9 ms·

Why are these numbers so massively different across the world? Do European companies generate that much less revenue? Or are labor unions in Europe just that m

Why are these numbers so massively different across the world? Do European companies generate that much less revenue? Or are labor unions in Europe just that much less effective at bargaining? Or is productivity that much lower in Europe? (I'm not sold on any of these)

nine_zeros 5y ago
The addressable customer market is one big difference. American companies sell to the world. Eastern EU companies are largely stuck with eastern Europe or EU at large. The other difference is that smaller addressable market also means fewer problems to solve and thus fewer companies. As an example, engineers in China, India and Indonesia are making way more that $18k these days because there are many problems to solve, many more companies competing for the same engineers.
- sweezyjeezy 5y ago
  But can American companies not hire these Eastern European developers to do this? If yes, why do the US salaries stay an order of magnitude larger?
  - bcrosby95 5y ago
    Some can. But hiring people in another country adds another layer or two of indirection. Anecdotally, software companies that pay the best tend to go the opposite direction: they hire people that are good at self directing and self motivating, which can remove entire layers of indirection.
  - nine_zeros 5y ago
    American companies can but the pool is not large enough to open offices there. And if they are opening international offices, it's likely going to be in Asia where there is more money to be made. If you are in EU, the offices are likely going to be in western Europe or Switzerland or UK - larger addressable markets.
  - nonameiguess 5y ago
    In some cases, they can. A friend of mine is a project manager for CC Bill, a payment processor for porn sites. They hire almost exclusively from eastern Europe for software development. But if you want to do business with the US government or financial or healthcare industries, i.e. where most of the money is if you're not an ad tech giant, you're largely restricted to hiring US persons. That doesn't mean they need to be citizens, but they need to live in the US, and live here legally, which largely means they can command US wages.
  - unpresidented 5y ago
    VCs and senior executives are largely hesitant to randomly go hire from any random country, eastern European or not. Unless there is an established city, like say, Bucharest. Most managers don't want to deal with 1 person in each random city. Having an official office in a big EU city is no brainer. It is being done as well. Unrelated: A friend of mine had a well established Vodka factory in Crimea/Ukraine randomly taken over by some goons. Sometimes people worry, for good reason or not.
a_imho 5y ago
There are plenty of US companies in Europe, it just turns out they can get away with underpaying people. 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...
HenryKissinger 5y ago
It's all of that. European tech companies are smaller than US tech companies, have lower gross revenue per employee, make less profit per employee. Taxes are higher in Europe, which disincentivizes risk taking and ambitious individuals. Labor productivity is also lower in Europe. Finally, Europe still has a culture where software engineers, cloud architects/products/managers/etc. are viewed as code monkeys and the people who really matter in a corporation are the finance people and upper level executives. Europe also suffers from a brain drain to the US (and Canada to a smaller proportion). Many of Europe's best and brightest software engineers have already emigrated to the US, leaving behind the less productive ones.
- cryptoz 5y ago
  > Taxes are higher in Europe, which disincentivizes risk taking and ambitious individuals. This seems backwards to me. A society with higher taxes typically has better social safety nets, better infrastructure, less corruption, etc. Higher-tax societies incentivize risk-taking, not the other way around, especially for "ambitious individuals". When there is more structure and support around, more people are able to take a leap.
  - amelius 5y ago
    You can't take risk with money you already paid your taxes with.
  - mandelbrotwurst 5y ago
    There are effects in both directions - there’s both less upside due to higher taxes and less downside due to the safety net.
  - mikem170 5y ago
    What you said may be true for an individual, but not necessarily a small company. Because of socialist regulations and taxes a small company may have higher startup costs and it may be difficult to lay off employees, which makes hiring someone more risky, along with expanding the business.
  - 5y ago
missedthecue 5y ago
Or are labor unions in Europe just that much less effective at bargaining? Ah yes, the famously powerful US software engineer's union.
- beebmam 5y ago
  My point is: it seems to me that it is possible that labor unions in Europe are less effective at bargaining than individuals in the US, but I'd like to see research. I didn't intend to imply the US software industry is unionized; the US barely has any union jobs in 2021.
  - jsjohnst 5y ago
    > the US barely has any union jobs in 2021 In software, sure, but to say there barely are any union jobs in the US currently is wildly inaccurate.
    - adventured 5y ago
      For reference (for anyone curious) presently ~10% of US jobs are unionized. 40 years ago it was around to ~20%. https://usafacts.org/articles/labor-union-membership/ https://usafacts.org/articles/labor-union-membership/
    - karaterobot 5y ago
      Since I went to the trouble to look it up: There are estimated to be 4.4 million software developers employed in the U.S.[1] and about 150 million total jobs[2], so about 3% of employed persons in the U.S. are software developers. About 11% of U.S. workers are union members[3], so there are more than 3 times as many union members as professional developers in the U.S. [1] https://dqydj.com/number-of-developers-in-america-and-per-state/ https://dqydj.com/number-of-developers-in-america-and-per-st... [2] https://www.deptofnumbers.com/employment/us/ https://www.deptofnumbers.com/employment/us/ [3] https://www.bls.gov/news.release/union2.nr0.htm https://www.bls.gov/news.release/union2.nr0.htm
      - 5y ago
nonameiguess 5y ago
What country? Serbia's GDP per capita is about 1/10 of the United States. Software developers make less money there because everyone makes less money there.
- VRay 5y ago
  Man, some Eastern Europeans offered to write an app for me for $2000, and I assumed it was a scam since it'd be 50+ hours of work. Maybe I should hit those guys up again, if someone posting to HackerNews is making less as a programmer there than you'd make flipping burgers in California
