In Silicon Valley wages are down for everyone but the top 10 percent

https://www.recode.net/2018/10/13/17953004/wages-workers-silicon-valley-income-inequality

by chollida1 • 8 years ago

221 276 8 years ago

recode.net

crawfordcomeaux5• 8 years ago

Serious question:

How would a Post-Capitalist Silicon Valley be different from today?

And what if everyone in Silicon Valley started practicing shamanism?

And/or anarchism?

What things would companies measure instead of or in addition to money & attention?

What if tech leaders & workers joined together in saying "We peacefully revoke consent to be governed this way and request immediate transformative justice." (Or something more effectively worded than that)

nkoren2• 8 years ago

Serious advice: you're using your brain wrong. Find something better to do with it. Questions which start with "what if everyone <insert verb here>" are bad questions. People will always behave in diverse, contradictory, and conflicting ways. We've been doing that pretty much since the Cambrian explosion, and we're not going to stop any time soon. Asking what would happen if we did is useless -- like asking what would happen if gravity reversed, or if black was white and white was black.

If you're vexxed by income inequality and consumerism and environmental degradation and such -- as I am -- then it's best to pursue avenues of enquiry and develop theses which aren't fundamentally impossible from the fifth syllable onwards.

joejerryronnie2• 8 years ago

Good advice, although the original post could be the basis for a sweet fictional novel.

KirinDave2• 8 years ago

Serious advice: you're using your brain wrong. Find something better to do with it. Questions which start with "what if everyone <insert verb here>" are bad questions. People will always behave in diverse, contradictory, and conflicting ways.

Serious advice #1: thought experiments can have value even if the thought experiment does not directly model plausible human behavior. The same is true of statistical, scientific, mathematical, and philosophical inquiry. Many foundation proofs begin with "assume this unlikely thing is true." Heck, laissez-faire capitalism as a concept started as a thought experiment based around the fiction of a prior redistribution of wealth (too bad everyone seems to forget that first part).

This is a discussion forum, and the question "what if the majority of folks start doing ______" isn't so absurd a question to ask in all but the most degenerate cases.

like asking what would happen if gravity reversed

Ironically written given the front page has a detailed writeup on an experiment looking for signs of anti-gravity in the cosmos.

Serious Advice 2: "If you're vexxed by income inequality and consumerism and environmental degradation and such -- as I am" is defining activism of any sort with you as its focal point. Any such activism is doomed, because one need only render you unlikable to derail even unrelated work (as we have seen in the UK's politics these last few years). It's even worse to admonish other people to operate this way. Reconsider it, please.

anothergoogler5• 8 years ago

You're assuming parent wasn't going for the top comment. In addition to the open-ended hypothetical, popular tactics include prefacing with "This is an unpopular opinion" and "My theory is". Depending on the goal, they might be using their brain correctly. Stacking open-ended hypotheticals is a savvy move.

crawfordcomeaux5• 8 years ago

I see I wasn't clear because I used absolute terms. Please insert your own desired population percentages for the questions where I've implied 100%.

In the meantime, I'll still consider the ideas because I find it useful. There are no bad questions, just people who find it useful to judge others and their questions. I've found it transformationally useful to minimize my judgment, so I don't count myself among that crowd anymore and I don't judge others who do.

If it's the absolute terms I used, like "everyone," that's put you off, cool. Let's instead imagine what would happen if a majority chose to. Or 25%. Or 3.5%.

Just as you chose to answer a question I didn't ask, you could've easily modified my questions to fit your standards.

Serious advice: Responding with judgment isn't typically conducive to learning unless the recipient has learned to let go of other people's judgments. Here's a paper on the subject I find useful.

https://queue.acm.org/detail.cfm?id=3068754

KirinDave2• 8 years ago

How would a Post-Capitalist Silicon Valley be different from today?

What's interesting is that I don't think the day-to-day of it would look very different. Extremely hierarchical corporate structures don't work very well in small scale unless you have phenomenally charismatic (or even rarer, actual top-of-field domain expert) leaders. As an incentive to bring folks into the space, varying degrees of group ownership and power are offered to the founding set (and founding investors, which are often an integral part of the early business).

In a very real sense but perhaps to a lesser total degree, this is (as the syndicalists love to put it) "the workers owning the mill they operate."

What's also interesting is that as the company scales, this approach is considered increasingly untenable (mostly from a profit-generation standpoint) and a more absolutely hierarchical system emerges. But nearly everyone has the opinion that these corporate structures are awful, inefficient beasts that create incentives for parasitic management, outsized rewards for C-sets who may or may not provide actual value, and a constant conflict within the workforce to avoid being trivialized by the desire to increase efficiency over product quality or market share.

