8 ms·

The Anatomy of Your Salary

24 points by louwhopley 4y ago

aftbit 4y ago
>Consider the price of water compared to the price of diamonds. Diamonds are far more expensive than water, even though water is essential for life and diamonds are basically useless. >Water is cheap because it’s relatively easy to acquire, whereas diamonds are much harder to get. Salaries work precisely this way. Diamonds are expensive not because they're hard to get, but because their sales and distribution channels are controlled by a cartel. Oddly similar to SWE salaries, now that I think about it. :P
- akavi 4y ago
  What's the cartel keeping SWE salaries high?
  - hguant 4y ago
    Superficially, FAANG offering massive compensation packages to anyone who fits their model of "Stanford/MIT degree, willing to suffer through LeetCode challenges", which has a massive effect on the market for SWE, as it changes the bar for what's _possible_ in the realm of compensation, and ensures that the cartel gets its pick of SWE talent, simply because it can offer substantially more than most other companies. Interestingly, those companies are also the ones that I think have put the most effort into quantifying the value of a software developer to the business as a whole. The salaries look obscene to many people, but the cartel pays them because it believes it's getting more value than it's paying for.
    - williamDafoe 4y ago
      Don't forget the 50-60 hr real workweeks (more than 10% of the search team I was on was always working 11pm-12pm midnight). Turnover is actually pretty high at Google. My whole team (9 people) quit in the year that I left.
    - csdvrx 4y ago
      > the cartel gets its pick of SWE talent, simply because it can offer substantially more than most other companies. Some people will refuse to work for a FAANG as a matter of principle, and they don't have a monopsony, so it's not exactly a cartel I'd say
    - thirtyseven 4y ago
      That's... not a cartel though? A cartel is a group of firms conspiring to artificially control the supply of some good in order to increase its price, what you described is just several independent firms that have a high demand for workers and are bidding up salaries for them. It was more cartel-like when Apple and Google were conspiring to keep tech salaries down by setting salary caps.
    - givemeethekeys 4y ago
      Do you know how much money the sales people in these organizations make on the backs of those engineers?
    - 908B64B197 4y ago
      > Stanford/MIT degree, willing to suffer through LeetCode challenges Or who actually completed a data structure and algorithm course as well as a discrete math course. I mean someone could grind leetcode for hours and rote instead of putting the work to complete these classes I suppose.
  - drelihan 4y ago
    Probably referring to recent articles / interviews that claim how large tech companies over-hired in efforts to take supply out of the market for competitors. https://fortune.com/2023/03/10/google-over-hired-talent-do-nothing-fake-work-stop-working-rivals-former-paypal-boss-keith-rabois/amp/ https://fortune.com/2023/03/10/google-over-hired-talent-do-n...
  - apercu 4y ago
    High? Based on what data? Is inventing things all day and understanding rapidly changing complex systems easier than family law? Outside a few thousand high paying jobs concentrated in a few regions, if you objectively look at most software developers worldwide, they're barely middle class.
    - jltsiren 4y ago
      I'd say most software developers are comfortably middle class. They are not upper middle class professionals in the same way as lawyers and doctors often are. Median full-time income is a good starting point for defining the middle class, at least in developed countries. People earning around the median tend to be pretty good examples of what middle-class life looks like. Most software developers earn above the median, but not so much above that their lives would be qualitatively different. In the US, the median is currently somewhere between $55k and $60k.
      - apercu 4y ago
        I guess I define middle class as somewhat comfortable.
      - jwestbury 4y ago
