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Major US tech companies earn a profit-per-employee of $200-400k[0]. That's across every employee, so depending on how you attribute value the profit-per-SWE is

by ahupp 6y ago

Major US tech companies earn a profit-per-employee of $200-400k[0]. That's across every employee, so depending on how you attribute value the profit-per-SWE is much higher. That gives a lot of headroom to drive up salaries when competing for hires, and in part sets the market price. I suspect that low European software salaries are just a function of low profitability of European software companies. e.g, spotify is (at best) around $44k per employee, SAP is $41k. [0] https://fortune.com/2020/08/24/apple-microsoft-facebook-amazon-alphabet-profit-per-employee/ https://fortune.com/2020/08/24/apple-microsoft-facebook-amaz...

softwaredoug 6y ago
My sense is there's a larger US market than a pan-Europe market. If I go from German to France to Spain, I'm almost certainly not going to see the same grocery store chains. In the US, there are regional chains, but also a high proportion of homogeneity. In Europe you have strong national and cultural differences that lead to economies more isolated from the whole. In the US, there's regional differences, but I can order at a Starbucks pretty easily in all 50 states without breaking a sweat. Maybe why US brands tend to get big in the US and then export overseas? US has a homogenous and large market, which brands can make a lot of money in and develop a solid profitable base. That's probably very hard to do in Europe.
- fy20 6y ago
  > I'm almost certainly not going to see the same grocery store chains That's not really true. It's fair to say that a lot of supermarket chains have operations only in a single country, but there are quite a few multi-country brands as well which aren't uncommon. A few examples: Carrefour, Auchen, Lidl, Audi, Tesco, (Euro/Inter)Spar, Iceland, Rewe - and that doesn't include subsidiaries of the same company (e.g. ICA/Rimi).
  - Uberphallus 6y ago
    > It's fair to say that a lot of supermarket chains have operations only in a single country, but there are quite a few multi-country brands as well which aren't uncommon. Actually it's fair to say most of the business is done by local chains, and Europe-wide operations are rather uncommon. From your mentions, I'd only consider to be "Europe-wide" Carrefour and Spar. Carrefour is everywhere (though their market strategy changes a lot from country to country) and Spar's operations are kinda spotty but also kinda everywhere. Auchan is everywhere, but in heavy decline because they're basically the Walmart (supercenter) of Europe and people don't like to drive to a hypermarket that much anymore. Almost their only profitable branch at the moment is their Chinese one. Lidl and Aldi's presence is very spotty outside of Germany. Many countries copied their hard discount model so they have to fight with local companies that have a cultural edge (Lidl and Aldi tend to have tons of German products no matter the host country). Tesco is a leader in the UK, then kinda common in Central-Eastern Europe, but then almost universally unknown in Germany-Austria-Italy and westward. There are more Tesco in Thailand than in the whole of Continental Europe, to put it in perspective. Rewe is just in Germany, Austria and Eastern Europe (under different names and with wildly different marketing). Iceland I never heard about, but it's overwhelmingly a UK operation from a quick search. From your mentions I'd take the wild guess that you live (or have lived) a significant amount of time in the UK ;)
    - hashmush 6y ago
      To reinforce your point, from a Swedish perspective. I've never seen or heard of Carrefour before. We used to have Spar[1] but those got replaced by other chains. Lidl started showing up maybe 15 years ago and is everywhere by now. I don't think any town/city with more than 20k people is missing a Lidl. Tesco I've only seen in the UK. [1]: Spara means "to save" in Swedish, so I've always thought that Spar was from here. TIL it's not.
    - timwaagh 6y ago
      Carrefour is not in the Netherlands, neither is Auchan. The only ones we have are Lidl and Aldi. And spar, e which is of Dutch origin
    - fy20 6y ago
