[ryandrake]

Yep, the tired old "Shortage of Engineers" meme is bound to come up in any discussion about tech hiring that ignores compensation. Saying there is a shortage of something in a market only makes sense given a price. Sure, there is probably a shortage of Bay Area engineers if you're paying $70K, but I bet there is no shortage if you're paying $400K.

[wrong_variable]

I think its a lot more complex than that.

If the cost of beef was increased 4x for whatever reason, then most people would just switch their preference for meat.

There are ofcourse a lot of greedy companies.

But a lot of the time the consumer demands a price point for software product, many startups cannot afford to pay 400K to developers.

I think its not a reflection of how difficult it might be to create software but stagnant wages for the average person.

[vonmoltke]

I agree with everything you say about the economics of the situation, but ours is the omly industry I know of where inability to make enough money to pay for a sufficient workforce translates into a workforce shortage. A cattle rancher isn't going to compalain about a "ranchhand shortage" if she can't afford to pay enough to attract them.

[TrickzOnU]

It is not. The rancher would just hire an illegal immigrant often and it happens all the time on farms and restaurants. It doesn't fly in office environments and in positions where the salary cant just disappear in the books.

Secondly, only the technology industry has a massive pipeline of overseas workers available...so naturally there is constantly a "shortage" as a means to increase the pipeline of overseas workers.

I'm not saying NOT to hire overseas workers. I'm saying to be honest about it. Say -- we refuse to pay market wages and would rather that new graduates not find work than pay them a living wage for the Bay Area, instead we'll hire offshore workers desperate to flee their countries and willing to shack up 3 to a studio apartment.

[a3n]

The whole thing is based on unrealistic expectations. People work somewhere in the Bay Area, or launch a startup there; it's one of the most expensive areas in the country, maybe the world. Then they don't want to pay enough so that there is no shortage of employees.

So then the talk turns to bringing in H1Bs who will work for the low end of the "prevailing" (Ha!) salary.

Why don't these companies cut to the chase and just open an office in India? Or have the entire operation there?

Or are some of them actually not trying to change the world by delivering better toast to your door, and they just want to live in the Bay Area?

[ryanSrich]

It's a form of off shoring. They create a fake shortage, lobby for more H1Bs, pay the national average for fair market, which is laughably low for the Bay Area, and there you have it. The tech shortage sponsored by Facebook...

[illegalFallacy]

>It doesn't fly in office environments

This is untrue in my experience as the equivalent in an office environment to hiring an illegal immigrant would be subcontracting a 'job' to either a staffing agency whose H1B employees get paid piecemeal and billed out for different amounts. I've also worked with independent contractors who if you added up their low pay on the level, wouldn't be making adequate pay.

Heck, I've worked contract jobs through staffing agencies trying to make end meets and had the job location charge for parking which would be reimbursed 3 months later. Good luck getting ur money if you are working the next job and can't afford the time to follow up for that check.

There are plenty of ways companies dance around the same entity of illegal immigrant wages.

[acjohnson55]

To be fair, that is literally what a shortage is, economically speaking.

[branchless]

The system of usury against land ensures that land costs adapt to absorb all available income after food/clothing/energy costs have been accounted for.

Why is silicon valley more expensive to rent in? Because people came with money and the banks agreed to loan at a multiple of the new wage ceiling.

If wages increase x4 guess what will happen?

We need to stop banks creating debt to issue against land otherwise it will always absorb all income. And therefore all productivity gains flow to the land owner.

[mahyarm]

Also known as supply vs demand...

Bay area is infamous for many housing supply constraints in regulations. As far as loans increasing the demand side, banks can be pretty strict with %20 down payment restrictions. Which is why once houses go out of the dual income high earner price range ($1-1.5 million), you start seeing it overflow to other less desirable regions in the bay area.

[branchless]

But the creation of credit costs nothing therefore rent extraction can scale up to match productivity gains in a heartbeat.

