If there exist jobs that produce $1MM in value but that have a going rate of 200k, then there should be more of those jobs: either the company doing the work should expand, or it should have competitors. This will lead to increased competition to hire, which means higher wages. The increased number of jobs might generate downward pressure on the value produced by those jobs (since the output is now less scarce), and the increase in salary should increase the number of people who want to work in the field (which would dampen the salary increase), but we should ultimately reach some sort of equilibrium. The fact that tech companies bemoan how hard it is to find employees suggests that we aren't at this equilibrium.
To give an analogy, your explanation is akin to when people observe that the price of a good is based on the competitive market, and that the cost to produce merely provides (in most cases) a floor to that price. However, that's only part of the story: in a well functioning market large spreads between cost to produce and price encourages competitors to enter the space, which leads to lower prices. There may be delays, and there may be exceptions, but generally the function of competition is to reduce these spreads. Likewise, we should expect competition to reduce the spreads between job value and job salary, generally by increasing salaries and lowering values.
How could you possibly determine how much value your efforts are producing? How much value are you assigning to the risk the founder and investors are taking? Maybe your $200k job is producing $200k in value. Or even less.
>The fact that tech companies bemoan how hard it is to find employees suggests that we aren't at this equilibrium.
Tech companies always pretend it's impossible to find employees. That's not reality, though. That's a political strategy.
I'm not disputing that there's difficulty, and that it might not always be possible (although we can often estimate and assign a confidence level). But the parent comment claimed that even if we did know, value shouldn't pull salaries up: that's what I'm responding to (side note: the parent also implied that we can know what values are, since he acknowledged their use as a floor for salaries).
The repairs were a profit center, and the labor I was billing was keeping the utilities turned on, buying replacement tools, consumables, paying for my lunch break, covering rework, a hedge against me injuring myself, paying for the shop van I used to run inventory between stores, paying taxes, business licenses, my manager's salary, the owner's salary, paying for Bob to wander over and consult on a repair I wasn't sure about, paying the interest payments on the loans, and covering the loss leaders that got us repeat customers who needed repairs in the first place. Things like trade-ins and entry level equipment.
At your programming job, every manager above you in the chain, every support team that you use to get your work done are all being paid out of the money billed for you. Yes you may be writing $1M in software a year, but the company wouldn't exist and you wouldn't have any sales without those other people, so all of that overhead gets subtracted from your value. Ironically and possibly painfully, a company can exist for months without a single programmer, but it can't exist long without a management chain.
For example, you may discover that someone else got that promotion that you were eyeing, because they provided 15x value compared to you - 7 patents, 3 products architected that opened up new areas for growth, etc.
Genuinely interested to hear an expansion of this. How would pretending that technical employees are hard to recruit, benefit a company politically?
Absolutely 0, because they're not the ones doing the work.
And what makes showing up at the office and typing on a keyboard such a holy use of time that it alone deserves compensation?
"And what makes showing up at the office and typing on a keyboard such a holy use of time that it alone deserves compensation?"
The fact that it actually makes the damn product.
) In Icelandic, "win" means "work".
When the poor takes an investment risk of $1000 they risk more than some elite putting up $1000.
What is $1,000 worth to you? Now, that question has a wide range of answers. In some places, that's literally worth multiple lives. Or it could be beyond insignificant.
Obviously very few can or should take a personal investment risk of 100% or more of their net worth.
The original comment was that holding money generates nothing, you have to risk it, and I completely agree. You can risk 20% of your net worth and you're not risking your livelihood, and odds are in ~8 years your investment will have doubled, and your net worth increased by 20%. For some people that's a thousand dollars, others it's ten million. If you want to double your net worth in less than 30 years, you're going to have to risk a lot more. Everyone has access to the same returns on the public market (and we restrict access to private markets for very good reasons).
So it's a literal definition of risk, and as a percentage of net worth it works well. The problem of massive wealth inequality to me is completely adjacent to risking capital in return for investment returns.
This is true generally, but I think it doesn't apply in context. Tech has saturated the existing market, there is no demand to be satisfied for more tech. Of course, the industry will continue to grow, but only because the very nature of tech is to innovate. Growth in tech doesn't come from creating new supply to fill an ever-growing demand, it comes from innovating and creating new demand. That means that the growth of tech is bound to the rate of scientific progress, of investor's wallets and of cultural change. You can't keep hiring more and more 200k developers to make more millions, because there's no one left to pay more millions.
The parent, slg, was right in their analysis except for one point: employers have to compete on salary between each other, but they also have to compete against the engineer's opportunity to start their own company, which would let them earn directly in proportion to the value they produce. Engineers' salaries are therefore related to the level of risk and difficulty of entrepeneurship. The easier it becomes to start a startup (controlling for the expected returns of starting a startup), the more employers will pay their engineers.