      Carrefour and Auchan don't exist in my country, but Lidl is one of the biggest supermarkets (#4, ahead of well established local brands) even though they only entered the market a couple of years ago. The #2 and #3 supermarkets are owned by Scandinavian supermarkets but rebranded - basically just a different name, same colours and style. The #1 is HQed here, but has a majority share of the market in neighbouring countries. Tesco is big outside the UK and Ireland in a few Eastern European countries such as Poland and Hungary. I think they were the first hypermarkets in these countries. I've lived in Italy and Spain, and my local supermarkets there were Carrefour and Auchan. So yes it varies... But my point was that if you actually look it's fairly easy to find a supermarket brand that's HQed in another country. Maybe more common (where I am) in Eastern Europe compared to Western Europe, as these markets are younger, so it made sense for foreign brands to come when everything opened than establishing everything from scratch. Of course it's not so integrated as the US - you explained this yourself, brands and marketing are tailored for the local market - but it's not so uncommon as OP suggested.
- midasuni 6y ago
  Language barriers - if all of Spain is talking about your product, that’s not going to seemlessly bleed into Italy and Germany as all the hype is in Spanish. Most people speak English as a second language, but they don’t speak German Italian Spanish French and English. So many VC funded projects seem to be aimed at American cultural problems too, exporting the issues they are trying to solve and fighting non American wye to solve those issues.
qafy 6y ago
I would love to see some research on the factors that contribute to this. Work culture? Leadership culture? Rigor in interviewing process? Education? There has to be a reason US tech employees are 5x-10x as "productive". What are we doing differently?
- jt2190 6y ago
  “Productive“ here means “put to work on tasks that produce high returns”, not “output more than average”. It’s really a function of a willingness to make “big bets” that, when they pay off, pay handsomely.
- colinmhayes 6y ago
  I think it's the prevalence of venture capital that allows us firms to chase growth for a decade before turning a profit.
- dcolkitt 6y ago
  Academic research shows that US multinationals consistently lead in adapting the best corporate management practices of any major country.[1] Germany and Scandinavia come in a distant second, with Southern Europe falling significantly behind. The disparity in IT-intensive industries is particularly large.[2] This is true even when comparing the productivity of workforces within the same market. I.e. European who work for American multinationals tend to be more productive than those who work for local multinationals. The short answer is that American management culture is really world-class. And, I think in software in particular, good management is a major force multiplier in terms of output and execution. [1] https://www.aeaweb.org/articles?id=10.1257/jep.24.1.203 https://www.aeaweb.org/articles?id=10.1257/jep.24.1.203 [2] https://www.aeaweb.org/articles?id=10.1257/aer.102.1.167 https://www.aeaweb.org/articles?id=10.1257/aer.102.1.167
  - peterlk 6y ago
    > Academic research shows that US multinationals consistently lead in adapting the best corporate management practices of any major country.[1] Your source points to an article about horseshoe crabs... Can you update it? I'd be interested to red about your claim.
comp_throw7 6y ago
This is the correct answer. To put it another way, US companies are more productive (in the economic sense) than EU companies, and that gap is even wider for tech companies (& those that rely heavily on employing software engineers). Putting aside the question of whether EU companies have higher overhead per employee (probably true on average), they also derive significantly less value from their employees. This is the same effect which explains why the few "big" tech companies in otherwise low-paying regions will pay above local market rates (e.g. Shopify, Spotify, etc).
- fy20 6y ago
  Reading your comment gave me a thought... maybe a better way of looking at the difference in salaries is that living in the EU is better value for money than living in the US. In pretty much all of the EU, even in expensive cities like Stockholm or Dublin, if you earn a salary of €100,000, you can live a pretty decent life. Heck even on €50,000, you can do well in a lot of places. Good luck doing the same in any of the top 10 most expensive cities in the US.
  - comp_throw7 6y ago
    There is a sense in which a non-trivial chunk of those productivity gains are eaten up by rent-seeking (in SF/NY, the high rents are literally rent-seeking in that they're the result of deliberate manipulation of local laws & regulations around housing & zoning for the benefit of existing homeowners). Even there, though, a single person can live quite nicely on 100k USD (or 120k USD, if going from 100k Euro), if they're ok with roommates. On 50-60k USD, yeah, that'd be trickier, though honestly it's manageable if you skip the top 5. You can have a very reasonable quality of life in, say, Los Angeles (as a healthy young person without dependents, yes) with that income.