[Tsagadai]

Which given that land is limited (you can only go so far out before you are in another place) then the price of the building will increase. It is possible to end up in a situation where even very wealthy workers cannot afford to rent within hours of a city. Sydney, Melbourne, London and Vancouver are examples where this is starting to happen.

it has not happened yet but it is certainly pricing many out at lower ends of the income scale.

[branchless]

Exactly. Go work on your productivity. The rentiers are waiting.

[hueving]

>Why is silicon valley more expensive to rent in?

Because supply and demand. High salaries attract a lot of people to the bay and communities systematically refuse to build new housing to meet the demand so the price goes up.

You can do whatever you want to the banks but that won't change the fundamental of 2X people trying to live in X houses.

[wangchow]

Silicone valley is mental. I wouldn't want to live there just because of the gentrification..

[branchless]

No, many hot-spots have large rentier presence including people "owning" and renting out multiple residencies which causes huge supply pressure.

Credit also typically increases ahead of wages which squeezes people further.

This isn't supply of people vs supply of homes, this is supply of credit. If you neutralise this you will see prices fall and be paying less of your labour to banks.

2008 - the credit taps ran dry => huge crash. Before that near unlimited credit saw land prices increase hugely. Neither on the up or the down did we see wages have such volatility.

[newjersey]

I don't know why it is outrageous to say the solution to high rent is to build more.

We shouldn't worry about "squeezing" people out. Ours is a HUGE nation. We have A LOT of natural resources and there is no reason why we can't let people build more (outside of protected areas, of course).

People who are "priced out" should move to places where rent costs less. I keep hearing about property owners having enough political clout to block further development, depressing supply. They placate existing residents with tiny portions of rent-controlled apartments.

I fail to see how "gentrification" is a problem at all in the bigger scheme of things.

I don't think people renting out more places is a problem. If landlords hold supply out of the market to prop up prices, we can discourage such actions with a more dynamic property tax that places a realistic tax burden on under occupied or unoccupied property.

All that being said, we definitely need to figure out some way to peoperly educate people about personal finance.

[branchless]

I'm not arguing not to build more I'm simply arguing with the notion that the main problem is one of supply and demand. It is not, there are other problems in the mix including taxing labour not land.

https://www.amazon.com/Progress-Poverty-Industrial-Depressio...

[TrickzOnU]

>> People who are "priced out" should move to places where rent costs less

It is a huge nation, but one where 70% of the tech jobs are stuck in SF/SV. I can move to Lincoln Nebraska and pay $400/mo in rent, but I sure as heck wont find an employer seeking a python job.

[whoiskevin]

Water? Nation has natural resources. Valley does not.

[danieltillett]

Rents can only increase if the supply is limited compared to the demand. Anything that decreases supply why demand is high will only increase prices. The solution is to either increase supply or decrease demand for housing.

[branchless]

I guess they didn't get the memo on this in all the pre 2008 countries where supply was being added like crazy and so was credit and prices rose before a huge crash.

It's very naive to think that this is simply any one factor, especially supply and demand alone.

Why are economics conversations so limited?

[danieltillett]

The complication with the supply/demand story is speculation. What happened pre-2008 was demand was artificially boosted by speculators (i.e. a bubble). The true demand for housing didn’t change much, but the speculative demand for housing driven by rising prices and cheap money increased massively. The downside of all speculative bubbles is when they pop.

The best way to avoid speculative run ups in prices (and subsequent crashes) is effective taxation. Of course taxation of land is not popular with the rich and powerful as it can’t be avoid.

[branchless]

Exactly. Forcing supply below demand through zoning restrictions does help, but once speculation begins this hurts supply also.

It amazes me on HN where on most other complex behavioural problems if someone came along and shouted "it's because of X" they would be laughed out to cries of "it's more complicated than just one thing".