        This is a fundamental misunderstanding of "middle class," which has no connection to median income, but is exactly what it says on the tin -- a class between the upper classes and the lower classes. The earliest recognised middle classes were the wealthy merchant class who had similar wealth to the upper classes, but less social capital -- they were definitively above the lower class, whose labour was owned by the upper classes. These were the free men, or yeomen, of the middle ages, for instance -- people who owned their land, likely had their own businesses, and weren't beholden to the upper class. In more recent times, such as the 18th-19th century, the middle class expanded dramatically to include typical professionals, such as doctors and lawyers -- people who may rub shoulders with the elites, but whose wealth was still tied to their jobs. If their business failed, they would often no longer be middle class, whereas the upper class could likely fall back on connections and maintain good social standing. The median worker was decidedly lower class. This structure broke down somewhat in the US and, to a lesser extent, in western Europe in the post-war era, due to an abundance of demand for labour, which allowed lower class workers to enjoy traditionally middle-class luxuries, which included widespread homeownership, often multiple cars per family, etc. But don't make the mistake of thinking a well-paid factory worker was middle class -- they were working class. Most software engineers worldwide are working class. In certain pockets -- the Bay Area, Seattle, etc. -- or certain industries -- such as finance -- they are closer to middle class by earnings, but still working class by vocation, as they (we) work for a living and do not own our own businesses (as many doctors and lawyers do).
  - pwinnski 4y ago
    You might have misunderstood. Historically cartels have worked to keep SWE salaries low, not high[0]. 0. https://qz.com/247251/silicon-valley-hasnt-got-away-with-its-no-poaching-cartel-just-yet https://qz.com/247251/silicon-valley-hasnt-got-away-with-its...
    - nonethewiser 4y ago
      That doesn’t fit his analogy though. It also doesn’t make sense that the cartel would also be the primary source of income (the company, compared to diamond mine + cartel).
      - pwinnski 4y ago
        Ah, okay, I see now. Feel free to define analogy as a thing in which everything applies in exactly the same way to the level of detail that it really means you're describing the exact same thing using different words, while the rest of us go on with understanding that analogies are limited-purpose.
- lysecret 4y ago
  Take meteroits then. Ah do me a favour and google meteroits.
- Domenic_S 4y ago
  > because their sales and distribution channels are controlled by a cartel. ...which is only effective because naturally-occurring diamonds are hard for the average person to get. If there could be a water cartel there would be, but it doesn't work because 1) you can just go down to the river/find some snow/dig a well/etc/etc, and 2) water is inefficient to move in large quantities. You could fit millions of dollars worth of diamonds in the space of 1L of water (maybe $10-$100 at cartel prices)
- francisofascii 4y ago
  Medical schools certainly acted like a cartel to keep the number of physicians low. But SWEs? There is no gatekeeping authority AFAIK. Unless you are talking about the H-1B Program.
- nonethewiser 4y ago
  > Diamonds are expensive not because they're hard to get, but because their sales and distribution channels are controlled by a cartel. That’s _why_ they’re hard to get. I also don’t think SWE salaries are similar. A union would be analogous to the cartel, which are pretty much non existent in tech. Not necessarily in terms of good/bad but in terms of controlling the supply of labor. What do you see as the analog to cartels?
  - pydry 4y ago
    Cartels can be for buying or selling. For example, the new EU gas buying cartel or the Apple/Google/Intel/Adobe wage fixing cartel: https://www.cnet.com/tech/tech-industry/apple-google-others-settle-anti-poaching-lawsuit-for-415-million/ https://www.cnet.com/tech/tech-industry/apple-google-others-...
- beebmam 4y ago
  Supply of engineers is bottlenecked by education and experience. Not similar to diamonds
matheusmoreira 4y ago
In simple words: leverage. How much they need you divided by how much you need them.
gdthvxs 4y ago
Low effort post that can be replaced entirely with “supply and demand.” Why not actually do some research and back up the claims? Give some insight?
lysecret 4y ago
I mean this is the beauty of our market economy, in 9/10 cases when someone asks "why is this the price?" The answer is supply and demand. The other answer is incentives. Here you got a free econ degree.
- diob 4y ago
  Saying it's supply and demand or market economy is burying the lede a bit though. A lot of underpaid jobs have leverage due to how the USA infrastructure / economy is structured, which is that it's difficult to move / change. Even if you want to leave a job, you can't given you have no leeway in budget to search for a job, let alone pay the expenses to likely move (since our urban areas are so spread out). Factor in family that is relying on you, company provided insurance, etc. and your ability to consider leaving a job is heavily restricted. You can't even afford to go on strike, at least not to a duration that the company will care about. That and unions are absolutely gutted here. So you end up with a group of folks that have no leverage. It's by design unfortunately.
  - JamesBarney 4y ago
