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But... we understand EXACTLY why developers are paid so well. Economics (the same reason EVERY profession is paid the way they are). There are two factors that

But... we understand EXACTLY why developers are paid so well. Economics (the same reason EVERY profession is paid the way they are). There are two factors that come into play for employee pay- 1. Supply/demand: When demand outstrips supply, prices rise. The demand for software so vastly outstrips the ability to produce it that salaries are being driven very high because 2. The marginal value that an employee can produce. This is a hard cap on the salary that any profession can charge, and is the primary driver for demand. So long as 2 is higher than the prevailing salary, demand will continue to rise, which will apply upwards pressure on salaries. Of course, high salaries will attract more supply over time, which will put pressure back down on salaries. The current dynamic is SO out of whack though- there is a ton of slack in the system. This isn't a boom/bust thing either. There is SO MUCH business value that could be had if there were programmers available to build the software. I don't think we're even scratching the surface of everything that could be profitably built yet. I think betting on a big bust in software engineer salaries would be a bad move.

humanrebar 7y ago
> Of course, high salaries will attract more supply over time, which will put pressure back down on salaries. It's not clear to me that there aren't soft and hard caps on supply, even if everyone wanted to be a programmer because the compensation was so great. There are certainly aspects of intelligence, temperament, and personality that are needed to crank through information, organization, and abstraction problems as part of a team for decades of one's life.
Gatsky 7y ago
This is a bit hand wavy... isn’t current comp due to a handful of tech companies that became very profitable very quickly, and a lot of venture capital money? Without either of these two factors I doubt wages would be at the same level.
- NeverFade 7y ago
  Those companies became very profitable because technology made them so. It wasn't some accident that is here today and gone tomorrow. Technology is at the core of companies like Google, Netflix, Amazon, Facebook. Without the technology, which is implemented by SWEs, none of these would exist. Their number isn't declining, it's growing.
  - est31 7y ago
    > Those companies became very profitable because technology made them so. It wasn't some accident that is here today and gone tomorrow. Technology is at the core of companies like Google, Netflix, Amazon, Facebook. Without the technology, which is implemented by SWEs, none of these would exist. Yes but don't assume that people in india, africa, or eastern europe are too dumb to do the same work. Nor do the outposts of the companies you mentioned pay the same US levels in those countries. There must be another component of this.
    - NeverFade 7y ago
      > Yes but don't assume that people in india, africa, or eastern europe are too dumb to do the same work. Where did I ever assume that?! > Nor do the outposts of the companies you mentioned pay the same US levels in those countries. There must be another component of this. How about "they pay what they have to"? In India, if they pay $60k/yr, plenty of talented candidates would work for them. In the US, if they paid that much, nobody would apply. Simple.
      - est31 7y ago
        Well the question is: why don't they replace the $370k/yr american employees by the $60k/yr indian ones? Why do they pay the premium for US employees? Except for defense projects, it doesn't matter where the code is made, US or India. The German software industry outsources heavily and tech wages don't reach the US levels. Why doesn't Google?
        NeverFade 7y ago
        > The German software industry outsources heavily and tech wages don't reach the US levels. German SWE work doesn't pay well domestically. It's also struggling to attract talent. Probably a reason why Germany isn't known for its many profitable software companies. > Well the question is: why don't they replace the $370k/yr american employees by the $60k/yr indian ones? In the case of an engineer making $400k in the US, I suggest this is a fairly exceptional individual, with a level of skills and abilities that are rare in _any_ country. Since that individual produces large profits for their employers, employers struggle to hire them at any price that is lower than their productive yield. Strong SWEs can make companies like Google and Facebook millions of dollars per year. So these companies will gladly pay any six figure salary for these individuals. Of course, if they can get away with only paying them $60k in India, they will. It's not their goal to pay well; it's a necessity.
- ThrowawayR2 7y ago
  Current comp is ultimately because computers and the internet are both the entertainment medium of choice (displacing film, radio, TV, and we know all of those industries and the supporting industries they spawned were huge) and a universal personal and business tool (with an impact as great or greater than the automobile did on both personal and business transportation and, as before, we know how big the auto industry and supporting industries became). Computing and the internet are so fundamental now that I do not expect this wave to stop until every person on the planet, no matter what their local standard of living is, has a personal smartphone within arm's reach 24/7. We're not guaranteed to have no bumps along the way of course but, over the long term, it's really hard to envision a case where demand for developers, and consequently comp, drops drastically before this global saturation occurs.