  - marivilla 5y ago
    I'm a refugee from Nicaragua living in Mexico. I have legal status (thank god) but my paperwork is still a mess. So I freelance on Upwork. I'm surviving, but I make way less than a kid flipping burgers in the US. But the good news is I'm alive and well and happy :) And it will get worked out in time. I'm super happy with my life and it keeps getting better but when I hear first worlders, or even affluent third worlders, talk about money it sounds so crazy :3 Hearing someone say 100k a year is 'enough for a family', when working families where I am now get by decently on 300 MXN a day lol. Perspective is everything. Just gotta keep working hard! If you ever need a freelancer who's even cheaper than Eastern Europeans I'm here for you <3
    - vasco 5y ago
      You have no information on your profile so nobody can contact you.
      - marivilla 5y ago
        ok! mariavillosa1612@gmail.com :D
- KronisLV 5y ago
  Latvia. The annual income per capita is somewhere around 8000 USD: https://www.ceicdata.com/en/indicator/latvia/annual-household-income-per-capita https://www.ceicdata.com/en/indicator/latvia/annual-househol... Things are similar in some other Eastern European countries: https://en.wikipedia.org/wiki/List_of_countries_by_GNI_(nominal)_per_capita https://en.wikipedia.org/wiki/List_of_countries_by_GNI_(nomi... (of course, the values vary based on whether you care about the disposable income, or not)
odiroot 5y ago
If anything, if there are unions, they keep the engineers salaries down. At least that was my experience in Berlin, Germany. Unions don't want "privileged" engineers to earn much more than average office worker.
- goodpoint 5y ago
  Unions do what their members want. A software engineering union can do plenty of work to push salaries upwards.
  - b9a2cab5 5y ago
    Unions make sure everyone gets paid fairly equally. That doesn't work in a top heavy profession like software engineering where the top are 5x better and paid 5x more than the bottom.
deleted 5y ago
[deleted]
robocat 5y ago
Looking at New Zealand, there are a few drivers to lower pay: 1. A business will pay the least they can to hire someone, so salary really depends on the excess availability of potential employees - if there is an excess of developers then wages remain low. The business owners sensibly wish to keep the excess profits (why share?). 2. Businesses have a figure for what a standard developer is worth, and that figure is disconnected from the value of that person to the business. I have repeatedly seen businesses lose extremely profitable employees because the business decision makers wouldn’t pay someone enough more than a “normal” salary for their position. 3. There are a lot of NZ software businesses that are simply not that profitable and they don’t generate the excess profits necessary to pay high wages. Not that many companies earn enough to pay SV wages. 4. I suspect that a lot of super-talented people move to SV, and the wages there are skewed by the excess talent (excess talent is not so common elsewhere?). I have personally seen some extremely talented developers leave my town for overseas for higher wages, because the talented have the best opportunity to do so.
toast0 5y ago
If you're a European developer and underpaid, are you going to start your own company to do the same work but sell it yourself and take all the margin? Probably not, from comments I've seen here, it takes an awful lot of work to make a legal business. In the US, it takes minutes to incorporate, and even less time if you don't care to incorporate and just want to file a Doing Business As to use a separate name. Business banking doesn't take a lot to get going either. If you live in California, your employer probably can't stop you from quitting to start a competitor (as long as you don't take IP with you)
- KronisLV 5y ago
  > If you're a European developer and underpaid, are you going to start your own company to do the same work but sell it yourself and take all the margin? It depends on the country and the government there, i'd say, as well as how technologically advanced they are. Here in Latvia, it's actually not too hard - you just need to fill out a couple of forms, take care of the starting capital and payments and then you'll be registered as a company. In addition, there are various types of companies, to support small startups as well: https://www.ur.gov.lv/en/register/ https://www.ur.gov.lv/en/register/ That said, i believe that taxes and such are a tad overcomplicated in most countries, though there probably are a few good arguments against making most of the bureaucracy a bunch of online forms with prepopulated data, with which i may or may not agree. Of course, for many, other aspects of actually running a company are what cause difficulty - everything from doing sales to marketing, as opposed to just writing code and architecting technical solutions.
- bmn__ 5y ago
  > are you going to start your own company to do the same work but sell it yourself and take all the margin? No, but not because it's supposedly difficult to incorporate; I did this once and it only took filling a one page form, waiting 10 minutes in queue and paying 20€ with a bank card. It's because instead of programming then time would be frittered away with customer acquisition and asshole management.
jltsiren 5y ago
I would add two reasons in addition to those already discussed: 1) Some of the difference is structural. Upper middle class gets a larger share of the wealth in the US than in most European countries. An American professional in any field is paid more relative to the median income than in Europe. 2) International comparisons are often misleading. This is true even if you adjust the numbers for purchasing power and structural differences (such as benefits/taxes paid on top of the nominal salary). For middle class and above, the marginal cost of employment is higher in the US than in Europe, because you are expected to contribute more towards healthcare / education / childcare / retirement / unemployment / parental leave / etc from your personal income. An American employer has to pay a larger fraction of those costs directly to their employees, while an European employer can rely more on other taxpayers. The second point sets American middle class salaries higher relative to GDP per capita than in Europe, while the first point sets upper middle class salaries higher relative to middle class salaries. In a truly open market, tech salaries would converge globally, but there are currently far too many legal and cultural obstacles for that.