    It's not that it's hard for them to quit. If you've ever worked low wage jobs you'll notice turnover is quite a bit higher than high wage jobs. The reason they aren't paid much is it usually low wage jobs are pretty easy to hire and train for. Which means there is a very large potential applicant pool.
    - diob 4y ago
      At least where I live, they have a huge teacher shortage, but the wages haven't moved. See https://www.kold.com/2023/02/23/study-shows-severe-arizona-teacher-shortage-continues/ https://www.kold.com/2023/02/23/study-shows-severe-arizona-t...
      - JamesBarney 4y ago
        I wouldn't consider teachers low wage. Their salary doesn't seem that high for college graduates but they usually get an enormous amount of time off, pretty good pensions and and great job security.
sixo 4y ago
It is also affected by the value of the work-if the work is not valuable enough for the salaries required to hire people who can do it, the job won't exist. If the business can't substitute for that role the business won't exist.
- nonethewiser 4y ago
  Real dilemma for non professional small businesses ATM with inflation
alexfromapex 4y ago
These proclamations about things without citing any data whatsoever drive me kind of crazy
- angarg12 4y ago
  I have an academic background and I feel exactly the same. I find it difficult to take anything not backed by data seriously, unless it's pure opinion (and presented as such). However these kind of posts are commonplace and often very popular. Sometimes I refrain from writing if I can't find data to back up my point. Maybe I overestimate the importance that people place on these things.
dangerwill 4y ago
This is the level of analysis you'd expect from a first year economics student. And that isn't even considering that his points about teachers are entirely wrong. Teachers generally need a post grad degree to teach, assholes in tech only devalue this work because it isn't coding. I would pay money to see this guy try to run a classroom. Finally, teachers don't "get a lot of time off". They get a lot of time off in the summer but are pretty swamped throughout the rest of the year and it seems to end up hitting the average working hours per year in total. This is one of those job stereotypes from before the 2000s, when jobs at the bottom of the pay scale were not squeezed as hard as they are now
- louwhopley 4y ago
  Perhaps in your part of the world. The author is based in South Africa. Your statements seem entirely US based (or Western). In South Africa teachers don't need post-grad, many don't even have grad. South Africa also don't have 3 month school summer holidays, but holidays spread throughout the year.
ecshafer 4y ago
Baseball statistics have this concept WAR (Wins Above Replacement), basically if by putting in this player, how much more wins did they bring in than some other player. This is what's really big in salary, but is tied together with another variable, how much money is that win worth? If I am hiring sandwhich makers and pay them $10 an hour, which brings in $15 an hour of revenue, then some other sandwhich maker is twice as good at making sandwhiches, how much do I pay them? Probably not $20 an hour, since them being faster might still only net $15 of revenue an hour. That increase in revenue is what drives salary. The downside to a bad sandwhich maker is very small, its at most a few messed up sandwhiches. Tom Cruise makes 1000x another actor for the same movie because the fact that Tom Cruise is in the movie brings in some large multiple of revenue, and Tom Cruise takes a cut of that increase. Sports work in the same way. Software, Finance, and to a point Sales are the "normal" jobs out there that work in a similar way because its largely non-fungible. An amazing trader or dev might make the firm 100x revenue than an average trader. A bad dev or trader brings in Negative value as they make things worse. This is why teachers don't make more money, a better teacher does not bring in 10x revenue to a district, a worse teacher doesn't create 10x losses. Even though teachers have a large societal effect, there is no direct revenue analysis you can do to show what the replacement value is.
- ishjoh 4y ago
  > a worse teacher doesn't create 10x losses I would argue this is exactly what a worse teacher does. They can discourage/mislead/destroy 100s or 1000s of students over their career which can have dramatic effects for a society.
  - ecshafer 4y ago
    I agree with you. But I think the problem is that our society doesn't really know what that is until many years after the fact and its really hard to measure. Personally I would absolutely support a policy where teachers who have better test scores (by some metric. Same district? same city? same state? raw numbers?) get more money. A company can pretty easily see X brought in more than Y revenue. Tough for a school.
- 4y ago

