Combination of two factors: 1. Efficiency wages. Highly motivated and skilled programmers are so much better at their jobs than unmotivated and unskilled repla

Combination of two factors: 1. Efficiency wages. Highly motivated and skilled programmers are so much better at their jobs than unmotivated and unskilled replacements that it's best to "overpay" above the market-clearing price, giving employers meaningful choice in applicants and regain some of the negotiating power in the relationship. 2. Tournament theory of compensation. Quantifying performance of engineers is difficult, but rank-ordering them (especially without an explicit stack-ranking) is relatively easy. So an efficient solution is to overpay the best-performing "winners" and underpay the rest, getting the same incentive effects as piece work without the cost of quantifying work output.