. It's not enough of a difference to make me unhappy and it's nowhere close enough of a difference to make want to emmigrate to the US. But it's a significant difference that is one of the driving factors behind tens of thousands of highly qualified Germans leaving the country every year. It's also a huge issue for us "on the ground", because we are starved for qualified applicants. Our entire industry is running into trouble trying to do ever more with a workforce that grows rather slowly. Unfortunately, managers seem to be unwilling to offer more to get the best people. Instead they fight tooth and nail to pay as little as possible.
- ahartmetz 8y ago
  In software it's not only the salaries, but also the rarity of European companies that are good at software. Generally speaking, engineers want to achieve results and hate inefficiency. Jobs in companies that really understand software are somewhat rare in Europe - usually you have to find a small to medium sized company, and the pay there is usually below the large companies. You pay for the privilege of being productive(!). In the US, if you join any of the famous large ones, you'll be in an environment where you can get stuff done and expand your skills in work time while getting some of the highest salaries. A phenomenon that I've seen a few times is highly skilled Eastern Europeans coming to Germany, then leaving for the US 1-4 years later. If they leave their home countries for a much higher salary anyway, why not move again and triple the salary another time?
  - lnsru 8y ago
    Very well written, I was just from curiousity recently talking to recruiter and I need to accept 20% salary cut to work in smaller company where I could be more productive. I rather take money and Udacity courses when idle. But there is another point: $100k in Germany is a top limit for skilled engineers. There are some geniuses with patents, papers and fame, they still make <$150k. I imagine, skilled engineer could earn more and retire earlier in the US.
hisnameisjimmy 8y ago
All this may be true, however, it may also be one of the reasons that Europe has not been a bigger player in the software revolution. The specialness and associated pay that Silicon Valley places on software engineers is at least partially because of the explosion of innovation possible in the field right now, which perhaps Europe has been slow to recognize.
swebs 8y ago
>or a structural overpayment in the USA? No, because those tech companies in the USA are still seeing massive profits. Software engineers are still getting paid much less than the value they provide to the company.
Cakez0r 8y ago
> The median wage for a software engineer in the USA is about $20k higher than that of a mechanical engineer, despite having the same level of qualification and a similar qualification (in my opinion, mechanical engineering actually is a lot harder than software). It's not about the level of your qualification or the difficulty of your job. It's about whether the business can make a margin on your time.
yomly 8y ago
I disagree with your sentiment enough that I want to downvote you (but won't as that's not what downvotes are for). STEM workers are absolutely underpaid in the EU for their level of qualification - a non-CS PhD grad is "lucky" to earn £30k~ GBP after they move into industry. £30k pa buys you sweet FA - meanwhile, someone quantitative/techy can go do trading or make webapps to earn 2-5x more I'd argue that software engineers aren't overpaid, everyone else is underpaid - structural wage stagnation is well documented.
- gaius 8y ago
  The British government famously says that technical people should be “on tap, not on top” and that attitude permeates the entire country, with just a very few exceptions
  - onemoresoop 8y ago
    It's more about experts to be kept on tap and not on top. And it makes sense. https://hbr.org/2012/07/keep-experts-on-tap-not-on-top https://hbr.org/2012/07/keep-experts-on-tap-not-on-top
    - gaius 8y ago
      Magazine for MBAs says MBAs are brilliant and everyone else is just a resource. Not very convincing.
      - onemoresoop 8y ago
        regardless of the magazine, it was not largely about technical people but about experts. It's the first time i'm hearing of 'on tap and not on top' and after reading on what it refers to it made a bit of sense to me. Experts are brilliant in their narrow field but they are not suitable to be at the top level. As to who should be on top is very debatable.. There are generally more examples of bad leadership...
        8y ago
magduf 8y ago
There's no such thing as being overpaid if you're not an executive (i.e., you have no real control over the business, you're just a paid employee). The business is paying you based on market conditions, and if they could get away with it, they'd pay you less. They're paying software engineers that much because that's what the market demands: there's not enough qualified talent to meet the employers' demand. SW engineers are paid more than other engineers in the US because there just isn't that much work, or demand, for other engineering disciplines here. A lot of the work has gone offshore: as an engineer with a EE degree, I don't do EE work because there just isn't that much of it here. All the electronics work has gone to Asia, except in the defense sector. What the US is still really good at is software: look at all our highest-valued tech companies, and all the other companies in Silicon Valley: an overwhelming number of them are doing software work. Smartphones, all the apps running on them, etc., are all software, and are a huge part of the economy now. Not to mention all the other places software is now used, such as finance, where it's used by non-tech companies to enhance their business. If it weren't for software, the US economy probably would have collapsed some time ago. Therefore, with software being a driving force in the US economy, and a shortage of qualified talent compared to demand (plus a lot of workers that are incompetent...), wages have been driven up compared to other engineers. Finally, if you look at real engineering wages compared to the past, inflation-adjusted, engineers were paid more back in the 60s or 70s or so, and had more job security too. So it's become a less attractive career than it was in the past, so software engineering is really just a holdout. As for Europe, AFAICT, engineers are just horribly underpaid there, and they try to make up for it some with extra perks like job security.
- toomanybeersies 8y ago
  I think there is such a thing as overpaid when you have the janitor working for $15 per hour and minimal benefits [1] and you have your engineers getting paid $200k with all sorts of benefits and perks. This kind of income disparity is completely unfair, and we haven't seen such high income and wealth disparity in the USA since the 1920s. [1] https://www.theguardian.com/technology/2017/sep/26/facebook-workers-housing-janitors-unique-parsha https://www.theguardian.com/technology/2017/sep/26/facebook-...

