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> 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 trai

> 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.
      - thedufer 11y ago
        > Whatever a competitor is willing to pay, the company that provided the training can just pay that and not risk their employees being poached. Yes they can, if they want to go out of business. If I spend $20k to train a new employee, I can afford to pay them their value to me - $20k (less than that if I want to make a profit, but this is the maximum that allows me to stay in business). Meanwhile, my competitor waits 4 weeks for me to do the training and offers their full value. Now I can either let them go, or match the offer - but either way I'm down $20k, while my competitor comes out even. So you can imagine why I might not want to spend money on training. Given your other points, this is only a problem is the cost of the portion of the training that is transferable is more than the extra cost of poaching (over that of hiring a fresh employee). As the job market becomes more liquid (decreasing that poaching cost), this becomes the case more and more.
      - notahacker 11y ago
        It isn't free to poach and onboard employees, but it's less than the cost of training in a huge number of industries, especially if the training comes with a recognised professional qualification attached to it. If I spend a large fraction of their annual salary on supporting them through a qualification I might well give them a pay rise afterwards, but a competitor able to extract similar revenue per head from trained staff can always afford to offer them a bigger pay rise after I've picked up the tab for their training. I'm only in profit whilst providing training if I can pay my staff less than their marginal revenue product for long enough to cover that overhead; ideally it would be before they've finished and got the certificate but that's not always possible. And hence, in the original example, the company providing the training ending up spending $111k on their member of staff over the course of the year to head off a competitor's $90k offer, even if the employee isn't worth $111k (Considering your original contribution to the thread was to argue the competitor wouldn't pay $111k, I think accusing me of missing the point is a bit rich...)
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.

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.
    - thedufer 11y ago
      > Whatever a competitor is willing to pay, the company that provided the training can just pay that and not risk their employees being poached. Yes they can, if they want to go out of business. If I spend $20k to train a new employee, I can afford to pay them their value to me - $20k (less than that if I want to make a profit, but this is the maximum that allows me to stay in business). Meanwhile, my competitor waits 4 weeks for me to do the training and offers their full value. Now I can either let them go, or match the offer - but either way I'm down $20k, while my competitor comes out even. So you can imagine why I might not want to spend money on training. Given your other points, this is only a problem is the cost of the portion of the training that is transferable is more than the extra cost of poaching (over that of hiring a fresh employee). As the job market becomes more liquid (decreasing that poaching cost), this becomes the case more and more.
    - notahacker 11y ago
      It isn't free to poach and onboard employees, but it's less than the cost of training in a huge number of industries, especially if the training comes with a recognised professional qualification attached to it. If I spend a large fraction of their annual salary on supporting them through a qualification I might well give them a pay rise afterwards, but a competitor able to extract similar revenue per head from trained staff can always afford to offer them a bigger pay rise after I've picked up the tab for their training. I'm only in profit whilst providing training if I can pay my staff less than their marginal revenue product for long enough to cover that overhead; ideally it would be before they've finished and got the certificate but that's not always possible. And hence, in the original example, the company providing the training ending up spending $111k on their member of staff over the course of the year to head off a competitor's $90k offer, even if the employee isn't worth $111k (Considering your original contribution to the thread was to argue the competitor wouldn't pay $111k, I think accusing me of missing the point is a bit rich...)

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.