nine_zeros 5y ago

The addressable customer market is one big difference. American companies sell to the world. Eastern EU companies are largely stuck with eastern Europe or EU at large. The other difference is that smaller addressable market also means fewer problems to solve and thus fewer companies. As an example, engineers in China, India and Indonesia are making way more that $18k these days because there are many problems to solve, many more companies competing for the same engineers.

sweezyjeezy 5y ago
But can American companies not hire these Eastern European developers to do this? If yes, why do the US salaries stay an order of magnitude larger?
- bcrosby95 5y ago
  Some can. But hiring people in another country adds another layer or two of indirection. Anecdotally, software companies that pay the best tend to go the opposite direction: they hire people that are good at self directing and self motivating, which can remove entire layers of indirection.
- nine_zeros 5y ago
  American companies can but the pool is not large enough to open offices there. And if they are opening international offices, it's likely going to be in Asia where there is more money to be made. If you are in EU, the offices are likely going to be in western Europe or Switzerland or UK - larger addressable markets.
- nonameiguess 5y ago
  In some cases, they can. A friend of mine is a project manager for CC Bill, a payment processor for porn sites. They hire almost exclusively from eastern Europe for software development. But if you want to do business with the US government or financial or healthcare industries, i.e. where most of the money is if you're not an ad tech giant, you're largely restricted to hiring US persons. That doesn't mean they need to be citizens, but they need to live in the US, and live here legally, which largely means they can command US wages.
- unpresidented 5y ago
  VCs and senior executives are largely hesitant to randomly go hire from any random country, eastern European or not. Unless there is an established city, like say, Bucharest. Most managers don't want to deal with 1 person in each random city. Having an official office in a big EU city is no brainer. It is being done as well. Unrelated: A friend of mine had a well established Vodka factory in Crimea/Ukraine randomly taken over by some goons. Sometimes people worry, for good reason or not.

a_imho 5y ago

There are plenty of US companies in Europe, it just turns out they can get away with underpaying people. 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...