- KaiserPro 7y ago
  Those handful of tech companies need a boat load of engineers, restricting the supply. A restricted supply means you have to play a higher price. It doesn't matter what causes the lack of supply, its the lack of supply that causes price rises.
- hobofan 7y ago
  I guess that depends on if you're talking about bay area comp or high comp elsewhere, which are on two very different levels, but still high compared to other jobs in their respective regions. For the bay area it might indeed be coupled to extremely profitable tech companies, but elsewhere there is still a very high demand for software engineers from SMBs. A lot of mid-sized businesses want to gain an edge over their competition via custom software solutions. (The optimistic part in my also thinks that it's still the early days there, where companies in each niche are trying to uncover software driven upsides with fewer resources, and once those are found everyone in the niche competes over squeezing out the most of that opportunity, which requires a lot more engineering resources). On top of that even moderately complex websites (search function + data pipeline leading into that) that a lot of 100+ people companies have require regular attention from a somewhat skilled software engineer. So in conclusion, I think that high compensations might be driven up by "a handful of tech companies", but a lot of the demand is mostly uncoupled from that.
ThrustVectoring 7y ago
There are more factors than just supply/demand and use value. There's the sensitivity of productivity and employee turnover with respect to pay, and the replacement of costly performance quantification with a significantly cheaper rank-ordering system (usually informal via promoting your "best" few engineers). The former leads to efficiency wages, and the latter to tournament theory. Example of the first: there are two jobs with an identical market-clearing wage and expected net present value of productivity. The first is relatively unskilled labor - you train them for maybe a week, and they do pretty much average performance for however long they stay. The second requires a year of training during which they provide zero value, then stay an average of a year after that during which they provide double the value. A savvy employer would pay the market-clearing wage for the first role, and above that for the second. By doing so, employees of the second type would be unable to find a job that pays as well as what they have now (since the market isn't clearing), so they'll tend to stay longer and provide extra value. Example of the second: corporations will pay CEOs much more than vice-presidents. The work that both jobs do is largely the same, and the disparity in value added between the two roles is much less than the salary difference. The spread is there to make sure that senior executives work really hard to be seen as a better choice than their competitors - now the board doesn't have to evaluate how well executives did in an absolute sense, but rather need only judge who the best candidate is for the top role.
vonseel 7y ago
Of course, high salaries will attract more supply over time, which will put pressure back down on salaries. The current dynamic is SO out of whack though- there is a ton of slack in the system. I understand all of this. Are there any examples of industries where - for lack of better terminology - a salary "bubble" formed and later popped? For example, X job used to pay 100k and now it pays 50k? Probably better to exclude jobs that aren't around anymore because they were replaced by automation or don't make sense because of modern technology, at least for this question. I guess I have an inkling that - ignoring things like economic downturns and lowering salaries due to high unemployment - employees will fight back against any downward pressure on pay, and once salaries go up, they tend to stay up. Sort of similar to what you see when an individual gets raises and jumps companies for an income boost - you rarely see someone take a job paying less than their current job. All that reminds me of how people who graduate during recessions earn lower income over their careers[1]. [1] https://hbr.org/2018/09/people-who-graduate-during-recessions-earn-less-money-but-theyre-happier https://hbr.org/2018/09/people-who-graduate-during-recession...
- OJFord 7y ago
  It's usually less exaggerated than that - stagnation while inflation or salary increases in other fields are higher.
- JackMorgan 7y ago
  Airline pilots real wages have been decreasing for a long time. Starting pilot out of flight school makes like 28k for a lot of hours a week.
  - sudosysgen 7y ago
    Yes, and the consequence is that there is a shortage of pilots and prices are rising back up.
  - vonseel 7y ago
    Yeah, I’m slightly familiar with that. Flying is a bit unusual since training is so much more expensive than other professions, and requires a lot of hours, so I guess you can consider the first few years like a medical residency. A low-paid training job. http://www.aacadetacademy.com/CadetAcademy/career_progression/1 http://www.aacadetacademy.com/CadetAcademy/career_progressio... AA has an interesting program here, but I still think the best route for aspiring pilots, if you can get a pilot spot, is probably Air Force Academy. It’s very hard to get a pilot spot, though, and I don’t think it’s ever guaranteed unless you do the Army Street to Seat flight program, which does not require a college degree, but they mainly fly helicopters (maybe only?). I often wish I had been a pilot... currently reading “Viper Pilot” by Dan Hampton which is a hell of a book.

