[Gatsky]

This is a bit hand wavy... isn’t current comp due to a handful of tech companies that became very profitable very quickly, and a lot of venture capital money? Without either of these two factors I doubt wages would be at the same level.

[NeverFade]

Those companies became very profitable because technology made them so. It wasn't some accident that is here today and gone tomorrow. Technology is at the core of companies like Google, Netflix, Amazon, Facebook. Without the technology, which is implemented by SWEs, none of these would exist.

Their number isn't declining, it's growing.

[est31]

> Those companies became very profitable because technology made them so. It wasn't some accident that is here today and gone tomorrow. Technology is at the core of companies like Google, Netflix, Amazon, Facebook. Without the technology, which is implemented by SWEs, none of these would exist.

Yes but don't assume that people in india, africa, or eastern europe are too dumb to do the same work. Nor do the outposts of the companies you mentioned pay the same US levels in those countries. There must be another component of this.

[NeverFade]

> Yes but don't assume that people in india, africa, or eastern europe are too dumb to do the same work.

Where did I ever assume that?!

> Nor do the outposts of the companies you mentioned pay the same US levels in those countries. There must be another component of this.

How about "they pay what they have to"?

In India, if they pay $60k/yr, plenty of talented candidates would work for them. In the US, if they paid that much, nobody would apply.

Simple.

[mattnewton]

Plenty of talented candidates would work for that price, and some would emigrate for 3x the salary and a visa. It’s a complicated and moving system I don’t think we are modeling properly in this discussion.

[est31]

Well the question is: why don't they replace the $370k/yr american employees by the $60k/yr indian ones? Why do they pay the premium for US employees? Except for defense projects, it doesn't matter where the code is made, US or India. The German software industry outsources heavily and tech wages don't reach the US levels. Why doesn't Google?

[Sacho]

The answer would be: 1) they do, and 2) they can't

1) Google clearly hires plenty of people in India. Here's their new office in India, with allegedly ~10k employees: https://careers.google.com/locations/hyderabad/. The assumption that Google is only hiring "expensive american employees" vs "cheap indian employees" does not hold

2) Talking about "american" and "indian" employees is misleading. Your question could just as well be "Why not hire for $100k from <midwest> instead of $370k in CA?" At that level of salary, you're talking about attracting top talent from around the world, who are often happy to migrate. The salary is a reflection of an arms race between tech companies - the same person isn't going to opt for $60k to stay in India - they will either take a $350k job in Facebook, a $300k job in Amazon, or at worst, a $100k+ remote job to stay at home(numbers are illustrative). You simply cannot attract the same talent due to how global(and competitive) the top-end of the programming marketplace is.

[TheCoelacanth]

> Why not hire for $100k from <midwest> instead of $370k in CA?

That's not a realistic comparison. That's a comparison of an average-ish salary in the midwest to a far above average salary in CA. Realistically, it's more like $100k in the midwest vs $130k in CA or $370k in CA vs not being able to hire anyone in the midwest because there isn't enough volume to be able to find someone who's that much of an outlier.

[NeverFade]

> The German software industry outsources heavily and tech wages don't reach the US levels.

German SWE work doesn't pay well domestically. It's also struggling to attract talent. Probably a reason why Germany isn't known for its many profitable software companies.

> Well the question is: why don't they replace the $370k/yr american employees by the $60k/yr indian ones?

In the case of an engineer making $400k in the US, I suggest this is a fairly exceptional individual, with a level of skills and abilities that are rare in _any_ country.

Since that individual produces large profits for their employers, employers struggle to hire them at any price that is lower than their productive yield.

Strong SWEs can make companies like Google and Facebook millions of dollars per year. So these companies will gladly pay any six figure salary for these individuals.

Of course, if they can get away with only paying them $60k in India, they will. It's not their goal to pay well; it's a necessity.

[cipher_system]

They try to but it's not always that easy. When you outsource you often need a lot more people to do the same work since there is more overhead. So the total cost may not be that much lower and the output is less.