    - crossroadsguy 6y ago
      You were comparing apples and oranges in living standards. The moment you inserted roommates, it became apples and bananas. By the time you will reach public transport, safety etc - it will be apples and cookies.
atom_arranger 6y ago
This makes the most sense. Ultimately an employee cannot have a company paying them more than the value they generate. The value engineers for US companies generate is higher than the value engineers for EU/CAD companies generate, so they have a better bargaining position. This is probably because US companies have a bigger market to start in, and have been more successful at expanding into other markets (including EU and CAD). The profit of tech companies is constrained by size of market addressed, not number of employees they hire.
- loosescrews 6y ago
  Parent mentioned SAP and Spotify as examples of large software companies earning less per employee than US software companies. Both of these companies have good penetration in the US market. SAP has great global market penetration. There is something else besides market going on.
- a_imho 6y ago
  Plenty of US tech companies are present in the EU including FAANG, it is not like Europeans work exclusively for EU companies. Suppressed salaries are pure profit. $T companies not just come from nowhere. https://elsajohansson.wordpress.com/2017/09/13/what-does-a-wage-gap-look-like/ https://elsajohansson.wordpress.com/2017/09/13/what-does-a-w...
oaiey 6y ago
European Employee here: That is indeed correct. It has less to do with the capabilities of the people or the quality, but with the addressed market. I would argue that 90% of my software products are developed by US companies (e.g. MS Office, Android, iOS, Gmail, ... with only rare exceptions, eg. SAP). The US dominates the software market (mostly for historic reasons but also for its unrivaled entrepreneur/VC/risk-taking management style) which sells it products everywhere in the world, earning much more on that way. And the remaining software products in Europe are acquired one-by-one (e.g. Skype). Having said all of that: Being a software engineer in Europe is a privilege with a good income situation.
shandor 6y ago
Keep in mind that those numbers are for the absolute top tech companies even in the US (and by extension, the world). Even in the PPE top 10, the last one Texas Instruments is ~40k less than the number 5. It would be actually very, very interesting to see the PPE information for a more comprehensive set of companies in the US and EU tech sectors. Or maybe it's me out of the loop and the six figure salaries are the norm in the US even outside the most profitable companies in the world? Edit: welp, of course the data was linked in the article: https://tipalti.com/profit-per-employee/ https://tipalti.com/profit-per-employee/ Just picking companies randomly a little lower from the list, Qualcomm is 118k, Oracle 81k, Advanced Micro Devices 30k.
Kappe 6y ago
Silicon Valley/San Francisco etc. was and still is the epi centry of IT. That doesn't tell you AT ALL if Europe companies are 'low profitabile' or just 'avg'/'normal' while no one can just comped with the history of SV/SFR.
winter_blue 6y ago
Yup, this is likely indeed the correct answer. The real question then becomes: how do other countries cultivate highly-profitable tech companies (similar to the ones in the US)?
thomasahle 6y ago
I don't think those numbers are accurate. Google and Facebook both have as many contractors as employees: https://www.nytimes.com/2019/05/28/technology/google-temp-workers.html https://www.nytimes.com/2019/05/28/technology/google-temp-wo... > But the company’s increasing reliance on temps and contractors has some Google employees wondering if management is undermining its carefully crafted culture. As of March, Google worked with roughly 121,000 temps and contractors around the world, compared with 102,000 full-time employees, according to an internal document obtained by The New York Times. Accounting for those would reduce profit-per-employee to half. Furthermore, those contractors earn a lot less, further boosting the wages for the full-time employees.
- ahupp 6y ago
  True, but remember that the initial question is about how much they pay SWE. I'd expect that the pay for contractors in e.g. the kitchen isn't subject to the same competitive forces, and won't move up as the company becomes more profitable.
johbjo 6y ago
Profit-per-employee is not really meaningful for comparison since very few European companies are pure software, and therefore have cost structures involving much more than salaries. Relatively few employees are software engineers in Volkswagen, Daimler or Siemens, for example. Still huge employers.