> Tech has saturated the existing market, there is no demand to be satisfied for more tech.
Of course, if you mean at current prices, then sure: everybody who wants and can buy at current prices will do so.
Still, demand is very elastic. Even with current tech, there's lots and lots more demand at slightly lower prices. Companies can just wait until their capital investments have deprecated a bit more, and then lower prices a bit.
(You also want to keep prices high initially, even if costs would allow to go lower and still break even, to capture the higher willingness of some people to pay more to get your product sooner. Basic price discrimination.)
> in a well functioning market
All these big California technology firms argue to shareholders that their network effects create a "moat" (they prefer you not to call it a "natural monopoly"), and that this is exactly why their revenues are disproportionate to their spending/hiring.
I think your argument should be played backwards: the large-cap CA technology industry is not a "well functioning market" because everyone's just seeking natural monopolies--and sometimes capturing them.
That's not how technology works. The most evident example is where data feeds data, creating a market without compare. You can't compete with google for map data or AWS for hosting.
> we should ultimately reach some sort of equilibrium
The equilibrium is not based on the metrics you have proposed except in the slightest degree.
I don't think technology is that different. Incumbents have always had advantages. That doesn't totally preclude the possibility of competition. It might be that they compete by providing less value for less cost (eg the maps might not be as good, but they might be good enough for some users), or by servicing users that the incumbent doesn't care about (side note: isn't this what The Innovator's Dilemma is about?). But it's rare that a competitor is so dominant as to totally preclude any possibility of competition. You certainly haven't provided an example of one yet.
In 20 years, we will see who is competing and who is was just funded with unicorn dreams. I don't consider a single one of those comparable.
Azure and Google Compute Engine? I'd say those are pretty comparable to AWS.
Could you explain your example? I tried this, thinking it might give me something interesting, but I couldn't figure out what you were referring to.
When I use "should" in my earlier post, I don't intend it as an ethical "should". I mean it as a "if everyone acts in a rational way, this should, eventually, be the outcome".
Price fixing is an actual thing, that's why we have labor laws. Also see: non-compete agreements.
There are 10s of thousands of businesses in the US. It's hard to believe there'd be any remotely successful collusion in keeping wages down.
Non-compete agreements are invalid in many states. Also, would you sign a non-compete agreement in order to get paid 10% of your value to the business?
This takes many assumptions: People know of all these businesses. People are able and willing to move at a whim (not so easy with family/friends), people are willing to change their jobs every other month (for a business a job is just a transaction of money vs time, human beings, failed constructions that we are don't see it that simple) and so on. Neither the world nor people are completely rational, so things which work in theory often donThere are 10s of thousands of businesses in the US. It's hard to believe there'd be any remotely successful collusion in keeping wages don't work in reality.
https://en.wikipedia.org/wiki/High-Tech_Employee_Antitrust_L...
It doesn't sound like it was very effective. Cartels in general tend to be unstable, as members have powerful incentives to cheat on the agreement.
It's hard to say if this agreement actually reduced salaries in any significant way, as there were plenty of other companies in the area who were not part of the cartel.
Totally agree that the price fixing wasn't kosher.
For example, a person doing the exact same job at Facebook is going to provide more value than a person doing the exact same job at Twitter which is going to provide more value than a person doing the exact same job at a brand new startup. The Facebook employee might be producing $1m and the Twitter employee might be producing $200k. In that instance Twitter can't pay more than $200k and Facebook has no incentive to offer more than $200k.
Or maybe a more concrete example, if I am the head of design for Ford, the value I produce for Ford is always going to be more than I can provide by myself because I have no way to put my skill set to use in a new company. I don't have access to the supply chains Ford does. I don't have access to the factories that Ford does. I don't have access to the labor market that Ford does. If I wanted to actually compete with them, it would require billions in funding behind me like Tesla.
Additionally, yeah, it's true, competitors might not be able to realize the same value in the same space. Competitive advantages exist. Spreads between value and salaries will exist, and some companies might have bigger spreads than others because they're more able to realize value. I agree with all of this.
All I am attempting to do is refute the claim that there's no relationship between value of work and renumeration for that work ("[t]he value someone creates has nothing to do with their salary"). I don't dispute that we can create toy examples where that doesn't happen, but they aren't effective refutations of the general point.
(Economists say demand and supply are elastic, I think.)
matthewowen's argument is not assuming the labor theory of value is true. It's just pointing out that, other things being equal, if the demand for X increases then the demand for X-makers' labor increases too; hence X-makers' wages increase.
Nobody is stopping engineers from saying "I'm going to contribute $1.5m to your bottom line this next year, I want you to pay me $1.4m", but they'll be shown the door because there's a guy that's willing to contribute the same $1.5m in exchange for $100k in compensation.
