5 ms·

It all comes down to U.S. tech companies being much more successful, mainly because of the scale of the U.S. market. Any U.S. startup can immediately address a

It all comes down to U.S. tech companies being much more successful, mainly because of the scale of the U.S. market. Any U.S. startup can immediately address a market of $21T (GDP) without any regulatory overhead or language considerations. This causes engineers to be insanely productive in terms of economic productivity. In comparison, Germany, the largest country in the EU, has a GDP of only $3.8T. It's much harder to scale across the entire EU, and even then, the entire EU market is still smaller at $15T. The second question is, why do international companies like FAANG underpay their European employees compared to their American peers? The reason for that is the prevailing market wage. Any company will pay as little they can while still getting the caliber of talent they need. Given the lower economic productivity of engineers working in local tech companies, the prevailing market wages are lower, so FAANG don't need to pay as much to get the top talent.

latte 5y ago
The argument that US companies have a larger addressable market is valid, but it doesn’t seem particularly convincing. Israel’s domestic market is tiny, and most Israeli start-ups go global from day 1. Probably partly because of that, Israel’s tech salaries are generally above those in the UK, being second only to US salaries. I don’t see anything that prevents, say, a French tech company from going global from day one and unlocking the same value per engineer as Israeli companies do. Many companies based in Cyprus, Estonia or Belarus plan to go global from day one too. Also, the global market forces (i. e. the demand for engineers from US companies and the overall increased impact per engineer thanks to globalisation) are driving the salaries upwards globally. However, this effect seems to be less pronounced in the EU than it is in other countries. As an example, in Russia in the last several years engineering salaries (while remaining modest in absolute terms compared to UK / US) have become a multiple of those of other white-collar workers, making engineers quite a privileged class. However, in Western Europe, a senior engineer’s salary and a (for example) bank compliance officer’s salary are still within the same range.
- HellDunkel 5y ago
  One reason might be that the so-called tech sector here in Europe often acts as a service provider to other, more traditional industries which in turn hinders them to build IP resulting in lower pay.
simonsarris 5y ago
I'm not super sure it's that. What's stopping companies like Spotify? It's not like they were just trying to address the Swedish market. And note carefully, from Wikipedia: > In April 2016, Ek and Lorentzon wrote an open letter to Swedish politicians demanding action in three areas that they claimed hindered the company's ability to recruit top talent as Spotify grows, including access to flexible housing, better education in the programming and development fields, and stock options. Ek and Lorentzon wrote that to continue competing in a global economy, politicians needed to respond with new policies, or else thousands of Spotify jobs would be moved from Sweden to the United States. The "and stock options" seems hugely overlooked but is not at all trivial. It seems to be one of the most important pressures on US companies to push all developer salaries way, way up.
- hellisothers 5y ago
  What is it about stock options that are unique to the US?
  - deleted 5y ago
    [deleted]
  - cosmodisk 5y ago
    Stock options are almost unheard of in Europe. It's changing but very slowly. It's a different landscape too: very few European startups IPO, compared to those in the US, so people aren't as pushy to get stock options when they know well it's just a pie in the sky.
shoto_io 5y ago
I think you are right, it is because of the US tech companies being much more successful. BUT, I don't think it is because of the scale of the US market. As others have pointed out, Spotify from Sweden and many companies from Israel are also very successful. I believe the real underlying reason is the strong VC ecosystem, which was established decades earlier in the US has led to the success of the tech companies there. In mainland Europe, VC is just getting started. My bet is, that we will see similar companies in 10-20 years from now.
- simonsarris 5y ago
  For what its worth, I have seen comments almost exactly like this 10 years ago on HN. It its very hard to predict when a real culture shift like that will happen. (I agree its an important part of the puzzle)
  - shoto_io 5y ago
    Fair enough. Predicting the future is impossible, I agree. But speculating is fine.
seoulmetro 5y ago
The reason for the US' success definitely does not revolve around the scale of the US market. It revolves around the scale of the US within the global market and the relaxed regulation building and freedoms of the US onto all markets. The US was the largest scale market back when tech companies were starting in the 80s and 90s. Not any more though. But the momentum is already there.
Thristle 5y ago
Yeah sure. Only that US companies with offices in other countries pay less than in US
xiphias2 5y ago
I’m not sure that G from FAANG underpays: I stayed in Zurich because I got much better pay than if I moved to US. Also the pension system in Switzerland is awesome. The big downside though was that the male-to-female ratio was beyond unhealthy, so it’s a much better deal for women and men who have a family already.
- mmmmmbop 5y ago
  Where did you move after Zurich?
  - xiphias2 5y ago
    Back to my home city (Budapest), but in the winters I’m travelling around South and Central America. I invested enough money during my stay in Zurich that I don’t have to worry about it anymore too much.
simonh 5y ago
They could compete with each other more aggressively for EU talent, essentially extending the US market for s/w engineers to the EU, but the problem is a huge swathe of the best EU s/w engineers already move to the US chasing those x3 wages. We're somewhat better off here in the UK, we have a well developed s/w industry in games, defence, embedded systems and finance. The difference is maybe only 2x instead of 3x. On of my daughters is considering going into s/w engineering, so I'm resigning myself to the thought there's a good chance she'll head west on graduation (I'm a Brit). The pull of the US isn't quite so strong here in london if you get into finance, but if you're a top flight talent in say Ireland or Scotland what are you going to do? There are few local opportunities, and no good reason to go to London as against SF or Seattle.
- disgruntledphd2 5y ago
  > if you're a top flight talent in say Ireland or Scotland what are you going to do? There are few local opportunities, and no good reason to go to London as against SF or Seattle. Actually, London is a bunch easier in that case, as you can freely move there and not need visa sponsorship (specifically talking about Ireland here). London is far too expensive for the tech salaries though, if you're not working in finance.
- zerr 5y ago
  Not sure about being better though - outside London/Finance sector/FG, six-figure is quite rare, isn't it?
- nickd2001 5y ago
  Doesn't Dublin now have a hot tech job market? And to some extent other Irish cities such as Cork? If I was a 21-yr old new grad now, I'd be off to Ireland in a flash, live there 5 yrs get a EU passport while you still can. It surprises me more young Brits aren't doing that. Maybe they aren't aware you can still go work in Ireland without a visa. For now , at least... As for SF or Seattle, hasn't the changes to the H1B visa program made that far more difficult for Brits than it used to be?
meheleventyone 5y ago
> It all comes down to U.S. tech companies being much more successful, mainly because of the scale of the U.S. market. Any U.S. startup can immediately address a market of $21T (GDP) without any regulatory overhead or language considerations. This causes engineers to be insanely productive in terms of economic productivity. In comparison, Germany, the largest country in the EU, has a GDP of only $3.8T. It's much harder to scale across the entire EU, and even then, the entire EU market is still smaller at $15T. I mean it's tech, the US market is open to everyone no? I don't know of many European tech companies that think they'll get anywhere only addressing their local market. My feeling is that European wages are gradually increasing due in part to the successes like Unity and Spotify, plus FAANG companies effects on local offices. It's a bit lopsided at the moment, someone noted there is almost a bimodal distribution of salary which I'm sure exists in the US as well but is more stark here. Remote work is also starting to have an effect. I earn quite a bit more (still nothing to write home about in terms of the salary I could earn in the US) working remotely for a US based company.
- ozzythecat 5y ago
  > plus FAANG companies effects on local offices. I work at one of the FAANGs and this isn’t exactly true for our case. We pay a wage competitive with other local companies, and it’s certainly a fraction of the same role pays in the US.
- em500 5y ago
  There's probably some spillover / upwards pressure from the successful US companies. But I think the main driver is that in Europe, software is mostly considered a cost centre instead of a revenue centre. In Europe there are not that many successful tech giants, where programmers are seen as essential for bringing in the money. Rather, most programmers work in other industries supporting the main business.
  - meheleventyone 5y ago
    Yeah. This is at least a plausible explanation for the bimodal distribution.