Yet when it comes to millions of people with varying priorities interacting with government and the banks anyone who comes up with anything more complex than "it's supply and demand" is told "no, I've done econ 101 thank you".

Hacker news can't be bothered with Georgism, they've done econ 101 syllabus (provided by their establishment).

https://www.amazon.com/Progress-Poverty-Industrial-Depressio...

[bayesian_horse]

You are running into the fallacy that you can know what is a bubble and what is not, before the fact.

[Retric]

Markets can stay irrational for a while, however the crash was a direct result of over supply. Land is plentiful and city's only have reduculys prices through poor infrastructure or artificially reduced development.

[branchless]

Land is plentiful. Land with the correct planning permission is not.

Credit however is not constrained except by a willingness to borrow and on the up this is near-unlimited. Fortunes are made not by doing but by speculating and then at the end the workers pick up the tab.

[branchless]

Would love to know how anyone could downvote this!

Come on, let's hear how rents are not tied to wages in a thread about remote working providing higher wages than the local area but lower wages than the hot-spot.

Let's hear it HN.

[metafunctor]

This seem to be exactly how it works. A lot of states and countries have tried to fix the problem by introducing housing benefits – but guess who, in the end, gets that money?

[branchless]

Housing benefit is the worst thing you can do. It's landlord benefit. Land value tax is the way forward.

[ta_donk_gt]

> many startups cannot afford to pay 400K to developers.

Then hire remote devs. Or move your startup to a more affordable location.

If you need to have developers work onsite, and you need to be in the Bay Area, then you need to pay accordingly.

[conjectures]

> many startups cannot afford to pay 400K to developers

It's a good point, but I wouldn't expect a construction company that could only pay 20% of cost to hire cranes to complete many buildings.

So maybe startups in that bracket just aren't viable under their current models. Maybe they need to rethink their salary/equity mix to make up for lack of cash.

[kowdermeister]

$70k is a splendid salary if you live outside the US :) It's probably more than I ever earned in my lifetime.

[TrickzOnU]

Yes, i'd take a $70k salary while living in North Carolina. But the "shortage" being discussed here is for the Bay Area. I'm here, let me break down my costs: - $17k taxes - $3k health care premiums - $7k college loans - $36k rent - almost nothing left for savings, retirement, down payment, engagement ring, any means to get out of my situation

[macjohnmcc]

You couldn't afford to get married if you can't afford an engagement ring.

[jajern]

You can get married for about $60 (or the cost of a marriage license in your area). Of course, if you want a Wedding then that's a little different.

[thefastlane]

not sure what you mean?

[progressive_dad]

I think I got the gist of OP's comment... Computer programmers make higher than the average salary. If you're barely making ends meet as a programmer your significant other is probably NOT making ends meet. Living together and sharing expenses saves some money but you'll probably be just about back where you started once you're married and co-habitating with your spouse.

Then comes kids...

[bogomipz]

Can I ask what 36K in rent affords and roughly which part of the Bar Area?

[nedwin]

$3k per month should get you a studio apartment in the Mission, SOMA, downtown etc.

If you're willing to share you can get for cheaper. If you want 1 bedroom you're going to struggle to find something for $3k.

[climb12]

Less 3k a month is in solid 1 bedroom territory for those neighborhoods these days. Around ~$2700 is what I'm seeing in my search for decent 1bedrooms in good SF neighborhoods.

[bogomipz]

That's still pretty crazy though. What if you had a kid(s)? That's $2700 a month that could be building equity somewhere else.

From what I have seen the salary spread between say SF and NYC is not enough to compensate for the higher rental costs in SF.

[doozy]

It may be a splendid salary in some locations outside the US, it is not in many others.

Americans tend to believe they are wealthier than anyone else. Not so! Apart of the fact several countries in Europe have higher salaries (and cost of living than the US) there's the fact major cities are much more expensive than smaller ones, even in poorer countries.