Which is why you should be an owner/competitor versus an employee if you know the business well enough.
In case of financial trouble (very common at startups), who gets to be laid off first, the CEO or the developer?
Also, rank-and-file employees are typically scape-goated in legal proceedings, example: finance people going to jail for rogue/insider trading, even though upper management at least encouraged such behavior.
Wrong comparison. The CEO and developer are both employees. I've outlasted laid-off CEOs at several places of employment.
The comparison is between an employee and an owner. (Of course an owner may ALSO be an employee, maybe even CEO, and an employee may also be an owner, but comparison should consider these roles separately.)
The employee is risking having his assets stop growing temporarily as he is forced to go find another source of income. The owner might have no income from the business for a long time even if it is succeeding (or ever if it fails) and has to hand over already-earned assets to the business in hopes of getting it back plus more, but if things go south, he might not get anything back and may even be forced to hand over additional assets to cover damages. The employee's risk is temporarily not gaining assets, while the owner's risk is potentially losing his.
Reality is a little murkier than this separation, because an employee might lose assets moving to a new city only to get laid off. In a certain sense, an employee is the "owner" of a small service business providing services to a customer (his employer) and owners can trade off equity for risk by bringing in partners, but the big picture is still that people who decide on ownership vs. employment are choosing between two very different risk/reward profiles.
This isn't a very difficult thought exercise - if you believe the risk profile is greater for employees than CEOs, then why not quit your job and become a CEO of your own company?
A CEO or manager at many large corporations often has very little risk relative to the employees, and their contributions are often small relative to that of the employees, and in the least often not greater than the employees. I'm not saying there aren't good managers, or that they do nothing, but management has become too top heavy in the US as a whole, and the salaries of management pathologically disproportionate to their relative contributions.
You don't have to look very far to find examples of CEOs driving businesses into the ground and then leaving with severance packages that dwarf average employees' salaries, sometimes even average employee lifetime salaries, or of CEOs sheltered from financial or legal consequences by corporate personhood. There's also plenty of CEOs who take over businesses that are already turning around from a downside, after reforms that were put in place, and then are credited with causing the improvements, even though they did nothing.
Starting a company is different from managing or acting as an executive of an existing one, and my guess is that this is what people are reacting to. Even founders are sheltered to some extent when you consider venture capital and the protections of incorporation relative to, say, acting as an independent contractor.
In cases where employee ends up dependent on their employer, knowledge and experience of their job market would have prevented them from falling into this "trap", and also help them to escape it.
Likewise, employers (the shrewd ones at least, which our contemporary world tends to worship for good or bad) often don't actually take on real risk. We have witnessed many cases where companies have capitalized on profits, but chosen to socialize losses, bankruptcy or even worse, internal misconduct. This is in addition to the veil which usually shelters real corporate decision makers from risk.
This is not to say that risk analysis does not matter, but to emphasize its inherent subjectivity, and that the perception of risk can be varied through greater knowledge of one's situation.
That doesn't happen. The company has those debts. Not the individual.
"Early-stage startup employees are given greater compensation packages than later-stage employees specifically because of the greater risk of going to work for an early-stage startup."
Usually not, actually. We've seen plenty of stories about early stage employees being underpaid compared to what the new guys get, and their stock compensation gets dilluted to all hell.
"This isn't a very difficult thought exercise - if you believe the risk profile is greater for employees than CEOs, then why not quit your job and become a CEO of your own company?"
Because I like engineering, and becoming CEO is the fastest way I know of to stop doing engineering.
In certain industries, in certain places, this is possible. For tech businesses in the US, it might even be the norm. But it is far from universal. My food business failed 3 years ago, and despite being an LLC, I'm still personally liable for brick and mortar leases, business loans, credit card debt, unpaid taxes, and outstanding invoices from suppliers. On good days I think I might get past this and be a member of society again, but this seems far from certain. You are welcome to argue that with better risk management this would not be the case, but your blanket statement "That doesn't happen" is false and offensive.
Small company and startup loans are often secured by personal guarantees of the owners / founders.
If you haven't tried you probably can't imagine how stressful it can be at times...
Also, early startup employees are persuaded to accept below-market salaries and work a lot of overtime, exactly like the founders, without the upside ( rarely more than 1% of the company).
The downside was a lower pay now and substantially larger risk of losing my job compared to other places. And developer work here isn't exactly hard to find.
The potential upside was... maybe two years down the line they'd start paying me what other people were willing to pay me now. The guy I negotiated with even tried to make it sound like we were all there on the same terms cos our monthly pay was the same, leaving out that I'd be the only without a share, the other four sharing the company equally... have to say I walked away from that one.
Take a job for below market pay, sure. You better have decent equity though or you are being taken advantage of.
