14 ms·

> if a business invests $20k in training and $80k in salary, there is nothing stopping another employer from offering $90k in salary after training is complete

> if a business invests $20k in training and $80k in salary, there is nothing stopping another employer from offering $90k in salary after training is complete. And nothing stops the first business from raising the employee's pay to $91k. Why should they expect to keep paying the same salary to someone they've made more valuable? They already amortized the costs of training over the value added by the employee in the first year, right?

yummyfajitas 11y ago
Then the total cost to the first business for this employee is $111k. The cost to the second business (who provides no training) is $92k to beat the first company's offer. It's a losing proposition to provide training - you get the same labor at a higher cost. In contrast, if you simply pay $100k to trained employees, and employees can pay for training out of pocket, you preserve the cost structure (big caveat: I'm ignoring taxes) but without the risk of losing your investment.
- bicknergseng 11y ago
  > if you simply pay $100k to trained employees Assuming 1) you can find trained employees, and 2) they are willing to work for $100k. If the value of the trained employee is $111k, then why would they work for $100k except for ignorance of their value? This is my big problem with STEM shortage parrots and with labor as a market in general: ideal candidates are rare, and, in general, willingness to spend more or train up is pretty low. On the other hand, anecdotally businesses seem willing to wait months or years for that ideal candidate to come along and fail to balance the gigantic opportunity cost lost with the cost to train. It's economically not as simple as what I'm describing, but that's sorta my point. I rarely see anyone in labor market discussions (especially around STEM or highly skilled workers) include the opportunity cost of an unfilled position.
  - notahacker 11y ago
    Their market value probably isn't $111k, hence their existing employer being unwilling to match competitors' salary offering for a trained member of staff and pick up the tab for the training.
    - vectorjohn 11y ago
      If their market value isn't $111k, why would the competitor pay that?
      - thirdtruck 11y ago
        Exactly. Sometimes the market "decides" that you're going to have to stop under-paying your employees.
      - notahacker 11y ago
        Person currently earns $80k. Training costs $20k. Rival company will be willing to pay $90k salary after training to poach the developer, which means the current employer may end up forced to counter offer with $91k salary after paying for the training. 91k + $20k in training fees = $111k Competitor does not pay $111k because competitor does not pay for training. Which was the entire point of the exchanges above You could of course question why a company would train their employee at all if the market rate for an already trained member of staff was about $90k. Because retaining an existing member of staff at an $80k salary after paying $20k for their training happens to pay for itself after 2 years. Its quite sad I feel I have to post the calculation to avoid further downvotes, but its: (($80k * 2) + 20k)/2 = $90k I honestly thought this was high school stuff....
        vectorjohn 11y ago
        Nobody is asking how to add numbers together. I just think you're missing the point. Whatever a competitor is willing to pay, the company that provided the training can just pay that and not risk their employees being poached. Additionally, it isn't free to poach employees, they will have training costs no matter what. In other words, after training you raise their salary.
  - Futurebot 11y ago
    Exactly right. That opportunity cost seems perpetually ignored. Also, when we talk about "value in the market of an employee's skillset", we're obviously talking about how much total compensation they'll receive. What ALSO seems to get ignored is the fact that the people you're hiring (particularly in software!) are or should be generating a multiple of that salary, so worrying about "90k" vs "110k" is laughable when they may be generating value of 500k-1M, even after you factor in health care and all the other benefits. Does anybody actually believe that those few tens of thousands of dollars (should) make or break anything? We're not talking about the cost of eggs or something here; we're talking about software, a huge force and value multiplier. The (IMO very weak) counterargument here is "well, budgets are set to blah blah blah" - but in that case, you're allowing a difference of a few dozen thousand dollars dictate whether or not you get someone, which can be the difference between shipping, getting out a new version, or whatever and not doing so. If your budgeting is that inflexible, maybe your organization has other problems it should address first. When it comes to software, cost-based pricing should not be anywhere near the discussion. Software developers and their output should judged on value. It's crazy that anyone is still in this mindset after nearly two decades of software eating the world. We may be getting paid a lot relative to the median, but it's still just a fraction of the value it creates - otherwise, why would anyone bother? Hire a dev for 135k for example (includes benefits), and have them only generate 150k worth of value? Come on.
- vectorjohn 11y ago
  You misunderstood the premise. The first company pays $91k after training. So it's not $111k, it's $100k during training, then $91k after that. More competitively, it would just always be $100k and the second company would have no advantage. In fact, the first company has the advantage because it will be easier to initially find the people that need training.
  - thirdtruck 11y ago
    On top of that: The second company presumably still has domain-specific training of its own to perform, and will have to un-train the hire in other ways. Makes more sense to just pick up someone new.