Case in point: The most expensive cities in the Americas are Sao Paulo, Bogota and New York. You can easily enjoy a higher standard of living earning $70k in most of the US than you can in Sao Paulo or Bogota (I've lived in both, I know it for a fact)

[lohengramm]

Just for the record: $70k is still an amazing salary for São Paulo. Actually, you can find good enough developers for half of that.

[doozy]

That's not the point, the point is $70k in Sao Paulo buys you a lower standard of living than $70k pretty much anywhere in the US but in a handful of cities.

$70k in Sao Paulo doesn't go much further than $70k in New York (or Tokyo, London, Paris, Singapore...)

Do I have to remind you how much a computer, a smartphone or a car costs in Brazil compared to the US?

I doubt your claim of finding "good enough" developers for $35k. I was making more than that in my first job, fresh out of school, when I had zero real world experience, working remotely for an American company, and that was in the early 2000s.

Most companies would be elated to find even a competent html/css/js coder for that price.

[lohengramm]

I understood your point about comparing São Paulo to other cities. I just wanted to point out that, in absolute terms (not relative to other ṕlaces), $70k is a great salary for SP standards.

About the $35k claim, let's make the math: currently USD 35k ~= BRL 115k. 115k/12 ~= 9.6k. That means USD 35k/year is roughly BRL 9.6k/month, which is the salary of a Senior Java guy here. Idk about 2000, but it seems like you were doing very good back then.

[doozy]

Fair enough, but the point stands. If I were given the choice of a $70k/year position in Sao Paulo or, let's say, Miami, FL. I would take the Miami location without hesitating for a second. $70k goes a lot further there than in South America. Literally everything is cheaper in Miami than in SP (or Bogota, where I am).

Most software developers, as most people, in South America simply cannot afford the standard of living of a first world country, even when they make a great salary for local standards. Most things don't cost any less just because the local population cannot afford it (and very often they cost more).

You're comparing local salaries with remote salaries. It's very different, 95% of local guys are unemployable remotely due to a combination of lack of language skills (huge factor), low skill level, shitty work ethics (another huge factor) and being stuck in dead-end technologies like Java.

When American companies look for remote developers they want people who speak excellent/perfect English, are in the same time zone, have (at least) above average skills and are willing to work like Americans do (Americans are workaholics, you'll be surprised at how damn lazy/unproductive most people are). I've been working remotely for 10+ years and I've been asked to find local talent several times, and finding it is hard. I've only vouched for one guy in all this time, and he quit after 6 months and moved to the US (and the pay was spectacular for local standards).

[Dangeranger]

70k is a good salary even in many places within the US, the problem is that the cost of living in SF and NYC makes that salary very hard to live on. Rent in some locations within SF and NYC can meet or exceed 70k.

[kowdermeister]

I get that, it's just so unreal to see these numbers for the same thing as I do. This is a really good reason why remote work is going to level the market. I'm a bit surprised that it's not already around 50% of hires.

[branchless]

Remote working on this scale in several major industries would precipitate a second banking crisis far larger than 2008 I suspect.

[Dangeranger]

What is considered 'good' compensation for a senior developer in Budapest? Have you been turned down for remote work due to where you live?

[bayesian_horse]

Compensation has nothing to do with "shortage of engineers". Engineers have to come from somewhere, and the only way higher compensation can bring more engineers is by competing with other industries or regions.

It's not like engineers prefer living on social welfare to an underpaid engineering job.

[ryandrake]

I'll address this one, see also vostok's comment below. I know plenty of former engineers and other super-smart technical people who wrote software for years but left because they hit the salary ceiling. They would go BACK to software engineering in a heartbeat if there was a compensation trajectory that matched their current jobs.

[vostok]

> Sure, there is probably a shortage of Bay Area engineers if you're paying $70K, but I bet there is no shortage if you're paying $400K.

Just to reiterate this, I know many people who would become developers if they could make $400k. These are smart people with strong technical skills.