I'm not saying there aren't early employees that deserve better deals, I'm quite sure there are. But a lot of the perception of unfairness I think stems from a lack of understanding of the differences between being a founder and being an early employee. They are just very different bargains, each with their ups and downs.
For example, let's say three founders own 20% each and there's an external investor that owns 20% and a 20% options pool. The founders payed for their shares with a year's sweat equity. The first employee gets 1% from the options pool. From then on everybody makes the same, and works just as hard. Is that unfair?
I'd say it depends, and the math is not entirely straightforward... Stuff you would have to take into account (and which I rarely see mentioned when people talk about this) include the probability of the company failing before raising money / hiring the first employee, each person's alternative costs and the company's expected future value when the first employee was hired. There are also more subtle issues, like the employee having every right and incentive to leave the minute the company starts going downhill, whereas the founders... Well, it's just very different.
I've been both by the way. :P
For their exposure, employees are compensated with salaries. Are you willing to pay your company money if the product you work on misses expectations?
However, there are many staff that are let go prior to cutting engineers out right.
Which makes it the perfect position to be in to launch and iterate and test and lean startup a good side hustle.
http://www.wbur.org/morningedition/2016/08/02/non-compete-ag...
Hell, I've treated it as a filter in the past: the mindset that leads a company to be unyielding on noncompetes is a signal not to work for them in the first place. That a noncompete is unenforceable in some jurisdictions functionally only means, for the overwhelming majority of tech employees, you aren't finding out how much they think of you before you sign on the dotted line and quit your other job.
I think a lot of companies who might have previously hired devs would be better off trying not to anymore, with what devs cost today. This is going to mean all sorts of things, including more off-the-shelf stuff vs. home-rolled for companies, smaller software companies that don't get started because people would rather take the BigCo job that pays $200k base plus stock, etc.
Pretty much any business is about taking stuff and making something out of it that can be sold for more than its inputs. With dev salaries being what they are, a lot of opportunities get ruled out quickly because they just aren't big enough.
No reason for 100s of companies to write the same app.
Agree though, risk vs reward.
Uber just lost a war of attrition with Didi Chuxing after throwing a billion dollars at China's taxi market
How much attrition can you afford?
As it turns out taxi riders care a lot more about price than they do about the company's cultural sensitivities.
This isn't unusual in the transportation sector. In the 80s UK bus companies would undercut each other in a bid to achieve a monopoly. Some even offered completely free buses in a bid to drive their competitors out of business.
No, the reason you don't get that salary is because you need to discount for the risk that you don't deliver $1.5m.
Realistically, you just could be full of shit, you could get bogged down in politics, your wife could get cancer, and any number of other things could happen. So the price trends down sharply.
Even assuming that you had an identical prior on the two candidates, the information that one person was willing to do a job for half price would make me doubt his intelligence.
Out of 100 developers 10 might save you 1.5million and getting the correct 2 might save you 3 million.
* I say there is no lower bound because slavery still exists. There are employers who do not pay people at all.
We keep hearing from large tech companies that there's a crisis -- a massive shortage of qualified software engineers, to such a degree that they won't be able to operate at all if they can't raise the H1-B quotas and import more people to fill all the jobs currently going unfilled.
If that truly is the case, then supply and demand would tell us that currently engineers are underpaid; if there are companies so desperate to hire engineers that they're turning to immigration law to try to increase the supply, why aren't they simply offering large enough compensation packages to attract the existing pool?
Pondering the answer to that may enlighten you.
With immigration Americans get cheaper tomatoes and unAmericans get comparatively better jobs. It's a win-win.
Well, they are. Compensation packages at the big tech companies are ridiculous. I know someone that got $100k signing bonus (cash, not stock) without a degree at 21 years old. He's not a genius either.
At a certain point, don't you think it's better to share some of that opportunity with smart foreigners? How many Teslas does an American twenty-something need?
Clearly they aren't. Say an engineer can make a company $1 million per year. They are only willing to pay $200k per year in total compensation, but they complain that they can't hire enough engineers. Obviously they aren't paying enough per engineer.
>At a certain point, don't you think it's better to share some of that opportunity with smart foreigners? How many Teslas does an American twenty-something need?
So it's not the multi-billion dollar companies that are being greedy, but the engineers making $150k a year?
Companies want to import foreign workers to depress wages so that they can save money, and your instinct is to blame the workers who don't want lower wages?
Engineers are not created from money. You might be able to fill your positions by paying more, but not all of the positions in the entire country. Not without immigration or higher graduation rates.
> Companies want to import foreign workers to depress wages so that they can save money, and your instinct is to blame the workers who don't want lower wages?
How do you justify that the location of birth should be the main determinant in whether an engineer earns $150k a year or $30k a year? That line of reasoning is a lot more disgusting to me than corporate profit-maximizing.
