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I think you overestimate how much negotiating power an individual worker has when deciding the price for their labor. Anecdotally, in the Software field there
by lumost 6y ago
I think you overestimate how much negotiating power an individual worker has when deciding the price for their labor.
Anecdotally, in the Software field there is a lot of "price anchoring" where a large employer decides that a software engineer makes ~125k, and both smaller/peer employers decide that a software engineer makes 125k +/- 10%.
From past experience the base "going rate" in a given market doesn't seem to change all that much unless a large employer decides to change the going rate because a higher or lower price point better suits their business - other companies will set their salaries to the baseline. Big Tech has recently been dragging wages up across the board by both hiring in volume, and paying more than everyone else.
I'd be curious if anyone has a formal study on price anchoring in wage negotiations.
- bob33212 6y agoI don't think they just pull 125k out of the air. I think that at 90k you are not going to get many great candidates. And at 250k you risk spending a LOT more money and still not being able to successfully recruit people that are much better than the 125k people. It is not like all your 125k people are going to quit when you double salaries to make way for all the FAANG people who are looking to switch jobs for the same salary.
- lumost 6y agoI think that hints to how these pay bands come to be within a company though, it's not a transparent and liquid market with a bid/ask spread and a clearing price. In practice the company decides a band that they think gets people in the door. HR gets involved, and management settles for a 0-2% inflationary increase YoY rather than the marginal rate. If you combine this with one employer bordering on a monopsony for buying a particular category of labor - then pay won't move in proportion to productivity.
- VRay 6y agoCoding is basically the one tradeskill where the free market is still working reasonably well. Apple or Google can turn a $500k total compensation package for an employee into $2M/year or more in revenue, so they'll keep snapping up people and dragging wages up. Facebook doesn't even bring people on to a specific team, they know that coders are so valuable that they'll hire as many as they can and just find things for them to do. Even at the low end, six months of tooling work from a $100k coder can often put a handful of $50k/year white collar employees permanently out of work (or make them twice as productive as before). If one company doesn't realize that, another eventually will. It's not too tough to pull in ~50-100k/year running a SaaS business or freelancing Things in the USA are really broken in the retail sector. Companies pay the absolute bare minimum that will keep them in business, and make up for a lot of the terrible morale issues that come along with that using Orwellian management systems
- dudeman13 6y agoI wished people had decided Software Engineers made 125k Could achieve financial independence in 2 years
- fennecfoxen 6y agoI made $125k total by year 3 of my career. If you need $125k, look elsewhere (and specifically look in California and maybe possibly New York.) The unfortunate consequence of the taboo of salary discussions is young software engineers not knowing how much they can actually make.
- wyclif 6y agoLook for CA and NY companies and salaries, but live in a low cost of living region and work remotely.
- dudeman13 6y agoI am not American.
- fennecfoxen 6y agoRestrictions on the free movement of people may be our biggest barrier to economic growth worldwide.