[bayesian_horse]

Until all companies are paying $400K, then they have the same problem again.

And on the other hand: Can they afford these wages? I would guess that many companies would have trouble justifying that salary on a broad level.

[vostok]

Companies can afford to give massive payouts to founders and investors so I don't see how they can't spare a few dollars for developers.

[BadassFractal]

Would you be the CEO that decides to pay your employees 2-3x market rate? I'd love to watch that experiment from the sidelines.

[ryandrake]

If employers are constantly complaining about a shortage, I would argue that their idea of the "market rate" is not correct.

I want to buy a BMW M3, but I will only pay $5,000. I can't find any, therefore there is a shortage of BMWs??

[yompers888]

To frame it another way, the work they want to do isn't worthwhile enough to justify paying the people who would be needed to do it.

[RKoutnik]

400k is market rate for top-quality bay area engineers, depending on specialty [0]. You don't see job ads for those folks, because hackers like that don't read them.

[0] And even for lower-paying specialties (like UI/UX), 400k isn't even 2x market rate.

[tensor]

At these rates it doesn't make any sense for any company to hire in the bay area. There are amazing engineers elsewhere in the US and in the world who have much more reasonable salary expectations and also live in places with much more reasonable living expenses.

Bay area engineers like to pretend that there are no people of their calibre elsewhere in the world, but that is just flat out wrong.

[p4wnc6]

Not really. Developers who are good enough to command that wage in the Bay Area, but who live elsewhere, also know how good they are. They might be willing to take a slight pay cut from what the lives-in-Bay-Area person would be paid, but whatever the pay cut is, it will not be proportional to cost of living. E.g. if I could earn 400k living in SF, but you offer to pay me 200K living in Lincoln, Nebraska, I'll turn you down. Not because that's not a good wage for the area, but because it communicates to me, as a potential employee, that you are trying to effectively extract rents on my productivity. You know that I'd be worth at least 400K to your business, but you want to slurp up an extra 200K off the top of that by paying someone who resides elsewhere. As an employee, this says you don't value me according to what I can add, but instead are looking to minimize my share in what I produce, and will use geography as a convenient excuse for it.

Beyond a certain level of salary, salary stops varying too much by cost of living or geography. If I make well over 200K per year in a major city, I'm going to expect someone else to pay me 200K/yr at least no matter where I live.

I wouldn't even try to get other job offers to negotiate you on it -- I'll just simply believe you're not meritorcratic and flat out reject your offer and view your company skeptically from then on. Low-balling an exceptional engineer over geography is dysfunctional in the same way as working really hard to hire a senior, experienced engineer and then telling them "2 weeks vacation is the standard for all new hires.." or something. It's just a big red flag.

[idrios]

I agree with the parent comment of this.

The bay area gets a lot of attention because it's the software capital of the world, and software has these crazy gross margins and rapid life cycles that allow companies to be born, experience explosive growth, make insane profits, (potentially) suffer radical declines, leading to a quick boom or bust. Software companies make great news stories, so the bay area gets a lot of attention, and many talented people who aren't sure where to go decide to move there.

I live there now and work out of coworking spaces where I've met a number of startup founders. Many of them are self-proclaimed visionaries hyped up by VR and AR or IoT. Few of them are as smart as my friends who are getting their Masters and PhD degrees at Duke, Wash U, or Case Western. The most impressive startup I saw in the last year was being made by a self-taught programmer/entrepreneur building his own company out of Colorado Springs.

Beyond just my anecdotal evidence, where do MIT and Harvard graduates go? Where do Georgia Tech, Rice U, John's Hopkins, Carnegie Mellon graduates go? Silicon Valley doesn't take all of their students nor just the top in their class. Some people move to DC, Seattle, Chicago, Boston, Austin, NYC, or Denver because they have family or friends there, or because the kind of work in these other cities is more appealing than The Bay.