humanrebar 7y ago

> Of course, high salaries will attract more supply over time, which will put pressure back down on salaries. It's not clear to me that there aren't soft and hard caps on supply, even if everyone wanted to be a programmer because the compensation was so great. There are certainly aspects of intelligence, temperament, and personality that are needed to crank through information, organization, and abstraction problems as part of a team for decades of one's life.

Gatsky 7y ago

This is a bit hand wavy... isn’t current comp due to a handful of tech companies that became very profitable very quickly, and a lot of venture capital money? Without either of these two factors I doubt wages would be at the same level.

NeverFade 7y ago
Those companies became very profitable because technology made them so. It wasn't some accident that is here today and gone tomorrow. Technology is at the core of companies like Google, Netflix, Amazon, Facebook. Without the technology, which is implemented by SWEs, none of these would exist. Their number isn't declining, it's growing.
- est31 7y ago
  > Those companies became very profitable because technology made them so. It wasn't some accident that is here today and gone tomorrow. Technology is at the core of companies like Google, Netflix, Amazon, Facebook. Without the technology, which is implemented by SWEs, none of these would exist. Yes but don't assume that people in india, africa, or eastern europe are too dumb to do the same work. Nor do the outposts of the companies you mentioned pay the same US levels in those countries. There must be another component of this.
  - NeverFade 7y ago
    > Yes but don't assume that people in india, africa, or eastern europe are too dumb to do the same work. Where did I ever assume that?! > Nor do the outposts of the companies you mentioned pay the same US levels in those countries. There must be another component of this. How about "they pay what they have to"? In India, if they pay $60k/yr, plenty of talented candidates would work for them. In the US, if they paid that much, nobody would apply. Simple.
    - est31 7y ago
      Well the question is: why don't they replace the $370k/yr american employees by the $60k/yr indian ones? Why do they pay the premium for US employees? Except for defense projects, it doesn't matter where the code is made, US or India. The German software industry outsources heavily and tech wages don't reach the US levels. Why doesn't Google?
      - NeverFade 7y ago
        > The German software industry outsources heavily and tech wages don't reach the US levels. German SWE work doesn't pay well domestically. It's also struggling to attract talent. Probably a reason why Germany isn't known for its many profitable software companies. > Well the question is: why don't they replace the $370k/yr american employees by the $60k/yr indian ones? In the case of an engineer making $400k in the US, I suggest this is a fairly exceptional individual, with a level of skills and abilities that are rare in _any_ country. Since that individual produces large profits for their employers, employers struggle to hire them at any price that is lower than their productive yield. Strong SWEs can make companies like Google and Facebook millions of dollars per year. So these companies will gladly pay any six figure salary for these individuals. Of course, if they can get away with only paying them $60k in India, they will. It's not their goal to pay well; it's a necessity.
ThrowawayR2 7y ago
Current comp is ultimately because computers and the internet are both the entertainment medium of choice (displacing film, radio, TV, and we know all of those industries and the supporting industries they spawned were huge) and a universal personal and business tool (with an impact as great or greater than the automobile did on both personal and business transportation and, as before, we know how big the auto industry and supporting industries became). Computing and the internet are so fundamental now that I do not expect this wave to stop until every person on the planet, no matter what their local standard of living is, has a personal smartphone within arm's reach 24/7. We're not guaranteed to have no bumps along the way of course but, over the long term, it's really hard to envision a case where demand for developers, and consequently comp, drops drastically before this global saturation occurs.
KaiserPro 7y ago
Those handful of tech companies need a boat load of engineers, restricting the supply. A restricted supply means you have to play a higher price. It doesn't matter what causes the lack of supply, its the lack of supply that causes price rises.
hobofan 7y ago
I guess that depends on if you're talking about bay area comp or high comp elsewhere, which are on two very different levels, but still high compared to other jobs in their respective regions. For the bay area it might indeed be coupled to extremely profitable tech companies, but elsewhere there is still a very high demand for software engineers from SMBs. A lot of mid-sized businesses want to gain an edge over their competition via custom software solutions. (The optimistic part in my also thinks that it's still the early days there, where companies in each niche are trying to uncover software driven upsides with fewer resources, and once those are found everyone in the niche competes over squeezing out the most of that opportunity, which requires a lot more engineering resources). On top of that even moderately complex websites (search function + data pipeline leading into that) that a lot of 100+ people companies have require regular attention from a somewhat skilled software engineer. So in conclusion, I think that high compensations might be driven up by "a handful of tech companies", but a lot of the demand is mostly uncoupled from that.