HenryKissinger 5y ago

It's all of that. European tech companies are smaller than US tech companies, have lower gross revenue per employee, make less profit per employee. Taxes are higher in Europe, which disincentivizes risk taking and ambitious individuals. Labor productivity is also lower in Europe. Finally, Europe still has a culture where software engineers, cloud architects/products/managers/etc. are viewed as code monkeys and the people who really matter in a corporation are the finance people and upper level executives. Europe also suffers from a brain drain to the US (and Canada to a smaller proportion). Many of Europe's best and brightest software engineers have already emigrated to the US, leaving behind the less productive ones.

cryptoz 5y ago
> Taxes are higher in Europe, which disincentivizes risk taking and ambitious individuals. This seems backwards to me. A society with higher taxes typically has better social safety nets, better infrastructure, less corruption, etc. Higher-tax societies incentivize risk-taking, not the other way around, especially for "ambitious individuals". When there is more structure and support around, more people are able to take a leap.
- amelius 5y ago
  You can't take risk with money you already paid your taxes with.
- mandelbrotwurst 5y ago
  There are effects in both directions - there’s both less upside due to higher taxes and less downside due to the safety net.
- mikem170 5y ago
  What you said may be true for an individual, but not necessarily a small company. Because of socialist regulations and taxes a small company may have higher startup costs and it may be difficult to lay off employees, which makes hiring someone more risky, along with expanding the business.
- 5y ago

missedthecue 5y ago

Or are labor unions in Europe just that much less effective at bargaining? Ah yes, the famously powerful US software engineer's union.

beebmam 5y ago
My point is: it seems to me that it is possible that labor unions in Europe are less effective at bargaining than individuals in the US, but I'd like to see research. I didn't intend to imply the US software industry is unionized; the US barely has any union jobs in 2021.
- jsjohnst 5y ago
  > the US barely has any union jobs in 2021 In software, sure, but to say there barely are any union jobs in the US currently is wildly inaccurate.
  - adventured 5y ago
    For reference (for anyone curious) presently ~10% of US jobs are unionized. 40 years ago it was around to ~20%. https://usafacts.org/articles/labor-union-membership/ https://usafacts.org/articles/labor-union-membership/
  - karaterobot 5y ago
    Since I went to the trouble to look it up: There are estimated to be 4.4 million software developers employed in the U.S.[1] and about 150 million total jobs[2], so about 3% of employed persons in the U.S. are software developers. About 11% of U.S. workers are union members[3], so there are more than 3 times as many union members as professional developers in the U.S. [1] https://dqydj.com/number-of-developers-in-america-and-per-state/ https://dqydj.com/number-of-developers-in-america-and-per-st... [2] https://www.deptofnumbers.com/employment/us/ https://www.deptofnumbers.com/employment/us/ [3] https://www.bls.gov/news.release/union2.nr0.htm https://www.bls.gov/news.release/union2.nr0.htm
    - 5y ago

nonameiguess 5y ago

What country? Serbia's GDP per capita is about 1/10 of the United States. Software developers make less money there because everyone makes less money there.

VRay 5y ago
Man, some Eastern Europeans offered to write an app for me for $2000, and I assumed it was a scam since it'd be 50+ hours of work. Maybe I should hit those guys up again, if someone posting to HackerNews is making less as a programmer there than you'd make flipping burgers in California
- marivilla 5y ago
  I'm a refugee from Nicaragua living in Mexico. I have legal status (thank god) but my paperwork is still a mess. So I freelance on Upwork. I'm surviving, but I make way less than a kid flipping burgers in the US. But the good news is I'm alive and well and happy :) And it will get worked out in time. I'm super happy with my life and it keeps getting better but when I hear first worlders, or even affluent third worlders, talk about money it sounds so crazy :3 Hearing someone say 100k a year is 'enough for a family', when working families where I am now get by decently on 300 MXN a day lol. Perspective is everything. Just gotta keep working hard! If you ever need a freelancer who's even cheaper than Eastern Europeans I'm here for you <3
  - vasco 5y ago
    You have no information on your profile so nobody can contact you.
    - marivilla 5y ago
      ok! mariavillosa1612@gmail.com :D
KronisLV 5y ago
Latvia. The annual income per capita is somewhere around 8000 USD: https://www.ceicdata.com/en/indicator/latvia/annual-household-income-per-capita https://www.ceicdata.com/en/indicator/latvia/annual-househol... Things are similar in some other Eastern European countries: https://en.wikipedia.org/wiki/List_of_countries_by_GNI_(nominal)_per_capita https://en.wikipedia.org/wiki/List_of_countries_by_GNI_(nomi... (of course, the values vary based on whether you care about the disposable income, or not)

odiroot 5y ago

If anything, if there are unions, they keep the engineers salaries down. At least that was my experience in Berlin, Germany. Unions don't want "privileged" engineers to earn much more than average office worker.