baybal2 8y ago

I totally agree with you. I myself made my entry into "big tech" with a web dev gig at $84k. At the time I was just another jQuery monkey whose only sellable skill was making mind bending (and CPU melting) javascript animations which were proudly called "web 2.0" At the same time, I had an alternative "entry level" embedded developer gig at $50k and $65k after 1 year. Thank god I went for a hipsterized web dev position. It was like gliding in butter for a year. Only later, I finally managed to get things straight and come into engineering consulting on my own terms.

adventured 8y ago

The reason software engineers are so valuable in the US, is because the homogenous US market enables a massive, rapid catapult scaling into the rest of the global economy. Europe has nothing even remotely like that to offer. It's why the US has over 100 tech companies worth $10b+, and Europe has so few. The US market alone would be more than considerable, it's far easier to scale into/across that one $20.5 trillion market (~$22.3t with Canada), than it is to scale across all of Europe in a comparable fashion. US software engineers are worth so much, because of that concept. They're underpaid if anything.

skgoa 8y ago

Software engineer compensation is the extreme example. When you compare other technical jobs, the difference is less extreme, but it is still there. I can only talk about Germany, but here we see that all types of highly qualified employees get lower compensation across the board. It's not enough of a difference to make me unhappy and it's nowhere close enough of a difference to make want to emmigrate to the US. But it's a significant difference that is one of the driving factors behind tens of thousands of highly qualified Germans leaving the country every year. It's also a huge issue for us "on the ground", because we are starved for qualified applicants. Our entire industry is running into trouble trying to do ever more with a workforce that grows rather slowly. Unfortunately, managers seem to be unwilling to offer more to get the best people. Instead they fight tooth and nail to pay as little as possible.

ahartmetz 8y ago
In software it's not only the salaries, but also the rarity of European companies that are good at software. Generally speaking, engineers want to achieve results and hate inefficiency. Jobs in companies that really understand software are somewhat rare in Europe - usually you have to find a small to medium sized company, and the pay there is usually below the large companies. You pay for the privilege of being productive(!). In the US, if you join any of the famous large ones, you'll be in an environment where you can get stuff done and expand your skills in work time while getting some of the highest salaries. A phenomenon that I've seen a few times is highly skilled Eastern Europeans coming to Germany, then leaving for the US 1-4 years later. If they leave their home countries for a much higher salary anyway, why not move again and triple the salary another time?
- lnsru 8y ago
  Very well written, I was just from curiousity recently talking to recruiter and I need to accept 20% salary cut to work in smaller company where I could be more productive. I rather take money and Udacity courses when idle. But there is another point: $100k in Germany is a top limit for skilled engineers. There are some geniuses with patents, papers and fame, they still make <$150k. I imagine, skilled engineer could earn more and retire earlier in the US.

hisnameisjimmy 8y ago

All this may be true, however, it may also be one of the reasons that Europe has not been a bigger player in the software revolution. The specialness and associated pay that Silicon Valley places on software engineers is at least partially because of the explosion of innovation possible in the field right now, which perhaps Europe has been slow to recognize.

swebs 8y ago

>or a structural overpayment in the USA? No, because those tech companies in the USA are still seeing massive profits. Software engineers are still getting paid much less than the value they provide to the company.