24 points by louwhopley 4y ago

>Consider the price of water compared to the price of diamonds. Diamonds are far more expensive than water, even though water is essential for life and diamonds are basically useless. >Water is cheap because it’s relatively easy to acquire, whereas diamonds are much harder to get. Salaries work precisely this way. Diamonds are expensive not because they're hard to get, but because their sales and distribution channels are controlled by a cartel. Oddly similar to SWE salaries, now that I think about it. :P

akavi 4y ago
What's the cartel keeping SWE salaries high?
- hguant 4y ago
  Superficially, FAANG offering massive compensation packages to anyone who fits their model of "Stanford/MIT degree, willing to suffer through LeetCode challenges", which has a massive effect on the market for SWE, as it changes the bar for what's _possible_ in the realm of compensation, and ensures that the cartel gets its pick of SWE talent, simply because it can offer substantially more than most other companies. Interestingly, those companies are also the ones that I think have put the most effort into quantifying the value of a software developer to the business as a whole. The salaries look obscene to many people, but the cartel pays them because it believes it's getting more value than it's paying for.
  - williamDafoe 4y ago
    Don't forget the 50-60 hr real workweeks (more than 10% of the search team I was on was always working 11pm-12pm midnight). Turnover is actually pretty high at Google. My whole team (9 people) quit in the year that I left.
  - csdvrx 4y ago
    > the cartel gets its pick of SWE talent, simply because it can offer substantially more than most other companies. Some people will refuse to work for a FAANG as a matter of principle, and they don't have a monopsony, so it's not exactly a cartel I'd say
  - thirtyseven 4y ago
    That's... not a cartel though? A cartel is a group of firms conspiring to artificially control the supply of some good in order to increase its price, what you described is just several independent firms that have a high demand for workers and are bidding up salaries for them. It was more cartel-like when Apple and Google were conspiring to keep tech salaries down by setting salary caps.
  - givemeethekeys 4y ago
    Do you know how much money the sales people in these organizations make on the backs of those engineers?
  - 908B64B197 4y ago
    > Stanford/MIT degree, willing to suffer through LeetCode challenges Or who actually completed a data structure and algorithm course as well as a discrete math course. I mean someone could grind leetcode for hours and rote instead of putting the work to complete these classes I suppose.
- drelihan 4y ago
  Probably referring to recent articles / interviews that claim how large tech companies over-hired in efforts to take supply out of the market for competitors. https://fortune.com/2023/03/10/google-over-hired-talent-do-nothing-fake-work-stop-working-rivals-former-paypal-boss-keith-rabois/amp/ https://fortune.com/2023/03/10/google-over-hired-talent-do-n...
- apercu 4y ago
  High? Based on what data? Is inventing things all day and understanding rapidly changing complex systems easier than family law? Outside a few thousand high paying jobs concentrated in a few regions, if you objectively look at most software developers worldwide, they're barely middle class.
  - jltsiren 4y ago
    I'd say most software developers are comfortably middle class. They are not upper middle class professionals in the same way as lawyers and doctors often are. Median full-time income is a good starting point for defining the middle class, at least in developed countries. People earning around the median tend to be pretty good examples of what middle-class life looks like. Most software developers earn above the median, but not so much above that their lives would be qualitatively different. In the US, the median is currently somewhere between $55k and $60k.
    - apercu 4y ago
      I guess I define middle class as somewhat comfortable.
    - jwestbury 4y ago