by ahupp 6y ago

softwaredoug 6y ago

My sense is there's a larger US market than a pan-Europe market. If I go from German to France to Spain, I'm almost certainly not going to see the same grocery store chains. In the US, there are regional chains, but also a high proportion of homogeneity. In Europe you have strong national and cultural differences that lead to economies more isolated from the whole. In the US, there's regional differences, but I can order at a Starbucks pretty easily in all 50 states without breaking a sweat. Maybe why US brands tend to get big in the US and then export overseas? US has a homogenous and large market, which brands can make a lot of money in and develop a solid profitable base. That's probably very hard to do in Europe.

fy20 6y ago
> I'm almost certainly not going to see the same grocery store chains That's not really true. It's fair to say that a lot of supermarket chains have operations only in a single country, but there are quite a few multi-country brands as well which aren't uncommon. A few examples: Carrefour, Auchen, Lidl, Audi, Tesco, (Euro/Inter)Spar, Iceland, Rewe - and that doesn't include subsidiaries of the same company (e.g. ICA/Rimi).
- Uberphallus 6y ago
  > It's fair to say that a lot of supermarket chains have operations only in a single country, but there are quite a few multi-country brands as well which aren't uncommon. Actually it's fair to say most of the business is done by local chains, and Europe-wide operations are rather uncommon. From your mentions, I'd only consider to be "Europe-wide" Carrefour and Spar. Carrefour is everywhere (though their market strategy changes a lot from country to country) and Spar's operations are kinda spotty but also kinda everywhere. Auchan is everywhere, but in heavy decline because they're basically the Walmart (supercenter) of Europe and people don't like to drive to a hypermarket that much anymore. Almost their only profitable branch at the moment is their Chinese one. Lidl and Aldi's presence is very spotty outside of Germany. Many countries copied their hard discount model so they have to fight with local companies that have a cultural edge (Lidl and Aldi tend to have tons of German products no matter the host country). Tesco is a leader in the UK, then kinda common in Central-Eastern Europe, but then almost universally unknown in Germany-Austria-Italy and westward. There are more Tesco in Thailand than in the whole of Continental Europe, to put it in perspective. Rewe is just in Germany, Austria and Eastern Europe (under different names and with wildly different marketing). Iceland I never heard about, but it's overwhelmingly a UK operation from a quick search. From your mentions I'd take the wild guess that you live (or have lived) a significant amount of time in the UK ;)
  - hashmush 6y ago
    To reinforce your point, from a Swedish perspective. I've never seen or heard of Carrefour before. We used to have Spar[1] but those got replaced by other chains. Lidl started showing up maybe 15 years ago and is everywhere by now. I don't think any town/city with more than 20k people is missing a Lidl. Tesco I've only seen in the UK. [1]: Spara means "to save" in Swedish, so I've always thought that Spar was from here. TIL it's not.
  - timwaagh 6y ago
    Carrefour is not in the Netherlands, neither is Auchan. The only ones we have are Lidl and Aldi. And spar, e which is of Dutch origin
  - fy20 6y ago
    Carrefour and Auchan don't exist in my country, but Lidl is one of the biggest supermarkets (#4, ahead of well established local brands) even though they only entered the market a couple of years ago. The #2 and #3 supermarkets are owned by Scandinavian supermarkets but rebranded - basically just a different name, same colours and style. The #1 is HQed here, but has a majority share of the market in neighbouring countries. Tesco is big outside the UK and Ireland in a few Eastern European countries such as Poland and Hungary. I think they were the first hypermarkets in these countries. I've lived in Italy and Spain, and my local supermarkets there were Carrefour and Auchan. So yes it varies... But my point was that if you actually look it's fairly easy to find a supermarket brand that's HQed in another country. Maybe more common (where I am) in Eastern Europe compared to Western Europe, as these markets are younger, so it made sense for foreign brands to come when everything opened than establishing everything from scratch. Of course it's not so integrated as the US - you explained this yourself, brands and marketing are tailored for the local market - but it's not so uncommon as OP suggested.
midasuni 6y ago
Language barriers - if all of Spain is talking about your product, that’s not going to seemlessly bleed into Italy and Germany as all the hype is in Spanish. Most people speak English as a second language, but they don’t speak German Italian Spanish French and English. So many VC funded projects seem to be aimed at American cultural problems too, exporting the issues they are trying to solve and fighting non American wye to solve those issues.