The shortage is a manufactured problem to justify an attempt to depress wages.
>How do you justify that the location of birth should be the main determinant in whether an engineer earns $150k a year or $30k a year?
If we take that to it's logical extreme. No one makes $150k a year. We allow an unlimited number of software engineers in until the average salary drops down to a level where it's not worth it to immigrate here. Maybe that's worth it to you, but if global income equality and globally open borders are your goal, argue for that.
Stop with this false argument about an engineering shortage that doesn't exist.
I think it is more likely that the marginal value added by an engineer to a company is much less than you think it is.
If Google currently earns an average of ~$2m per engineer that does not imply that they will earn an additional $2m upon hiring another engineer. In fact I'm confident they could fire at least 500 engineers tomorrow without negatively impacting their profit at all.
That makes no sense. If they can lose a significant chunk of their engineering team "without negatively impacting their profit at all" then why did they hire them in the first place.
If your assertion is true, they must have significantly overestimated their staffing needs. If they did, it's likely everyone did, so the engineering shortage crisis doesn't really exist after all.
Everything I've seen points to a real shortage and desperation on the part of the employers: interns making six figures with free Manhattan penthouses, nonstop recruiter spam, 22-year-olds negotiating stock packages on their 8 fulltime offers before they finish school, fresh grads buying Teslas with signing bonuses before their first day of work, countless job listings that never ever go away, $10k+ referral bonuses, websites where employers apply to you...
There's no more onus on me to prove a higher marginal value than there is on you to prove a lower one. You've attempted to shift the burden of proof by arbitrarily deciding that your assumption is the correct one.
I will say that most of the people I've read trying to determine the marginal value of software engineers, think that it's a good deal higher than what you seem to think it is. When you consider that there are outliers who will make or save companies tens of millions and not very many who are going to have very large negative impacts, the average is going to trend pretty high.
>Everything I've seen points to a real shortage and desperation on the part of the employers: interns making six figures with free Manhattan penthouses, nonstop recruiter spam, 22-year-olds negotiating stock packages on their 8 fulltime offers before they finish school, fresh grads buying Teslas with signing bonuses before their first day of work, countless job listings that never ever go away, $10k+ referral bonuses, websites where employers apply to you...
None of that is at all even remotely normal. The vast majority of software engineers don't experience anything like that. None of the people you're talking about are close to average. Average programmers don't pass Google style interviews. I went to a fairly average state school, and I've done a lot of tutoring and interview prep. I'd be shocked if 1% of the students I graduated with could pass a Google interview.
It's hardly shocking that the top 1% of engineers are making large salaries. Top law firms start associates out at $200k a year, do you think there's a shortage of lawyers?
If there really was a shortage, Google and other companies would relax their interview processes, and invest more in training. If anything, the real problem is that everyone thinks they need to hire the top 1%, but they don't want to pay for it.
$150k in silicon valley is equivalent to about $90k a year where I live, so I'm not interested in moving. If someone there offered me $300k, I'd go in a heartbeat.
The employers don't consider someone who can't pass an AmaGoogTwitBook interview (with some practice, of course) to be a 'qualified engineer', and there is indeed a shortage of such people.
Let's say I run a cleaning business, and I decide that I only want to hire janitors who can run a 4 minute mile. I think that they are the best people for the job, and no-one else will do.
Let's also say that I only want to pay them $50k a year. Some time goes buy and I'm having a really hard time finding people. Now I could raise what I'm offering to $100k a year, and find plenty of candidates who would move here from other states, change careers, move from management back to working as a janitor, come out of early retirement etc...
Or I could relax my requirements--take people who show the potential to run a 4 minute mile and train them.
Or I could lobby the government to increase the visa cap so I can import qualified people who are willing to work for $50k.
This doesn't sound so bad when you think about it. I wasn't willing to offer more than $50k a year, so wages weren't increasing anyway.
However, if I didn't have the option of raising the visa cap, and I really believed that only janitors who meet my qualifications would work, I would have no choice but to offer a higher salary.
Therefore, importing more workings depresses wages for qualified janitors.
Now you might be thinking $50k is plenty for qualified janitors. They can live with less. But here's the important part. You didn't increase the visa cap for only qualified janitors.
You increased the visa cap for all janitors, who are making at least the prevailing wage. And it's based on a lottery. The number of extra visa spots aren't proportional to how much a company is paying. Every company who is willing to pay the candidate at least the prevailing wage gets the same shot at these visa slots. Since, most companies don't have sub 4 minute mile requirements for janitors, the prevailing wage is much lower than $50k a year.
Now the market is flooded with janitors willing to work at average companies for $20k a year, and you've driven down wages for all janitors not just the top 1% of qualified janitors. Even though the shortage is only for the top 1%.