There was a pair of papers recently that I really enjoyed investigating what "fractal" community (and by obvious extension, corporate) structures could look like by De Florio & then Pajaziti:

https://onlinelibrary.wiley.com/doi/pdf/10.1002/sres.2242

https://arxiv.org/abs/1509.05112

These delve into how one can build service organizations around non-traditional (e.g., not-straight-line-to-the-top-always-centralized) structures and how these can actually have deceptively better efficiency even if their outcomes are only statistically predictable.

It's worth noting that these sorts of organization styles are not untested in the valley. The biggest success for such an organization I can think of off the top of my head is Google's technical support and loaner laptop system, which is semi-fractal and horizontal and despite looking like it'd be a huge money pit (from the traditional "control outcomes and limit loss" school of IT management), is actually dramatically cheaper than traditional IT departments at its scale. Data driven organizations often naturally push towards open and relatively flat org structures, with the understanding that the overhead of abuse of such system's leniency is much less expensive than the total expense of minimizing said abuse.

This isn't isn't exactly new, we see echos of the "actually the chaotic version of this over resources that are infinite in principle but constrained in a time domain is not much worse than the perfectly scheduled system" principle in lots of fields. Market economics likes this outcome (although not when you start making them own "externalities" like environmental damage). Network engineers have long ago made their peace with this truth, as well. A randomly scheduled network is only about 1/3 worse than an optimally scheduled network!

13of40• 8 years ago

If you think about it, Silicon Valley is what you get when you mix two parts new age culture with three parts IBM and let it ripen for a few decades.

drb919• 8 years ago

If you're asking seriously.... I think there's serious potential for co-ops. There's no reason services like Yelp need to be designed around a hockey stick revenue curve.

egypturnash2• 8 years ago

A Silicon Valley that counted its value in the amount of happiness it created for people using its products (and perhaps even for people who don't use their products) instead of the amount of financial value it extracted from them would be a very different place indeed.

The older I get the more I feel like capitalism is a system for turning human misery into profits for a lucky few.

skybrian• 8 years ago

Note that this report is in terms of percentages, which don't track what's happening to individuals. Population growth and turnover (as people move, retire, or join the workforce) mean that it's possible for average wages to decrease largely due to new low wage jobs filled by newcomers, rather than wage decreases for people already working in Silicon Valley. Someone would need to dig deeper to figure it out.

This trend towards inequality is still not good. The percentages do show that.

UncleEntity• 8 years ago

Or the mid-range jobs move out of the Bay Area because of the high cost of living?

I grew up in the Bay Area but there's a snowball's chance in hell I could ever go back due to what it costs to live there...just to rent a bedroom from some homeowner would cost more than the two bedroom apartment I currently live in.

friedman232• 8 years ago

If you are a Software Engineer you are likely in the top 10%. Just mentioning this because I saw a thread in /r/programming the other day and some Software Engineers actually thought they were not in the top 10% of Americans when it comes to salary.

CalRobert3• 8 years ago

It can be frustrating to read HN sometimes when it feels like you're the only one making under 200k. I do wonder how many engineers realize how astonishingly well paid they are compared to, say, their kid's teacher.

anothergoogler5• 8 years ago

Teachers being criminally underpaid doesn't change the fact that most engineers are underpaid. A good engineer can generate multiples of their salary in revenue.

accnumnplus1• 8 years ago

On less than half that in London, if that's any consolation.

claydavisss3• 8 years ago

Give me three+ months a year off, every year, and I will gladly take less pay.

It is not sensible for a teacher to make the same as someone who works fifty weeks a year.

microtherion2• 8 years ago

I prefer to justify my salary not by benchmarking myself against an excellent teacher, but against a mediocre investment banker.

djrogers5• 8 years ago

You don’t need to be making 200k to be in the top 10% nationally - that’s actually just under 140k.

[1] https://www.investopedia.com/personal-finance/how-much-incom...

tootahe453• 8 years ago

It sounds weird because it's an anonymous forum, but it's pretty common for people to lie to fit in, especially when there's no way of verification.

