I moved to the Bay Area in mid 2019 from another country. I've had discussions with my American colleagues where I asserted that we were overpayed for what we do. They insist that it's deserved because we're the top engineers of the world working at a top company. But I'm 100% certain the only reason we're paid as much is because of the insane cost of living in the Bay Area. I know many great engineers, or even my former-self, in my home country who are not paid even 1/3rd of what we get paid in the Bay Area. I think this WFH revolution will be a real reckoning for the software industry and the entitlement of many Bay Area engineers.

That is because of the historic lower status of "engineers" as well you need to compare these salaries to doctors Lawyers.

Or in the UK train drivers ;-)

I'm sure the cost of living is a significant factor, but don't overlook regular old capitalism. The giant FAANG companies need huge quantities of programmers to grow, they are fighting with their competitors to hire those programmers, and they're all convinced (true or not) that they need only the best programmers and that their interviewing systems which can identify such programmers.

Sure, the companies tried the standard approach of just secretly agreeing not to compete with each other for talent, but the DoJ didn't care for that, and so they just do the other thing: pay as much money as is necessary to get the folks they want.

Apple makes about $435,000 in profit (not revenue) per employee, including non-technical employees. If they think that they need to pay staggering salaries to programmers to keep a good thing going, they will absolutely do it. Would they like to pay their programmers a third of what they're paying now? Totally. Would such a salary be fair? Totally. But those programmers would just call a Google or Facebook recruiter and be out the door the next day.

You're right, the real reason is the high density of companies and the talent they attract to the Bay Area. My point with cost of living was that companies need to pay $(CoL + X + Y) for people to be willing to move out here. Where X is whatever they need to pay to entice the employee away from the other companies. And Y is the amount of savings/discretionary spending the employee wants to have.

I always wondered why the FAANG companies don't move their main campuses to somewhere with a lower CoL (call it CoL') so they only need to pay $(CoL' + X' + Y) to keep the employee. Paying X' (where X' probably less than X) because they're no longer in local competition with the other companies. I wonder how long it would take to recoup the cost of moving the company in savings on compensation. There are countless places which have better quality of life than the Bay Area, while also having lower CoL. I chose to move to the Bay Area because Y was greater than what I could get anywhere else.

I agree, otherwise way more jobs would have huge compensation growth in the bay area alone if cost of living was enough to explain the income growth of engineers.

There is a reason why software is %20 of the economy and most economic growth in the USA now and why engineers are paid a lot and I believe they are correlated.

The competition of Bay Area (and California, in general) engineers is definitely a factor. But it doesn't preclude rockstar engineers existing in other areas unwilling to relocate to the region. This policy gives tech companies the best of both worlds (theoretically).

I agree, but this may still result in a happier workforce. I expect that many people live and work in the bay area because of the higher salaries; this may encourage them to prioritize other factors in their lives.

If productivity isn't affected by location why wouldn't the salaries rise accordingly? Companies don't care how much housing costs in an area are, they care about the compensation vs. what they get.

Salaries aren't determined by productivity, they're determined by supply and demand. This comes up every thread where someone expects for-profit corporations to be magically convinced to pay more than they can because "but my productivity" or something.

And the willingness of workers to supply labor doesn't have much to do with expenses but their alternatives.

Cool, what are their alternatives? This is a trend that is sweeping across tech, starting with some of the highest paying employers in FAANG and trickling down to companies like Reddit. When the industry norm becomes permanent WFH, what alternative is there?

Seriously, what are you expecting workers to do exactly?

Their alternatives are the other remote companies! I'm expecting workers to do what they always have done, namely walk to the better paying employers. You earn the highest wages in any field in places where multiple employers are competing for labor, and the lowest in company towns.

Tech hubs like San Francisco are not "company towns", they already had multiple employers competing for labor, and workers already had the choice to go to these other companies that are becoming remote.

The only difference is the benefits of non-remote tech-hub work that have been driving the high wages in tech - concentration of talent, face-to-face communication/team-building, advanced urban infrastructure - are now gone. So tech workers will have the same amount of company choice, but can no longer benefit from tech hubs; tell me why companies are going to continue paying the same high wages again?

Your productivity, as measured by how much value you bring to the employer, does influence your salary, by setting a ceiling for it.

Concretely, if your work adds $300k/year to company revenue, it will at most pay you that much.

Of course, it prefers to pay you less, and to get close to that number it's best to be part of a big enough labor market that you can get job offers from several employers.

Here's the thing: In a mainly remote programmer labor market, that we seem to be entering, all employers in the entire US are in your local labor market, so that should work out fine.

What I just described is "supply and demand", with a bit of detail.

This is not how it works.

The bigger the labour pool, the worse deal you are going to get. You're now competing against the guy in Nowhere Town, this guy can do your job and he's willing to do it for less because he's never experienced an expensive reale estate market.

I run a small consulting practice. We are highly skilled and very experienced. We can often charge much less than our competitors because we don't have the overheads our competitors do. A 1 million dollar deal for my practice is worth a lot more than a 1 million dollar deal for Accenture. We can go down to 700,000 and still have over 90% profitability, Accenture will walk away at that price point because it's not worth their time.

> The bigger the labour pool, the worse deal you are going to get.

If this was true, big cities would pay the lowest wages, while remote rural places would be where to go for really high pay.

I think the main thing missing from your model is that the employer pool is also growing.

This is actually the case in certain industries and areas. You can, for example, make more money as a medical professional in a rural area than you can in cities, for example.