yummyfajitas 11y ago

Then the total cost to the first business for this employee is $111k. The cost to the second business (who provides no training) is $92k to beat the first company's offer. It's a losing proposition to provide training - you get the same labor at a higher cost. In contrast, if you simply pay $100k to trained employees, and employees can pay for training out of pocket, you preserve the cost structure (big caveat: I'm ignoring taxes) but without the risk of losing your investment.

bicknergseng 11y ago
> if you simply pay $100k to trained employees Assuming 1) you can find trained employees, and 2) they are willing to work for $100k. If the value of the trained employee is $111k, then why would they work for $100k except for ignorance of their value? This is my big problem with STEM shortage parrots and with labor as a market in general: ideal candidates are rare, and, in general, willingness to spend more or train up is pretty low. On the other hand, anecdotally businesses seem willing to wait months or years for that ideal candidate to come along and fail to balance the gigantic opportunity cost lost with the cost to train. It's economically not as simple as what I'm describing, but that's sorta my point. I rarely see anyone in labor market discussions (especially around STEM or highly skilled workers) include the opportunity cost of an unfilled position.
- notahacker 11y ago
  Their market value probably isn't $111k, hence their existing employer being unwilling to match competitors' salary offering for a trained member of staff and pick up the tab for the training.
  - vectorjohn 11y ago
    If their market value isn't $111k, why would the competitor pay that?
    - thirdtruck 11y ago
      Exactly. Sometimes the market "decides" that you're going to have to stop under-paying your employees.
    - notahacker 11y ago
      Person currently earns $80k. Training costs $20k. Rival company will be willing to pay $90k salary after training to poach the developer, which means the current employer may end up forced to counter offer with $91k salary after paying for the training. 91k + $20k in training fees = $111k Competitor does not pay $111k because competitor does not pay for training. Which was the entire point of the exchanges above You could of course question why a company would train their employee at all if the market rate for an already trained member of staff was about $90k. Because retaining an existing member of staff at an $80k salary after paying $20k for their training happens to pay for itself after 2 years. Its quite sad I feel I have to post the calculation to avoid further downvotes, but its: (($80k * 2) + 20k)/2 = $90k I honestly thought this was high school stuff....
      - vectorjohn 11y ago
        Nobody is asking how to add numbers together. I just think you're missing the point. Whatever a competitor is willing to pay, the company that provided the training can just pay that and not risk their employees being poached. Additionally, it isn't free to poach employees, they will have training costs no matter what. In other words, after training you raise their salary.
- Futurebot 11y ago
  Exactly right. That opportunity cost seems perpetually ignored. Also, when we talk about "value in the market of an employee's skillset", we're obviously talking about how much total compensation they'll receive. What ALSO seems to get ignored is the fact that the people you're hiring (particularly in software!) are or should be generating a multiple of that salary, so worrying about "90k" vs "110k" is laughable when they may be generating value of 500k-1M, even after you factor in health care and all the other benefits. Does anybody actually believe that those few tens of thousands of dollars (should) make or break anything? We're not talking about the cost of eggs or something here; we're talking about software, a huge force and value multiplier. The (IMO very weak) counterargument here is "well, budgets are set to blah blah blah" - but in that case, you're allowing a difference of a few dozen thousand dollars dictate whether or not you get someone, which can be the difference between shipping, getting out a new version, or whatever and not doing so. If your budgeting is that inflexible, maybe your organization has other problems it should address first. When it comes to software, cost-based pricing should not be anywhere near the discussion. Software developers and their output should judged on value. It's crazy that anyone is still in this mindset after nearly two decades of software eating the world. We may be getting paid a lot relative to the median, but it's still just a fraction of the value it creates - otherwise, why would anyone bother? Hire a dev for 135k for example (includes benefits), and have them only generate 150k worth of value? Come on.
vectorjohn 11y ago
You misunderstood the premise. The first company pays $91k after training. So it's not $111k, it's $100k during training, then $91k after that. More competitively, it would just always be $100k and the second company would have no advantage. In fact, the first company has the advantage because it will be easier to initially find the people that need training.
- thirdtruck 11y ago
  On top of that: The second company presumably still has domain-specific training of its own to perform, and will have to un-train the hire in other ways. Makes more sense to just pick up someone new.