Average software developers aren't making $150k a year and buying Teslas, and they are the ones you're going to hurt with visa cap increases.
I'll agree that there is a shortage of top 1% programmers. There is a shortage of the top 1% in nearly every industry almost by definition. However, until you develop a system for only importing enough top 1% programmers to meet demand, you're going to hurt everyone who's not in the top 1%.
There are several systems for doing this. The easiest to implement probably to use an auction instead of a lottery (this comes with a set of its own problems though).
Generally speaking, immigrants (about 1.2 million annually to the US) are free and full participants in the labor market, free to pursue the degrees and skills they wish, in response to salary, working conditions, career longevity, personal interests, and so forth. They may wish to open a sandwich shop, sell real estate, or write software. Just like people who were born in the US.
It turns out that, like those born in the US, these immigrants don't go into engineering in numbers that high tech employers feel they should. Personally, I think this is a sign that perhaps high tech employers need to sweeten the pot a bit - if people (immigrants or otherwise) who are free to choose aren't choosing you, that's the market's answer. It's not them, it's you.
Employers have responded by lobbying for what I consider to be a wildly self-serving and coercive visa that gives them the power to bestow and revoke US residency and work rights under the notion that there is a "shortage" of engineers. This enables them to say - we'll let you in if you study computer science and agree to write code for us for the "market rate" salary that fails to attract those with the freedom to choose their careers in sufficient numbers. We won't let you in if you don't take our tech test, and if you try to quit your job and open up a sandwich shop, we'll have you deported. You know, free labor markets.
I'm opposed to a system that allows employers to bestow (and revoke!) US residency and work rights on non-citizens under the condition that they study what the employer says they should study, work on what the employer says they should work on, live where the employer says they should live, and so forth. I think this position is very consistent with pro-immigration attitudes and personal freedom.
There is not set number of "positions", the number depends on the number of developer willing to work for the wage offered. If you would consider an employer who is willing to pay $50 per month for a developer to have an open "position", then the number of positions would be an order of magnitude higher.
I don't get this argument. If there are 100 open positions and 80 eligible candidates, 20 (at least) positions will remain vacant, regardless of compensation. Not saying that this example reflects the real world, just that the argument is not sound from a logical/mathematical standpoint.
> For example there are plenty of people qualified to do engineering work who aren't working in that field right now for whatever reason, but could be enticed to take an engineering job for enough money.
Like whom? How can you be qualified to do software engineering if a) you've invested so much in a different career that you already make more than SV salaries and b) you presumably haven't done software engineering in years?
As for past investments in different careers, those are sunk costs and irrelevant to decisions made now.
The population of people who consider $150k a year not to be sufficient incentive to get a job is vanishingly small.
> As for past investments in different careers, those are sunk costs and irrelevant to decisions made now.
It's not irrelevant if they did those things instead of learning/doing software engineering. You can't study medicine or law or banking for 8 years and just become an engineer at Google overnight because the Google starting salary had (hypothetically) risen to $300k and it's now a better deal.
Any employees that really create much more value than their salary can and will just leave and start their own company, where they get to set their own salary. By doing so, they'll also be leaving the pool of employees, and potentially hiring others too (reducing supply, increasing supply, driving salaries up).
Of course, every employee creates more value than their salary, to cover overheads, some profit for shareholders, etc. Employees that claim to be creating far more value than their salary, but not leaving to start a company, are probably deluding themselves, and vastly underestimating the value of the capital employed in their company, goodwill with customers, the sales and management functions, etc.
It's like a person making minimum wage working at a hotel in Times Square, charging $800 / night, saying they're getting a raw deal because they're creating so much value.
It's not just overhead, it's a highly efficient system.
(See eg the effects of Aldi on the Australian retail sector.)
Labor's price is set in a competitive factor market, just like land or capital. It gets bid up and down by supply and demand. Let's call this "the labor market force".
How much value a person can provide in a given setting depends on a whole range of things including what the employer does (scaled product company vs. body shop), overall management effectiveness, how motivated they are (both themselves and by their employer), their skill level, etc. Let's call this "the company force"
The reason people aren't paid as much as California devs elsewhere has a lot more to do with the "company force" than the "market force". The fact is, most companies who employ developer just don't need great devs. They need people who can develop websites of moderate complexity, keep things going, write line-of-business software, etc., not people who can do original, innovate algorithmic work.
Related, there is no "Developer shortage". There is only a technical talent shortage insofar as dev salaries are getting bid up and the buyers who are getting outbid (mostly smaller startups) are complaining. The good companies are getting exactly who they want.
They actually do they're just unable to recognize great devs, unable to recognize that they don't recognize them and refuse to pay for them.
But they certainly need them.
>Related, there is no "Developer shortage".
There's always a shortage of labor in every industry.