Apologies for the rant. I realized after writing it that your 'Not really' comment was probably in response to the parent's assertion that companies should hire from outside the bay area, while I took it as 'Not really' in that there are no engineers of the same calibre outside SV.

Regardless, the amount of hubris and hype over the Bay Area is staggering when there are so many equally talented engineers all over the US.

[charlesdm]

Why do you talk about ivy league graduates? Honestly, the degree is completely irrelevant. If you're a good developer living in Europe and/or the US, you can command $200k-400k a year (often as a consultant) doing specialised work. Plenty of companies are comfortable paying a day rate of $2000-5000 for someone who can deliver results. Not always super easy to get the work, but doable.

[p4wnc6]

My comment was solely about the desire or ability to pay top non-Bay Area devs far less than Bay Area devs.

I agree about the hubris. And for as much hubris as there is about the coveted "SV developer" it's at least 10x worse hubris regarding the coveted SV startup as employment destination.

[S4M]

You have to bear in mind that the dollars productivity of a programmer (how much money that programmer brings) doesn't only depend of his/her skills, but also of the company he's working. A programmer can bring tens of millions a year if he works in HFT in a hedge fund, much less otherwise. Companies in the Bay area have access to more funding, and are (I assume) willing to pay good programmers the high salaries you mention to be able to bring quicker their products to market. A standard company isn't in that situation and paying 400k for a top programmer, as good as he may be, isn't probably just worth it (at least if that programmer is an individual contributor).

[p4wnc6]

I have not found this to be true at all. The highest wage I've ever earned was from a rank and file big box corporate firm doing incredibly boring parochial line of business work as an intermediate developer smack in the middle of the engineering hierarchy.

I've worked in quant finance before too and the trouble there is that pay is more political. Firm sizes are smaller and the people with political power extract a bunch of rent, then leave a comparatively tiny bonus pool for all of the low level workers. It takes years of soul crushing political games to get up into that stratosphere of much higher bonuses. On the bottom, the firms will also hassle you hard during negotiations to try to ratchet down your base wage too, and make lots of unverifiable promises about how compensation will be made up out of bonuses. Whether this turns out true or not is largely a function of whose political darling you are. Ironically, as boring as the work is, this happens far less in rank and file companies.

I think there are so many confounding variables that it's not useful to draw sweeping conclusions about this. Sometimes big box corporate type companies will pay huge wages for someone who just maintains something that is not a revenue powerhouse at all. Sometimes firms will restructure to have fancy new divisions that "are like a start-up inside of an established company" (ugh) and they'll hammer down on only hiring young, inexperienced workers on cheap wages in a shiny new urban office who will work a ton of hours. It varies basically as much as the hyper local political circumstances of the teams vary.

[wolfgke]

> There are amazing engineers elsewhere in the US and in the world who have much more reasonable salary expectations and also live in places with much more reasonable living expenses.

Then hire them either remotely or open an office at a place where the living expenses are much cheaper (but the latter also costs money for the company which it could also spend in salaries). Where is the problem?

[Bahamut]

Can verify - I turned down an opportunity for lead frontend work a year ago for $350k-400k (a lot of compensation in stock/bonuses, so it was variable), and that wasn't even at a big tech company.

(For the curious, I opted for tremendous work-life balance instead)

[chris11]

Where are you currently in your career? I'm kind of curious, because I never hear of compensation packages normally going up that high. So I'm wondering what skills companies are looking for at that price.

[Bahamut]

At that point, I was 2 1/2 years in - that was a year ago. That was a rarity I think, although there are numerous stories of Netflix paying $300k+ now.

[chris_va]

400k isn't unusual about 6 years in.

[drumdance]

Back in the day Google completely changed the game by giving out an enormous amount of perks. Now they've become the norm in SV.

[jacquesm]

Ring side seat for you:

https://news.ycombinator.com/item?id=12071667

[cscurmudgeon]

I bet there is no shortage if you're paying $4 million.