The main thing missing here is that this is the tech industry where there was previously no demand in rural places, which makes the low supply in rural places irrelevant. Before the aggressive lockdowns across the country, tech companies didn't care about rural areas because the increased labor pool wasn't worth the compounding gains you get from a concentration of talent, face-to-face communication, and advanced urban infrastructure. Now they literally can't have that, they will give you a worse deal because they have access to a larger labor pool.

It's kind of absurd to suggest that increasing the labor pool alone will lead to higher wages. It's strictly worse for city dwellers who already benefited from an increasing employer pool, which is now offset by an increasing labor pool.

Theoretically this is true, but most business has little to no idea how much value a given employee adds to the company, with the exception of some very specific roles like sale. Just think of any middle manager - what is their value add to the company? They are clearly needed to make sure workers have clear objectives, but how would you put a number on it?

For starters, it’s not possible to measure how much value an employee generates. When I worked as a consultant, I billed $x per year, is that how much value I generated? No. How much of that value did sales generate? How much did the secretary generate? How much did the cleaner generate? How much of my colleagues value did I generate by referring clients to them when I was at capacity? Or by helping them with their work when they needed it? Or vice versa?...

I think you’ve made a bigger over sight here though:

> In a mainly remote programmer labor market, that we seem to be entering, all employers in the entire US are in your local labor market, so that should work out fine.

What you would expect from this is a new equilibrium prices that is a) lower than the current highest paid region, and b) higher than the current lowest paid region. Which is a situation that doesn’t benefit anybody currently working in the large metros.

A worse (but likely inevitable) outcome would be if wages started trending towards a price somewhere in between San Francisco and Manila.

And this seems like a desirable outcome, at least short term, for reddit. They get to pay (slightly) lower than Bay Area salaries, and get the top candidates across the US.

Ironically, years ago they made their entire workforce move to SF, after they'd been spread all over the country ever since reddit started.

I keep hearing this. Yet in practice have not seen top candidates in non Bay Area cities request drastically lower compensation

Top candidates in non Bay Area cities are already getting paid a fair bit lower. They’re not requesting lower pay, there just isn’t the same demand for top software engineers.

Yeah, this is even occurring in second tier cities like Austin, Denver, etc (well maybe slightly less so more recently).

This assumes there is an untapped supply of developers across the nation and that all a company has to do is look outside of the traditional tech hubs, but that is not the case. The tech hubs grew in a self-fulfilling cycle, attracting nearly the entire supply of competent developers.

Now that supply is spreading across the country because remote work is easier, but that doesn't change the number of developers that these companies are competing for. I doubt that the supply/demand curves will move much at all.

>The tech hubs grew in a self-fulfilling cycle, attracting nearly the entire supply of competent developers.

This is a wild statement and I would guess it is coming from someone who hasn't spent much time professionally outside of tech hubs. There are tech jobs and competent developers everywhere. They just exist in a higher concentration in tech hubs.

> The tech hubs grew in a self-fulfilling cycle, attracting nearly the entire supply of competent developers.The tech hubs grew in a self-fulfilling cycle, attracting nearly the entire supply of competent developers.

Even ignoring the silly claim at the end, what you say isn't logical. New developers aren't born in SV, they move there because that's where the jobs are. If they no longer need to move there for the good jobs, they won't.

> New developers aren't born in SV, they move there because that's where the jobs are. If they no longer need to move there for the good jobs, they won't.

This statement supports my point. A large proportion of devs currently live in a tech hub. They moved there because there was opportunity. Telling all the developers that the opportunity will come to them does not magically change the number of developers. So if demand for developers hasn't changed, and the supply hasn't changed, why would salaries change?

The only way the number of available devs changes is if some new untapped supply exists outside of the tech hubs. My argument is that it does not, the majority of devs that could already moved to a tech hub or figured something out.

As a non-tech hub guy, I think your last point probably isn't true. Where I work, the best devs are not on par with the Stanford/MIT etc. people, but we can hold our own quite well with the next tier down from New York, San Francisco, etc. (A lot of the devs here are from India originally but some are locals and the point stands regardless.) I've worked with a few of those people from big tech hubs on joint projects (one or two even went to prestigious technical colleges), and we had a high level of mutual respect and trust in one another's abilities. Whether my salary will trend towards yours or vice versa I don't know, but I definitely think I could have gotten a pretty big bump had I moved to San Fran. I don't because of many types of friction (laziness, family/friend/other relation ties, age, so on). If that friction goes away I assume we'll become more direct competitors.

> New developers aren't born in SV, they move there because that's where the jobs are.

Maybe as a rough generality. 1/3 of the developers I know were born in SV.

1/3 of the developers I know were born in New England.

It’s probably not hard to guess the confounding variable.

Sure, but that would be invalidating someone telling you no developers were born in New England.

SV is a 2m+ area filled with local schools, where many of the parents are developers and highly supportive of the education to be a developer. For someone to say “no developers are born in SV” is bewildering.

You've chosen to interpret a missing qualifier as "all" when the more likely response if you'd asked for a clarification would be "most". It was very clear what the point made was, and it was not that nobody born in SV ever becomes developers.

I live in the Midwest (unfortunately), and despite interviewing quite well it has been difficult to actually get those interviews while living in the Midwest. Previously on HN there were some interesting articles about bias against Midwesterners.

There's many great developers outside of SV but they're typically doing boring Windows-centric finance or engineering support work.

Of course it'll move the curve. Now companies won't be geo locked to US anymore. Yes they have offices in other countries but the salaries are adjusted according to their COL. Think of EMEA where lots of SWE would love US salary but still live there. So the net effect would be that the market will hit an equilibrium where that salary is now way lower for US SWEs than what they used to get but way higher for EMEA SWEs than what they used to get. Get ready for a big time pay cut.