latte 5y ago

The argument that US companies have a larger addressable market is valid, but it doesn’t seem particularly convincing. Israel’s domestic market is tiny, and most Israeli start-ups go global from day 1. Probably partly because of that, Israel’s tech salaries are generally above those in the UK, being second only to US salaries. I don’t see anything that prevents, say, a French tech company from going global from day one and unlocking the same value per engineer as Israeli companies do. Many companies based in Cyprus, Estonia or Belarus plan to go global from day one too. Also, the global market forces (i. e. the demand for engineers from US companies and the overall increased impact per engineer thanks to globalisation) are driving the salaries upwards globally. However, this effect seems to be less pronounced in the EU than it is in other countries. As an example, in Russia in the last several years engineering salaries (while remaining modest in absolute terms compared to UK / US) have become a multiple of those of other white-collar workers, making engineers quite a privileged class. However, in Western Europe, a senior engineer’s salary and a (for example) bank compliance officer’s salary are still within the same range.

HellDunkel 5y ago
One reason might be that the so-called tech sector here in Europe often acts as a service provider to other, more traditional industries which in turn hinders them to build IP resulting in lower pay.

simonsarris 5y ago

I'm not super sure it's that. What's stopping companies like Spotify? It's not like they were just trying to address the Swedish market. And note carefully, from Wikipedia: > In April 2016, Ek and Lorentzon wrote an open letter to Swedish politicians demanding action in three areas that they claimed hindered the company's ability to recruit top talent as Spotify grows, including access to flexible housing, better education in the programming and development fields, and stock options. Ek and Lorentzon wrote that to continue competing in a global economy, politicians needed to respond with new policies, or else thousands of Spotify jobs would be moved from Sweden to the United States. The "and stock options" seems hugely overlooked but is not at all trivial. It seems to be one of the most important pressures on US companies to push all developer salaries way, way up.

hellisothers 5y ago
What is it about stock options that are unique to the US?
- deleted 5y ago
  [deleted]
- cosmodisk 5y ago
  Stock options are almost unheard of in Europe. It's changing but very slowly. It's a different landscape too: very few European startups IPO, compared to those in the US, so people aren't as pushy to get stock options when they know well it's just a pie in the sky.