That's one of the iron rules of business lobbying - if you whinge about it enough the government will go and do something (training, bring in immigrants, teach code in school) that will let you pay employees less. => higher profit.
(As a side-note, that's why I always smile and engage with the staff whenever I can: it's a thankless job, despite being one of the most important.)
I appreciate that grocers are selling me cheap goods, and that it took hard work to create and supply them. Yet, I don't want them to form a cartel.
Cartelization is not good for the economy, no matter who tries to pull it off.
If we lived in a just meritocracy, people who created millions of dollars in value with their code would be compensated with millions of dollars, but this is rarely, if ever, the case. It's this fact which makes libertarian arguments about the unfairness of tax and social welfare programs offensive.
Market economics has some serious downsides, but it has vastly increased the welfare of humanity. More people have been coming out of poverty in China in the past few decades that ever before in human history.
If you feel it is unfair that as a developer you can create millions of dollars in value that you aren't being compensated for, then I recommend you consider ways that you could be compensated for this value. Perhaps instead of being an employee, maybe get involved in a start-up with equity (or found a company.) Having done so, I can assure you it's more nerve wracking than ever I would have expected, and harder to unleash the millions in value than one might expect, but it's still fun, challenging, rewarding, and worth giving a go! :-)
Okay, so what's the society of my boss getting paid twice as much as me while actively impeding my ability to create value?
Also, antibiotics and internet are poor examples of market economics; both are heavily subsidized and regulated. So it's disingenuous to hold these up and then in your following paragraph claim that market economics is helping humanity.
> Market economics has some serious downsides, but it has vastly increased the welfare of humanity. More people have been coming out of poverty in China in the past few decades that ever before in human history.
How do you justify attributing this to free market economics?
> If you feel it is unfair that as a developer you can create millions of dollars in value that you aren't being compensated for, then I recommend you consider ways that you could be compensated for this value. Perhaps instead of being an employee, maybe get involved in a start-up with equity (or found a company.) Having done so, I can assure you it's more nerve wracking than ever I would have expected, and harder to unleash the millions in value than one might expect, but it's still fun, challenging, rewarding, and worth giving a go! :-)
I do think it's unfair, but I actually don't care, because I'm self-aware enough to realize that the way in which our economy hurts me is nothing compared to how it hurts most people. I'm incredibly lucky to have landed in a career where things are only as unfair as they are, and I'd much rather work toward helping people in worse situations than me than in fixing the minor injustice of getting paid less than management.
Code that belongs to the company is ultimately the responsibility of the stockholders and their board. As an at will employee with no equity, I will give them exactly what they ask for in their code.
At each job, I will go above and beyond the call of duty once, to gauge the reaction. At some jobs, I get a cash bonus. At others, I just get a pat on the back. The last two jobs in a row, I was told to not do that again. So I didn't.
Don't be an apologist for bad management. I'm not going to do the right thing if I could get fired for it.
I also won't discount the frictional costs of changing teams. If you take two identical developers and switch their jobs, each of their teams would see a temporary hit in performance as each one gets acclimated. But they will eventually get to the point were their team is exactly as efficient as it was with the other employee.
That gave me a chuckle.
(Though, of course, some social intelligence goes a long way. No need to actually know how to code.)
The work is hard, and demands a lot of training/skill, but there are a lot of people who will do almost anything to stay in the field. One of the things they can do is accept a lower-than-tech-market salary.
That is not my experience at all. I see big skill differences in my coworkers.
But as an employer, it's real hard to know which candidate is 200% of the average and who is 50% (or -10%), so you end up having to offer everyone an average salary with small variations.
The main difference is that executives have leverage (and they have friends in high places) while average employees have almost no leverage.
It's the government's job to make sure that employees have some sort of leverage over their employers.
(You see some more examples of stories like the Ballmer resignation, when you look at the "Effects of untimely CEO death", eg http://www.cnbc.com/2016/04/28/the-effects-of-a-ceos-death-o...)
It's not only rank-and-file employees that have little leverage, average shareholders aren't much better off.
The government can try and make sure to keep barriers to entry low for competitors, and barriers to switching to competitors for employees. Competition keeps companies in line, even when it's executives running the show.
In many fields what prevents this is startup capital. It's expensive to get a supply chain for physical goods up and running. But if you have the business acumen and connections there is not nearly as much of a barrier to entry in the software world.
careful with the "U word" around here. We don't need no stinkin unions, or any sort of professional association.
I mean sure we don't get OT and too frequently get asked to be in a hellish oncall rotation or some 80 hour a week death march. We like it that way and we don't want to do anything to change it!
No need to accept these conditions. Eg Google and Facebook are always hiring and treat their employees better than that.
(And I don't really see why I would want to join an organization and throw in my lot with people who are not smart enough to take above remedy.)