ThrustVectoring 7y ago

There are more factors than just supply/demand and use value. There's the sensitivity of productivity and employee turnover with respect to pay, and the replacement of costly performance quantification with a significantly cheaper rank-ordering system (usually informal via promoting your "best" few engineers). The former leads to efficiency wages, and the latter to tournament theory. Example of the first: there are two jobs with an identical market-clearing wage and expected net present value of productivity. The first is relatively unskilled labor - you train them for maybe a week, and they do pretty much average performance for however long they stay. The second requires a year of training during which they provide zero value, then stay an average of a year after that during which they provide double the value. A savvy employer would pay the market-clearing wage for the first role, and above that for the second. By doing so, employees of the second type would be unable to find a job that pays as well as what they have now (since the market isn't clearing), so they'll tend to stay longer and provide extra value. Example of the second: corporations will pay CEOs much more than vice-presidents. The work that both jobs do is largely the same, and the disparity in value added between the two roles is much less than the salary difference. The spread is there to make sure that senior executives work really hard to be seen as a better choice than their competitors - now the board doesn't have to evaluate how well executives did in an absolute sense, but rather need only judge who the best candidate is for the top role.

vonseel 7y ago

Of course, high salaries will attract more supply over time, which will put pressure back down on salaries. The current dynamic is SO out of whack though- there is a ton of slack in the system. I understand all of this. Are there any examples of industries where - for lack of better terminology - a salary "bubble" formed and later popped? For example, X job used to pay 100k and now it pays 50k? Probably better to exclude jobs that aren't around anymore because they were replaced by automation or don't make sense because of modern technology, at least for this question. I guess I have an inkling that - ignoring things like economic downturns and lowering salaries due to high unemployment - employees will fight back against any downward pressure on pay, and once salaries go up, they tend to stay up. Sort of similar to what you see when an individual gets raises and jumps companies for an income boost - you rarely see someone take a job paying less than their current job. All that reminds me of how people who graduate during recessions earn lower income over their careers[1]. [1] https://hbr.org/2018/09/people-who-graduate-during-recessions-earn-less-money-but-theyre-happier https://hbr.org/2018/09/people-who-graduate-during-recession...

OJFord 7y ago
It's usually less exaggerated than that - stagnation while inflation or salary increases in other fields are higher.
JackMorgan 7y ago
Airline pilots real wages have been decreasing for a long time. Starting pilot out of flight school makes like 28k for a lot of hours a week.
- sudosysgen 7y ago
  Yes, and the consequence is that there is a shortage of pilots and prices are rising back up.
- vonseel 7y ago
  Yeah, I’m slightly familiar with that. Flying is a bit unusual since training is so much more expensive than other professions, and requires a lot of hours, so I guess you can consider the first few years like a medical residency. A low-paid training job. http://www.aacadetacademy.com/CadetAcademy/career_progression/1 http://www.aacadetacademy.com/CadetAcademy/career_progressio... AA has an interesting program here, but I still think the best route for aspiring pilots, if you can get a pilot spot, is probably Air Force Academy. It’s very hard to get a pilot spot, though, and I don’t think it’s ever guaranteed unless you do the Army Street to Seat flight program, which does not require a college degree, but they mainly fly helicopters (maybe only?). I often wish I had been a pilot... currently reading “Viper Pilot” by Dan Hampton which is a hell of a book.