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A little mentioned dynamic is that tech salaries can't be too much out-of-sync with non-tech salaries, because overpriced housing bought up by SWEs making 300K+

A little mentioned dynamic is that tech salaries can't be too much out-of-sync with non-tech salaries, because overpriced housing bought up by SWEs making 300K+ eventually leads to non-SWEs demanding wage increases to keep up with rent payments and/or remain able to save for a downpayment on newly priced homes. In turn, the lower disposable income from workers being squeezed by housing costs is lowering growth and tech growth in particular, which puts pressure on tech wages, stock valuations, and headcount. In other words, free market mechanisms are slowly starting to redistribute wealth from high-earning SWEs and other high earners to middle class workers and lower. In other words, it is not possible for too many people to be making 5x+ the median household income regardless of the value they may create. In other words, expect non-tech wages to rise faster than tech wages for the foreseeable future.

Temporary_31337 4y ago
Ah so you still believe in the trickle down economy. The problem with that is that anyone making 500k is not going to be able to spend fast enough to keep people around them equally wealthy and it gets worse the higher you go - you physically can’t spend 10M+ on groceries and haircuts near you so the higher proportion goes to financial instruments and assets which does not trickle down to neighbours
- giantg2 4y ago
  They're not talking about trickle down. They're talking about market pricing (COL) affecting pay. This is clearly evident looking at non-tech jobs in someplace like SV vs Philly.
- embeng4096 4y ago
  I think trickle down would actually go against GP's point. Their point seems to be that even as richer SWEs make more money, they price out middle class workers on housing -- then as workers pay more for housing, they have less money to buy things from the companies that pay the SWEs, with a result of putting downward pressure on SWE salaries. Believing in trickle down would actually undermine GP's point. If trickle down was true, SWEs' spending would offset the housing cost increases caused by SWEs, so middle class workers would have more disposable income to buy things from companies that pay the SWEs -- and that would be the opposite of what GP is describing.
sologoub 4y ago
Sounds like you are focusing on exceptions like SF Bay Area and to a lesser extent Seattle. There aren’t that many SWEs in the world and there are always professions that make exceptionally high income vs rest. The problem you are describing is most acute in the peninsula because of concentration, lack of new development, unwillingness to densify to meet demands, lack of rapid interconnected public transit and some geographic restrictions (once you leave the peninsula, commute becomes very bad because you either have to cross a bridge or go all the way around the bay). The WFH/remote is actually good for this problem as it reduced concentration and enables wealth to be a bit more spread out where it’s less impactful to the local communities. Of course, in resort areas we got concentration again (because of shallow supply) and many of the ills came back. Hopefully things stabilize a bit more on that front and a semblance of affordability is achieved.
jsharf 4y ago
It seems like this only affects areas where tech workers make up a lot of the population, like the bay area. Also, it assumes that non-tech workers won't just move to cheaper areas.
- Victerius 4y ago
  > Also, it assumes that non-tech workers won't just move to cheaper areas Which creates non-tech labor shortages in the original HCOL area and puts upward pressure on non-tech wages and downward pressure on tech wages, as non-tech wages are ultimately paid by the spending of everybody, including tech workers, who consume more than non-tech workers by virtue of simply earning more.

Temporary_31337 4y ago

Ah so you still believe in the trickle down economy. The problem with that is that anyone making 500k is not going to be able to spend fast enough to keep people around them equally wealthy and it gets worse the higher you go - you physically can’t spend 10M+ on groceries and haircuts near you so the higher proportion goes to financial instruments and assets which does not trickle down to neighbours

giantg2 4y ago
They're not talking about trickle down. They're talking about market pricing (COL) affecting pay. This is clearly evident looking at non-tech jobs in someplace like SV vs Philly.
embeng4096 4y ago
I think trickle down would actually go against GP's point. Their point seems to be that even as richer SWEs make more money, they price out middle class workers on housing -- then as workers pay more for housing, they have less money to buy things from the companies that pay the SWEs, with a result of putting downward pressure on SWE salaries. Believing in trickle down would actually undermine GP's point. If trickle down was true, SWEs' spending would offset the housing cost increases caused by SWEs, so middle class workers would have more disposable income to buy things from companies that pay the SWEs -- and that would be the opposite of what GP is describing.

sologoub 4y ago

Sounds like you are focusing on exceptions like SF Bay Area and to a lesser extent Seattle. There aren’t that many SWEs in the world and there are always professions that make exceptionally high income vs rest. The problem you are describing is most acute in the peninsula because of concentration, lack of new development, unwillingness to densify to meet demands, lack of rapid interconnected public transit and some geographic restrictions (once you leave the peninsula, commute becomes very bad because you either have to cross a bridge or go all the way around the bay). The WFH/remote is actually good for this problem as it reduced concentration and enables wealth to be a bit more spread out where it’s less impactful to the local communities. Of course, in resort areas we got concentration again (because of shallow supply) and many of the ills came back. Hopefully things stabilize a bit more on that front and a semblance of affordability is achieved.

jsharf 4y ago

It seems like this only affects areas where tech workers make up a lot of the population, like the bay area. Also, it assumes that non-tech workers won't just move to cheaper areas.

Victerius 4y ago
> Also, it assumes that non-tech workers won't just move to cheaper areas Which creates non-tech labor shortages in the original HCOL area and puts upward pressure on non-tech wages and downward pressure on tech wages, as non-tech wages are ultimately paid by the spending of everybody, including tech workers, who consume more than non-tech workers by virtue of simply earning more.