With tech it's the other way around.
> Is it possible that there are factors outside of unionization that affect how these workers are paid?
Of course, there are tons of variables. But it's a fact that unionized workers make more than non-unionized workers in the same jobs, that unionized workers are much more likely to have health insurance, that unionized workers are much more likely to have paid vacation and sick time, etc etc.
1) Unionization is easier and more effective when defection is difficult (or impossible, as in some German unions) and heavily punished. As soon as defection pays off, it loses its value.
2) The set of high level executives at large corporations is small and cliquish enough that it is a de facto union, since they can convince boards to bid up each other's prices and punish/shun those who offer their services at lower prices.
The American Medical Association is a great example.
(Unless you are going to work for fools..)
If we lived in a just meritocracy, people who created millions of dollars in value with their code would be compensated with millions of dollars, but this is rarely, if ever, the case.
Somebody (usually several somebodies) took the chance to create a support structure to enable said person to create the millions of dollars in value.
How much of the value should go to the value creator and how much to the enabler with the capital (and the vision to use it in that way instead of spending it on something else) is a very interesting question that has been tackled for a long time, particularly from Marx onwards.
A tech company contains a lot of structure, and very little of that is actually geared toward enabling anyone to create millions of dollars of value. A large portion of that structure exists to enable the management of a company to justify taking in large profits. It's should surprise no one that those creating the structure would create it in a way that benefits them.
I know a few people who work at a tech cooperative, which has mostly developers with 1 secretary who manages benefits/taxes/etc. and 1 "business liaison" who manages customer communication. They've created millions of dollars of value without most of the structure, and it's no coincidence that they're all set to retire in their late 30s.
And what you neglected to mention is that there is currently a massive developer shortage of supply, and lots of developers are being suckered into low salaries when they could be making much more somewhere else.
This under-values domain knowledge and especially company-specific knowledge. Yes, someone can ramp up on a code base over time, but I don't know if you've seen how ugly the limiting case is where they utterly replace all the devs with a new set who know nothing about the codebase and drop all the organizational knowledge. The rate at which things get done suddenly becomes a fraction of what it was before and the defects multiply quickly.
It's routine to get bonuses larger than your annual salary in finance, specially in investment banking roles, this is not routine in software engineering
In any case, in https://news.ycombinator.com/item?id=12212180 you said something like
- finance people used to get normal amounts of money, now they get more - hence, software people need to do something as a collective.
I don't see how the first implies the second. Especially since the finance people didn't do anything as a collective, did they?
Change the set of axioms and the initial parameters and you end-up with invalid definition and properties of market dynamics. I guess OP probably believes that markets reach equilibrium by themselves.
There's plenty of information about salaries at software companies floating around. Everyone knows (or could know with a quick search) what the salary for each level at the big tech firms are, as well as what the typical pay at startups is.
However the information problem for employees isn't actually all that bad, as you say. The problem for employers trying to figure out whether people can actually perform is much, much harder. (But luckily they can usually diversify their bets amongst more than one employee.)
Ignoring the risk factor in the equation leads to some rather wrong conclusions.
I would argue that the employee's current risk is greater than the stockholder's risk, since the stockholder generally has much more information about exactly what he is risking than the employee does -- and a greater legal right to that information. The average employee has no legal right to information about the health of the company where he's employed. He has to take the risk that the company isn't simply going to collapse out from under him leaving him with no income and a, best case, several week or month job search.
So what about the case of a worker cooperative economy? Where would the risk come from in a worker cooperative (beyond the normal risk an employee assumes)? Capital financing, which could still be done by debt or by crowd sourcing. In the case of debt, the risk depends on how we structure the companies. If they are structured as limited liability corporations, where only the property of the company can stand as collateral for debt, then the employee owner doesn't risk anymore than he does joining any other corporation. The difference is he has a legal right to complete information about the company's health and a voice in picking its direction.
He actually take substantially less risk in a worker cooperative (where employment means ownership is granted as a part of salary as opposed to being required to buy shares) than with a normal corporation. And he stands to reap the full benefits.
Free market socialism (i.e. a large UBI + single payer healthcare + low regulation) would largely mitigate that risk aversion, especially when combined with low levels of personal debt, since if you fail you can always count on decent healthcare and the UBI check.
Of course Mondragon in spain is different you have to Ante up
Some questions: 1. Wouldn't there still be a need for capital to finance risky ventures that take a long time to create value? How would a forward-looking startup with high capital costs, such as a biomedical device company with unproven technology, work in this economy? 2. How do you measure the value labor creates? 3. Is the allocation of resources among labor proportional to the value it creates? How does that work among a team of specialists that are more than the sum of their parts?
I'd genuinely like to understand whether this could work or has worked.
http://www.chelseagreen.com/business-economy/companies-we-ke...