qafy 6y ago

I would love to see some research on the factors that contribute to this. Work culture? Leadership culture? Rigor in interviewing process? Education? There has to be a reason US tech employees are 5x-10x as "productive". What are we doing differently?

jt2190 6y ago
“Productive“ here means “put to work on tasks that produce high returns”, not “output more than average”. It’s really a function of a willingness to make “big bets” that, when they pay off, pay handsomely.
colinmhayes 6y ago
I think it's the prevalence of venture capital that allows us firms to chase growth for a decade before turning a profit.
dcolkitt 6y ago
Academic research shows that US multinationals consistently lead in adapting the best corporate management practices of any major country.[1] Germany and Scandinavia come in a distant second, with Southern Europe falling significantly behind. The disparity in IT-intensive industries is particularly large.[2] This is true even when comparing the productivity of workforces within the same market. I.e. European who work for American multinationals tend to be more productive than those who work for local multinationals. The short answer is that American management culture is really world-class. And, I think in software in particular, good management is a major force multiplier in terms of output and execution. [1] https://www.aeaweb.org/articles?id=10.1257/jep.24.1.203 https://www.aeaweb.org/articles?id=10.1257/jep.24.1.203 [2] https://www.aeaweb.org/articles?id=10.1257/aer.102.1.167 https://www.aeaweb.org/articles?id=10.1257/aer.102.1.167
- peterlk 6y ago
  > Academic research shows that US multinationals consistently lead in adapting the best corporate management practices of any major country.[1] Your source points to an article about horseshoe crabs... Can you update it? I'd be interested to red about your claim.

comp_throw7 6y ago

This is the correct answer. To put it another way, US companies are more productive (in the economic sense) than EU companies, and that gap is even wider for tech companies (& those that rely heavily on employing software engineers). Putting aside the question of whether EU companies have higher overhead per employee (probably true on average), they also derive significantly less value from their employees. This is the same effect which explains why the few "big" tech companies in otherwise low-paying regions will pay above local market rates (e.g. Shopify, Spotify, etc).

fy20 6y ago
Reading your comment gave me a thought... maybe a better way of looking at the difference in salaries is that living in the EU is better value for money than living in the US. In pretty much all of the EU, even in expensive cities like Stockholm or Dublin, if you earn a salary of €100,000, you can live a pretty decent life. Heck even on €50,000, you can do well in a lot of places. Good luck doing the same in any of the top 10 most expensive cities in the US.
- comp_throw7 6y ago
  There is a sense in which a non-trivial chunk of those productivity gains are eaten up by rent-seeking (in SF/NY, the high rents are literally rent-seeking in that they're the result of deliberate manipulation of local laws & regulations around housing & zoning for the benefit of existing homeowners). Even there, though, a single person can live quite nicely on 100k USD (or 120k USD, if going from 100k Euro), if they're ok with roommates. On 50-60k USD, yeah, that'd be trickier, though honestly it's manageable if you skip the top 5. You can have a very reasonable quality of life in, say, Los Angeles (as a healthy young person without dependents, yes) with that income.
  - crossroadsguy 6y ago
    You were comparing apples and oranges in living standards. The moment you inserted roommates, it became apples and bananas. By the time you will reach public transport, safety etc - it will be apples and cookies.