goodpoint 5y ago
Unions do what their members want. A software engineering union can do plenty of work to push salaries upwards.
- b9a2cab5 5y ago
  Unions make sure everyone gets paid fairly equally. That doesn't work in a top heavy profession like software engineering where the top are 5x better and paid 5x more than the bottom.

deleted 5y ago

[deleted]

robocat 5y ago

Looking at New Zealand, there are a few drivers to lower pay: 1. A business will pay the least they can to hire someone, so salary really depends on the excess availability of potential employees - if there is an excess of developers then wages remain low. The business owners sensibly wish to keep the excess profits (why share?). 2. Businesses have a figure for what a standard developer is worth, and that figure is disconnected from the value of that person to the business. I have repeatedly seen businesses lose extremely profitable employees because the business decision makers wouldn’t pay someone enough more than a “normal” salary for their position. 3. There are a lot of NZ software businesses that are simply not that profitable and they don’t generate the excess profits necessary to pay high wages. Not that many companies earn enough to pay SV wages. 4. I suspect that a lot of super-talented people move to SV, and the wages there are skewed by the excess talent (excess talent is not so common elsewhere?). I have personally seen some extremely talented developers leave my town for overseas for higher wages, because the talented have the best opportunity to do so.

toast0 5y ago

If you're a European developer and underpaid, are you going to start your own company to do the same work but sell it yourself and take all the margin? Probably not, from comments I've seen here, it takes an awful lot of work to make a legal business. In the US, it takes minutes to incorporate, and even less time if you don't care to incorporate and just want to file a Doing Business As to use a separate name. Business banking doesn't take a lot to get going either. If you live in California, your employer probably can't stop you from quitting to start a competitor (as long as you don't take IP with you)

KronisLV 5y ago
> If you're a European developer and underpaid, are you going to start your own company to do the same work but sell it yourself and take all the margin? It depends on the country and the government there, i'd say, as well as how technologically advanced they are. Here in Latvia, it's actually not too hard - you just need to fill out a couple of forms, take care of the starting capital and payments and then you'll be registered as a company. In addition, there are various types of companies, to support small startups as well: https://www.ur.gov.lv/en/register/ https://www.ur.gov.lv/en/register/ That said, i believe that taxes and such are a tad overcomplicated in most countries, though there probably are a few good arguments against making most of the bureaucracy a bunch of online forms with prepopulated data, with which i may or may not agree. Of course, for many, other aspects of actually running a company are what cause difficulty - everything from doing sales to marketing, as opposed to just writing code and architecting technical solutions.
bmn__ 5y ago
> are you going to start your own company to do the same work but sell it yourself and take all the margin? No, but not because it's supposedly difficult to incorporate; I did this once and it only took filling a one page form, waiting 10 minutes in queue and paying 20€ with a bank card. It's because instead of programming then time would be frittered away with customer acquisition and asshole management.

jltsiren 5y ago

I would add two reasons in addition to those already discussed: 1) Some of the difference is structural. Upper middle class gets a larger share of the wealth in the US than in most European countries. An American professional in any field is paid more relative to the median income than in Europe. 2) International comparisons are often misleading. This is true even if you adjust the numbers for purchasing power and structural differences (such as benefits/taxes paid on top of the nominal salary). For middle class and above, the marginal cost of employment is higher in the US than in Europe, because you are expected to contribute more towards healthcare / education / childcare / retirement / unemployment / parental leave / etc from your personal income. An American employer has to pay a larger fraction of those costs directly to their employees, while an European employer can rely more on other taxpayers. The second point sets American middle class salaries higher relative to GDP per capita than in Europe, while the first point sets upper middle class salaries higher relative to middle class salaries. In a truly open market, tech salaries would converge globally, but there are currently far too many legal and cultural obstacles for that.