      This is a fundamental misunderstanding of "middle class," which has no connection to median income, but is exactly what it says on the tin -- a class between the upper classes and the lower classes. The earliest recognised middle classes were the wealthy merchant class who had similar wealth to the upper classes, but less social capital -- they were definitively above the lower class, whose labour was owned by the upper classes. These were the free men, or yeomen, of the middle ages, for instance -- people who owned their land, likely had their own businesses, and weren't beholden to the upper class. In more recent times, such as the 18th-19th century, the middle class expanded dramatically to include typical professionals, such as doctors and lawyers -- people who may rub shoulders with the elites, but whose wealth was still tied to their jobs. If their business failed, they would often no longer be middle class, whereas the upper class could likely fall back on connections and maintain good social standing. The median worker was decidedly lower class. This structure broke down somewhat in the US and, to a lesser extent, in western Europe in the post-war era, due to an abundance of demand for labour, which allowed lower class workers to enjoy traditionally middle-class luxuries, which included widespread homeownership, often multiple cars per family, etc. But don't make the mistake of thinking a well-paid factory worker was middle class -- they were working class. Most software engineers worldwide are working class. In certain pockets -- the Bay Area, Seattle, etc. -- or certain industries -- such as finance -- they are closer to middle class by earnings, but still working class by vocation, as they (we) work for a living and do not own our own businesses (as many doctors and lawyers do).
- pwinnski 4y ago
  You might have misunderstood. Historically cartels have worked to keep SWE salaries low, not high[0]. 0. https://qz.com/247251/silicon-valley-hasnt-got-away-with-its-no-poaching-cartel-just-yet https://qz.com/247251/silicon-valley-hasnt-got-away-with-its...
  - nonethewiser 4y ago
    That doesn’t fit his analogy though. It also doesn’t make sense that the cartel would also be the primary source of income (the company, compared to diamond mine + cartel).
    - pwinnski 4y ago
      Ah, okay, I see now. Feel free to define analogy as a thing in which everything applies in exactly the same way to the level of detail that it really means you're describing the exact same thing using different words, while the rest of us go on with understanding that analogies are limited-purpose.
lysecret 4y ago
Take meteroits then. Ah do me a favour and google meteroits.
Domenic_S 4y ago
> because their sales and distribution channels are controlled by a cartel. ...which is only effective because naturally-occurring diamonds are hard for the average person to get. If there could be a water cartel there would be, but it doesn't work because 1) you can just go down to the river/find some snow/dig a well/etc/etc, and 2) water is inefficient to move in large quantities. You could fit millions of dollars worth of diamonds in the space of 1L of water (maybe $10-$100 at cartel prices)
francisofascii 4y ago
Medical schools certainly acted like a cartel to keep the number of physicians low. But SWEs? There is no gatekeeping authority AFAIK. Unless you are talking about the H-1B Program.
nonethewiser 4y ago
> Diamonds are expensive not because they're hard to get, but because their sales and distribution channels are controlled by a cartel. That’s _why_ they’re hard to get. I also don’t think SWE salaries are similar. A union would be analogous to the cartel, which are pretty much non existent in tech. Not necessarily in terms of good/bad but in terms of controlling the supply of labor. What do you see as the analog to cartels?
- pydry 4y ago
  Cartels can be for buying or selling. For example, the new EU gas buying cartel or the Apple/Google/Intel/Adobe wage fixing cartel: https://www.cnet.com/tech/tech-industry/apple-google-others-settle-anti-poaching-lawsuit-for-415-million/ https://www.cnet.com/tech/tech-industry/apple-google-others-...
beebmam 4y ago
Supply of engineers is bottlenecked by education and experience. Not similar to diamonds