WillPostForFood• 8 years ago

70% of teachers in Palo Alto make over $100,000, and that's for 38 weeks of work.

https://www.paloaltoonline.com/news/2016/05/23/with-new-cont...

tomcam2• 8 years ago

When you figure out pension, health, and other benefits, teachers compete favorably with developers in many parts of the country.

bowlich• 8 years ago

I work remote in a rural western state, I make closer to the national average for an SE than the SV worker. I ran the math once in my county and found that I was in the top 1% wage earners for my county.

drb919• 8 years ago

Software Engineers are also hugely underpaid.

cperciva• 8 years ago

This isn't necessarily true in Canada. The top 10% of "working-age" Canadians earn around 100k/year, and there are lots of software engineers who get paid less than that.

didibus• 8 years ago

Totally onboard for Americans. But is this true of the SV area? I'm curious to see numbers for it.

akhilcacharya2• 8 years ago

That’s amusing - would it be possible to link the thread? I must have missed it.

friedman232• 8 years ago

here is a link

https://www.reddit.com/r/programming/comments/9o0bcc/inequal...

A lot of software engineers think they are on the poorer end of inequality which is obviously not true.

Eridrus• 8 years ago

The top 10% individually was 108k in 2017. The median software engineer was making 107.6k in 2017.

So, on a technicality you are wrong - most software engineers are not in the top 10%. But even if you were right, there is a wide range of pay for software engineers, so it should not be surprising that some of those getting paid less will comment.

closeparen5• 8 years ago

If you’re a software engineer, you’re likely in the middle 30% of whatever city you live in. Which, if it’s the Bay Area, probably does mean the top 10% of America.

chasing11• 8 years ago

As a relatively high-earning person in tech, let me say again: Please tax me and people like me (or wealthier) more. Please, please, please. I'm a greedy capitalist, but income disparity hurts everyone and our country would be such a more pleasant and productive place if those at the top would express just a shade more generosity by supporting their fellow citizens.

meddlepal4• 8 years ago

Yes tax us more so it can be spent just as inefficiently. Throwing more money at our problems is not the solution.

chasing11• 8 years ago

Throwing money at it would solve all sorts of problems. It'd let us pay teachers more. It'd let us provide more healthcare opportunities to people. It'd help us improve our infrastructure like roads and public transportation. It'd help our libraries. It'd make education less expensive, allowing more people access. Fewer people in economic distress means less crime. Better parks. Better maintenance of natural spaces. Etc.

Government isn't perfect. But neither is private industry. We need both. And both need money to function well.

gamblor956• 8 years ago

Throwing more money at problem works when the primary problem is that they aren't currently receiving enough money.

wwweston• 8 years ago

It's not prima facie obvious that public spending via taxation is less efficient. It's also not clear which argument you might be making asserting that it is -- the general characterizing of state agencies as bureaucratic and wasteful, or something like the undergrad econ models relating taxes to clearing gaps in supply/demand curves, or perhaps something even less specific -- but suffice it to say neither is the end of the story.

drb919• 8 years ago

Well better than letting the cash not get spent at all.

AlexandrB• 8 years ago

Yes tax us more so it can be spent just as inefficiently.

Citation needed. Even supposedly inefficient government spending helps the economy more than having the top 1% hoard resources. Consider Apple's huge cash on hand as an example of the latter. What economic benefit is society deriving from allowing Apple to dodge taxes and keeping that money out of the hands of government?

Now consider that some government programs are wildly efficient[1] while funding basic research that private VCs won't touch. And finally that government employees are often paid orders of magnitude less than their private-sector counterparts for doing largely the same work.

Is there inefficiency in government? Yes. But probably no more than in a similarly sized private company.

[1] https://www.nrdc.org/experts/despite-trumps-threat-eliminate...

expertentipp2• 8 years ago

Just move to an EU country? Over here for any senior software professional the net salary is half of the total salary cost. 50% it is. Dissapointingly it doesn’t convert to exceptional public services or social mobility. It just indicates that one is not connected enough or not born high enough to be above the employment contract relationship.

chasing11• 8 years ago

Moving countries isn't really viable option for most people. I'm happy to stick around here and try to make this place better.

Anyway, I'd gladly admit that money isn't the only thing. But it's an important thing. If people in your government aren't using that money wisely (and you live in a democracy): Vote for people who will.

And realize that there's no utopian solution: There's stuff that's better and stuff that's worse. Any system will have major flaws. Crooked timber of humanity, and all that.

alain94040• 8 years ago

It's the same rate in Silicon Valley. Federal tax in the higher bracket is 35-40% (it changed with the new tax laws). On top, California will tax 9-12%. That's roughly equivalent to your European 50% rate.

owenversteeg• 8 years ago

It doesn't convert to exceptional public services? Over here in the Netherlands we have practically no homelessness, extremely low crime, public transit that can take you nearly everywhere worth going very quickly and reliably, a great primary education system that will leave you bilingual (with working knowledge of a third language!) by the time you're 16, a great university system that only costs €1800 a year, and a great social support system in case you no longer make that high salary and need support from the government.

apexalpha• 8 years ago

What country are you in, because in NL the highest bracket will be 49,50% from 70k and onward.