atom_arranger 6y ago

This makes the most sense. Ultimately an employee cannot have a company paying them more than the value they generate. The value engineers for US companies generate is higher than the value engineers for EU/CAD companies generate, so they have a better bargaining position. This is probably because US companies have a bigger market to start in, and have been more successful at expanding into other markets (including EU and CAD). The profit of tech companies is constrained by size of market addressed, not number of employees they hire.

loosescrews 6y ago
Parent mentioned SAP and Spotify as examples of large software companies earning less per employee than US software companies. Both of these companies have good penetration in the US market. SAP has great global market penetration. There is something else besides market going on.
a_imho 6y ago
Plenty of US tech companies are present in the EU including FAANG, it is not like Europeans work exclusively for EU companies. Suppressed salaries are pure profit. $T companies not just come from nowhere. https://elsajohansson.wordpress.com/2017/09/13/what-does-a-wage-gap-look-like/ https://elsajohansson.wordpress.com/2017/09/13/what-does-a-w...

oaiey 6y ago

European Employee here: That is indeed correct. It has less to do with the capabilities of the people or the quality, but with the addressed market. I would argue that 90% of my software products are developed by US companies (e.g. MS Office, Android, iOS, Gmail, ... with only rare exceptions, eg. SAP). The US dominates the software market (mostly for historic reasons but also for its unrivaled entrepreneur/VC/risk-taking management style) which sells it products everywhere in the world, earning much more on that way. And the remaining software products in Europe are acquired one-by-one (e.g. Skype). Having said all of that: Being a software engineer in Europe is a privilege with a good income situation.

shandor 6y ago

Keep in mind that those numbers are for the absolute top tech companies even in the US (and by extension, the world). Even in the PPE top 10, the last one Texas Instruments is ~40k less than the number 5. It would be actually very, very interesting to see the PPE information for a more comprehensive set of companies in the US and EU tech sectors. Or maybe it's me out of the loop and the six figure salaries are the norm in the US even outside the most profitable companies in the world? Edit: welp, of course the data was linked in the article: https://tipalti.com/profit-per-employee/ https://tipalti.com/profit-per-employee/ Just picking companies randomly a little lower from the list, Qualcomm is 118k, Oracle 81k, Advanced Micro Devices 30k.

Kappe 6y ago

Silicon Valley/San Francisco etc. was and still is the epi centry of IT. That doesn't tell you AT ALL if Europe companies are 'low profitabile' or just 'avg'/'normal' while no one can just comped with the history of SV/SFR.

winter_blue 6y ago

Yup, this is likely indeed the correct answer. The real question then becomes: how do other countries cultivate highly-profitable tech companies (similar to the ones in the US)?

thomasahle 6y ago

I don't think those numbers are accurate. Google and Facebook both have as many contractors as employees: https://www.nytimes.com/2019/05/28/technology/google-temp-workers.html https://www.nytimes.com/2019/05/28/technology/google-temp-wo... > But the company’s increasing reliance on temps and contractors has some Google employees wondering if management is undermining its carefully crafted culture. As of March, Google worked with roughly 121,000 temps and contractors around the world, compared with 102,000 full-time employees, according to an internal document obtained by The New York Times. Accounting for those would reduce profit-per-employee to half. Furthermore, those contractors earn a lot less, further boosting the wages for the full-time employees.

ahupp 6y ago
True, but remember that the initial question is about how much they pay SWE. I'd expect that the pay for contractors in e.g. the kitchen isn't subject to the same competitive forces, and won't move up as the company becomes more profitable.

johbjo 6y ago

Profit-per-employee is not really meaningful for comparison since very few European companies are pure software, and therefore have cost structures involving much more than salaries. Relatively few employees are software engineers in Volkswagen, Daimler or Siemens, for example. Still huge employers.