Cakez0r 8y ago

> The median wage for a software engineer in the USA is about $20k higher than that of a mechanical engineer, despite having the same level of qualification and a similar qualification (in my opinion, mechanical engineering actually is a lot harder than software). It's not about the level of your qualification or the difficulty of your job. It's about whether the business can make a margin on your time.

yomly 8y ago

I disagree with your sentiment enough that I want to downvote you (but won't as that's not what downvotes are for). STEM workers are absolutely underpaid in the EU for their level of qualification - a non-CS PhD grad is "lucky" to earn £30k~ GBP after they move into industry. £30k pa buys you sweet FA - meanwhile, someone quantitative/techy can go do trading or make webapps to earn 2-5x more I'd argue that software engineers aren't overpaid, everyone else is underpaid - structural wage stagnation is well documented.

gaius 8y ago
The British government famously says that technical people should be “on tap, not on top” and that attitude permeates the entire country, with just a very few exceptions
- onemoresoop 8y ago
  It's more about experts to be kept on tap and not on top. And it makes sense. https://hbr.org/2012/07/keep-experts-on-tap-not-on-top https://hbr.org/2012/07/keep-experts-on-tap-not-on-top
  - gaius 8y ago
    Magazine for MBAs says MBAs are brilliant and everyone else is just a resource. Not very convincing.
    - onemoresoop 8y ago
      regardless of the magazine, it was not largely about technical people but about experts. It's the first time i'm hearing of 'on tap and not on top' and after reading on what it refers to it made a bit of sense to me. Experts are brilliant in their narrow field but they are not suitable to be at the top level. As to who should be on top is very debatable.. There are generally more examples of bad leadership...
      - 8y ago

magduf 8y ago

There's no such thing as being overpaid if you're not an executive (i.e., you have no real control over the business, you're just a paid employee). The business is paying you based on market conditions, and if they could get away with it, they'd pay you less. They're paying software engineers that much because that's what the market demands: there's not enough qualified talent to meet the employers' demand. SW engineers are paid more than other engineers in the US because there just isn't that much work, or demand, for other engineering disciplines here. A lot of the work has gone offshore: as an engineer with a EE degree, I don't do EE work because there just isn't that much of it here. All the electronics work has gone to Asia, except in the defense sector. What the US is still really good at is software: look at all our highest-valued tech companies, and all the other companies in Silicon Valley: an overwhelming number of them are doing software work. Smartphones, all the apps running on them, etc., are all software, and are a huge part of the economy now. Not to mention all the other places software is now used, such as finance, where it's used by non-tech companies to enhance their business. If it weren't for software, the US economy probably would have collapsed some time ago. Therefore, with software being a driving force in the US economy, and a shortage of qualified talent compared to demand (plus a lot of workers that are incompetent...), wages have been driven up compared to other engineers. Finally, if you look at real engineering wages compared to the past, inflation-adjusted, engineers were paid more back in the 60s or 70s or so, and had more job security too. So it's become a less attractive career than it was in the past, so software engineering is really just a holdout. As for Europe, AFAICT, engineers are just horribly underpaid there, and they try to make up for it some with extra perks like job security.

toomanybeersies 8y ago
I think there is such a thing as overpaid when you have the janitor working for $15 per hour and minimal benefits [1] and you have your engineers getting paid $200k with all sorts of benefits and perks. This kind of income disparity is completely unfair, and we haven't seen such high income and wealth disparity in the USA since the 1920s. [1] https://www.theguardian.com/technology/2017/sep/26/facebook-workers-housing-janitors-unique-parsha https://www.theguardian.com/technology/2017/sep/26/facebook-...