matheusmoreira 4y ago

In simple words: leverage. How much they need you divided by how much you need them.

gdthvxs 4y ago

Low effort post that can be replaced entirely with “supply and demand.” Why not actually do some research and back up the claims? Give some insight?

lysecret 4y ago

I mean this is the beauty of our market economy, in 9/10 cases when someone asks "why is this the price?" The answer is supply and demand. The other answer is incentives. Here you got a free econ degree.

diob 4y ago
Saying it's supply and demand or market economy is burying the lede a bit though. A lot of underpaid jobs have leverage due to how the USA infrastructure / economy is structured, which is that it's difficult to move / change. Even if you want to leave a job, you can't given you have no leeway in budget to search for a job, let alone pay the expenses to likely move (since our urban areas are so spread out). Factor in family that is relying on you, company provided insurance, etc. and your ability to consider leaving a job is heavily restricted. You can't even afford to go on strike, at least not to a duration that the company will care about. That and unions are absolutely gutted here. So you end up with a group of folks that have no leverage. It's by design unfortunately.
- JamesBarney 4y ago
  It's not that it's hard for them to quit. If you've ever worked low wage jobs you'll notice turnover is quite a bit higher than high wage jobs. The reason they aren't paid much is it usually low wage jobs are pretty easy to hire and train for. Which means there is a very large potential applicant pool.
  - diob 4y ago
    At least where I live, they have a huge teacher shortage, but the wages haven't moved. See https://www.kold.com/2023/02/23/study-shows-severe-arizona-teacher-shortage-continues/ https://www.kold.com/2023/02/23/study-shows-severe-arizona-t...
    - JamesBarney 4y ago
      I wouldn't consider teachers low wage. Their salary doesn't seem that high for college graduates but they usually get an enormous amount of time off, pretty good pensions and and great job security.

sixo 4y ago

It is also affected by the value of the work-if the work is not valuable enough for the salaries required to hire people who can do it, the job won't exist. If the business can't substitute for that role the business won't exist.

nonethewiser 4y ago
Real dilemma for non professional small businesses ATM with inflation

alexfromapex 4y ago

These proclamations about things without citing any data whatsoever drive me kind of crazy

angarg12 4y ago
I have an academic background and I feel exactly the same. I find it difficult to take anything not backed by data seriously, unless it's pure opinion (and presented as such). However these kind of posts are commonplace and often very popular. Sometimes I refrain from writing if I can't find data to back up my point. Maybe I overestimate the importance that people place on these things.

dangerwill 4y ago

This is the level of analysis you'd expect from a first year economics student. And that isn't even considering that his points about teachers are entirely wrong. Teachers generally need a post grad degree to teach, assholes in tech only devalue this work because it isn't coding. I would pay money to see this guy try to run a classroom. Finally, teachers don't "get a lot of time off". They get a lot of time off in the summer but are pretty swamped throughout the rest of the year and it seems to end up hitting the average working hours per year in total. This is one of those job stereotypes from before the 2000s, when jobs at the bottom of the pay scale were not squeezed as hard as they are now

louwhopley 4y ago
Perhaps in your part of the world. The author is based in South Africa. Your statements seem entirely US based (or Western). In South Africa teachers don't need post-grad, many don't even have grad. South Africa also don't have 3 month school summer holidays, but holidays spread throughout the year.

ecshafer 4y ago

Baseball statistics have this concept WAR (Wins Above Replacement), basically if by putting in this player, how much more wins did they bring in than some other player. This is what's really big in salary, but is tied together with another variable, how much money is that win worth? If I am hiring sandwhich makers and pay them $10 an hour, which brings in $15 an hour of revenue, then some other sandwhich maker is twice as good at making sandwhiches, how much do I pay them? Probably not $20 an hour, since them being faster might still only net $15 of revenue an hour. That increase in revenue is what drives salary. The downside to a bad sandwhich maker is very small, its at most a few messed up sandwhiches. Tom Cruise makes 1000x another actor for the same movie because the fact that Tom Cruise is in the movie brings in some large multiple of revenue, and Tom Cruise takes a cut of that increase. Sports work in the same way. Software, Finance, and to a point Sales are the "normal" jobs out there that work in a similar way because its largely non-fungible. An amazing trader or dev might make the firm 100x revenue than an average trader. A bad dev or trader brings in Negative value as they make things worse. This is why teachers don't make more money, a better teacher does not bring in 10x revenue to a district, a worse teacher doesn't create 10x losses. Even though teachers have a large societal effect, there is no direct revenue analysis you can do to show what the replacement value is.

ishjoh 4y ago
> a worse teacher doesn't create 10x losses I would argue this is exactly what a worse teacher does. They can discourage/mislead/destroy 100s or 1000s of students over their career which can have dramatic effects for a society.
- ecshafer 4y ago
  I agree with you. But I think the problem is that our society doesn't really know what that is until many years after the fact and its really hard to measure. Personally I would absolutely support a policy where teachers who have better test scores (by some metric. Same district? same city? same state? raw numbers?) get more money. A company can pretty easily see X brought in more than Y revenue. Tough for a school.
4y ago