shoto_io 5y ago

I think you are right, it is because of the US tech companies being much more successful. BUT, I don't think it is because of the scale of the US market. As others have pointed out, Spotify from Sweden and many companies from Israel are also very successful. I believe the real underlying reason is the strong VC ecosystem, which was established decades earlier in the US has led to the success of the tech companies there. In mainland Europe, VC is just getting started. My bet is, that we will see similar companies in 10-20 years from now.

simonsarris 5y ago
For what its worth, I have seen comments almost exactly like this 10 years ago on HN. It its very hard to predict when a real culture shift like that will happen. (I agree its an important part of the puzzle)
- shoto_io 5y ago
  Fair enough. Predicting the future is impossible, I agree. But speculating is fine.

seoulmetro 5y ago

The reason for the US' success definitely does not revolve around the scale of the US market. It revolves around the scale of the US within the global market and the relaxed regulation building and freedoms of the US onto all markets. The US was the largest scale market back when tech companies were starting in the 80s and 90s. Not any more though. But the momentum is already there.

Thristle 5y ago

Yeah sure. Only that US companies with offices in other countries pay less than in US

xiphias2 5y ago

I’m not sure that G from FAANG underpays: I stayed in Zurich because I got much better pay than if I moved to US. Also the pension system in Switzerland is awesome. The big downside though was that the male-to-female ratio was beyond unhealthy, so it’s a much better deal for women and men who have a family already.

mmmmmbop 5y ago
Where did you move after Zurich?
- xiphias2 5y ago
  Back to my home city (Budapest), but in the winters I’m travelling around South and Central America. I invested enough money during my stay in Zurich that I don’t have to worry about it anymore too much.

simonh 5y ago

They could compete with each other more aggressively for EU talent, essentially extending the US market for s/w engineers to the EU, but the problem is a huge swathe of the best EU s/w engineers already move to the US chasing those x3 wages. We're somewhat better off here in the UK, we have a well developed s/w industry in games, defence, embedded systems and finance. The difference is maybe only 2x instead of 3x. On of my daughters is considering going into s/w engineering, so I'm resigning myself to the thought there's a good chance she'll head west on graduation (I'm a Brit). The pull of the US isn't quite so strong here in london if you get into finance, but if you're a top flight talent in say Ireland or Scotland what are you going to do? There are few local opportunities, and no good reason to go to London as against SF or Seattle.

disgruntledphd2 5y ago
> if you're a top flight talent in say Ireland or Scotland what are you going to do? There are few local opportunities, and no good reason to go to London as against SF or Seattle. Actually, London is a bunch easier in that case, as you can freely move there and not need visa sponsorship (specifically talking about Ireland here). London is far too expensive for the tech salaries though, if you're not working in finance.
zerr 5y ago
Not sure about being better though - outside London/Finance sector/FG, six-figure is quite rare, isn't it?
nickd2001 5y ago
Doesn't Dublin now have a hot tech job market? And to some extent other Irish cities such as Cork? If I was a 21-yr old new grad now, I'd be off to Ireland in a flash, live there 5 yrs get a EU passport while you still can. It surprises me more young Brits aren't doing that. Maybe they aren't aware you can still go work in Ireland without a visa. For now , at least... As for SF or Seattle, hasn't the changes to the H1B visa program made that far more difficult for Brits than it used to be?

meheleventyone 5y ago

> It all comes down to U.S. tech companies being much more successful, mainly because of the scale of the U.S. market. Any U.S. startup can immediately address a market of $21T (GDP) without any regulatory overhead or language considerations. This causes engineers to be insanely productive in terms of economic productivity. In comparison, Germany, the largest country in the EU, has a GDP of only $3.8T. It's much harder to scale across the entire EU, and even then, the entire EU market is still smaller at $15T. I mean it's tech, the US market is open to everyone no? I don't know of many European tech companies that think they'll get anywhere only addressing their local market. My feeling is that European wages are gradually increasing due in part to the successes like Unity and Spotify, plus FAANG companies effects on local offices. It's a bit lopsided at the moment, someone noted there is almost a bimodal distribution of salary which I'm sure exists in the US as well but is more stark here. Remote work is also starting to have an effect. I earn quite a bit more (still nothing to write home about in terms of the salary I could earn in the US) working remotely for a US based company.

ozzythecat 5y ago
> plus FAANG companies effects on local offices. I work at one of the FAANGs and this isn’t exactly true for our case. We pay a wage competitive with other local companies, and it’s certainly a fraction of the same role pays in the US.
em500 5y ago
There's probably some spillover / upwards pressure from the successful US companies. But I think the main driver is that in Europe, software is mostly considered a cost centre instead of a revenue centre. In Europe there are not that many successful tech giants, where programmers are seen as essential for bringing in the money. Rather, most programmers work in other industries supporting the main business.
- meheleventyone 5y ago
  Yeah. This is at least a plausible explanation for the bimodal distribution.