Not saying this is always the case but it has been like that at my company several times. IMO IT and business need to work close together to efficiently produce quality stuff that the customers want. This is way harder if you are separated by a sucky phone line.

[codycraven]

Additionally, businesses learn after being burned a few times that throwing distant resources at software problems tends to make a bigger mess than they started with (no matter how good their PM may be). Often one good developer embedded within a domain in a company is worth more than an entire outsourced team.

I'm sure there are exceptions, but it's what I've anecdotally observed over my career to date.

[Eridrus]

Google would have to become a remote management company for that to happen. But Google makes so much money that they're not really under pressure to do that.

Outsourcing is a strategy employed by companies who need software engineers on the cheap and are less concerned about the non-zero difficulty of remote work/management.

[tonyedgecombe]

I wonder if lack of competition has made them lazy when it comes to driving down costs. Each of the FAANGS is a monopoly or near monopoly in its niche and American regulators seem reluctant to deal with that.

[300bps]

Except for defense projects, it doesn't matter where the code is made, US or India.

Actually, yes it does.

[Gatsky]

My point is that there are usually quite specific conditions and money flows leading to very good compensation for certain jobs, rather than a 'force' like 'Technology' which seems a bit magical to me. An example is when Ford starting offering higher wages to change the labour market dynamics [1]. Although yes, this was brought about by the industrial revolution, saying that doesn't really provide the crucial insight into why it happened and the effect it had.

[1] https://www.forbes.com/sites/timworstall/2012/03/04/the-stor...

[NeverFade]

Your initial comment talked about "tech companies that became very profitable very quickly" as if that's some sort of accident. I'm reminding you that it is not, but a direct result of their technological focus.

Technology is a force that makes employees more profitable. Work that used to require dozens of employees now requires just one engineer writing code for multiple computing devices. Nothing "magical" about it, it's the very nature and purpose of technology.

[Gatsky]

I didn't mean to say it was an accident, but at the same time surely you aren't claiming it was an inevitability?

[NeverFade]

It is inevitability. Increasing productivity is the goal of technology. Look at technology from the dawn of time, all it did was increase the productivity of labor, both individually and as a group.

Without getting into a huge topic - it also encourages a "winner takes all" set of conditions, in which companies with the right technology and the best employees control a disproportionate amount of the profits in their field.

[ThrowawayR2]

Current comp is ultimately because computers and the internet are both the entertainment medium of choice (displacing film, radio, TV, and we know all of those industries and the supporting industries they spawned were huge) and a universal personal and business tool (with an impact as great or greater than the automobile did on both personal and business transportation and, as before, we know how big the auto industry and supporting industries became). Computing and the internet are so fundamental now that I do not expect this wave to stop until every person on the planet, no matter what their local standard of living is, has a personal smartphone within arm's reach 24/7.

We're not guaranteed to have no bumps along the way of course but, over the long term, it's really hard to envision a case where demand for developers, and consequently comp, drops drastically before this global saturation occurs.

[hobofan]

I guess that depends on if you're talking about bay area comp or high comp elsewhere, which are on two very different levels, but still high compared to other jobs in their respective regions. For the bay area it might indeed be coupled to extremely profitable tech companies, but elsewhere there is still a very high demand for software engineers from SMBs.

A lot of mid-sized businesses want to gain an edge over their competition via custom software solutions. (The optimistic part in my also thinks that it's still the early days there, where companies in each niche are trying to uncover software driven upsides with fewer resources, and once those are found everyone in the niche competes over squeezing out the most of that opportunity, which requires a lot more engineering resources).

On top of that even moderately complex websites (search function + data pipeline leading into that) that a lot of 100+ people companies have require regular attention from a somewhat skilled software engineer.

So in conclusion, I think that high compensations might be driven up by "a handful of tech companies", but a lot of the demand is mostly uncoupled from that.

[KaiserPro]

Those handful of tech companies need a boat load of engineers, restricting the supply.

A restricted supply means you have to play a higher price.

It doesn't matter what causes the lack of supply, its the lack of supply that causes price rises.