Most people, with deductions and stuff, will pay around 1/3 taxes on their salary. Going up if you earn more.

Dissapointingly it doesn’t convert to exceptional public services or social mobility.

I disagree with that. Some European countries _do_ have excellent services.

whb072• 8 years ago

Can you explain how income disparity hurts? Just using that measurement alone it can distort the ground reality. To list a couple high wealth disparity countries: Singapore, US, and North Korea. Clearly one of them is not like the others.

chasing11• 8 years ago

Not in a Hacker News comment, I can't. But google around -- the information is fairly easy to find.

Spooky233• 8 years ago

North Korea is peasants, military and a tiny elite. There is no real commercial sector.

If you look at the US, it’s more of a developing Brazil like situation. We’re developing a growing peasant/underclass, growing the wealthy as assets concentrate and squeezing the professional and semi-professional classes.

int_19h4• 8 years ago

It makes for social instability. Studies show time and again that it's the relative wealth that makes people unhappy, not absolute.

Don't get me wrong, I would much rather have a large salary, and take home as much of it as I can after taxes. But I would also rather have it be a permanent, stable arrangement (maybe not at any particular company, but in general). Angry torches-and-pitchforks-wielding mobs tend to disrupt that, so I consider it to be in my long-term financial interest to contribute to building a society where people are generally happy and don't feel like they need to get violent to fix their problems. Just looking at the news headlines daily, I wouldn't say that what we have in US right now is such a society.

claydavisss3• 8 years ago

The State of California is already showing annual surpluses.

But in any case you will note that both your Federal and State tax forms permit a voluntary donation beyond what you owe ..do you take advantage of this?

infinity02• 8 years ago

No, because I can't be sure that my peers also "take advantage" of it to the same extent.

I and many people are happy to contribute more, but only if others also contribute more. Especially if people better off than me (like my landlord) aren't paying their fair share, that strongly indicates to me that I should not pay my fair share either.

nightski• 8 years ago

Taxing wages doesn't seem like a very smart strategy. You probably feel rich, but if your primary source of income is wages then you aren't. This won't solve income disparity as it's not how wealthy people earn income. It really will hurt the middle to upper-middle class without making a huge difference.

chasing11• 8 years ago

I don't think I said just tax my wages.

Taxes on capital gains are also way too low. Let's close some loopholes, as well.

d357r0y3r4• 8 years ago

If you want to do the most with your apparently surplus income, look into effective altruism. Your dollar will go a lot further with <take your pick of 1,000 charitable organizations> than it will after going through 10 layers of bureaucracy.

The great thing about is you can start doing it today - you don't have to wait for a gridlocked, highly polarized federal legislative body to come to some pork-filled "compromise".

egypturnash2• 8 years ago

Yes, because the world's direction should obviously be decided by the folks who won the startup lotteries.

fzeroracer3• 8 years ago

We should just remove healthcare and replace it with effective altruism. That would work right?

The problem with effective altruism is that it requires people to invest in things that sometimes would go against their own personal interests. For example I have no reason to invest my money in improving the public transit of towns I can never see myself living in, instead I would invest that money in places that I or my family lives in.

The flaw of course is that it leads to companies heavily investing only in regions where they're located which are usually heavily gentrified and upper-class neighborhoods.

chasing11• 8 years ago

I’m not sure GoFundMe is actually a great replacement for universal healthcare.

pteredactyl6• 8 years ago

100% this.

djrogers5• 8 years ago

How does taxing you more change income disparity?

pascalxus• 8 years ago

I think you might come to regret such an attitude when you find out your too old to be hired and age discrimination kicks in. You might take job security for granted now, but there's no guarantee that software engineering will be in high demand forever.

When you get older, you'll be left with whatever meager amount you've earned. If I were you I'd start saving, rather than reveling in your seemingly high salary.

chasing11• 8 years ago

First, I’m not sure why you’re making assumptions about what I do and don’t do with my money.

Second, you’re exactly right in that people’s fortunes can turn. Which is why we should all support things like universal healthcare and higher minimum wages. No one should feel like if things go badly for them they could literally no longer afford to live.

pteredactyl6• 8 years ago

Uhhh. I get your sentiment, but have you seen what our government has done with our tax dollars lately?

Giving the government more money is not the answer.

masonic2• 8 years ago

  Please tax me and people like me (or wealthier) more.

You can pay more tax than you do now, voluntarily -- there's a place for it right on your 1040 (if USA). If thus statement is sincere, you should be doing so already.

QasimK2• 8 years ago

I don’t think the sincerity of his statement is related to his individual action at all. He’s talking about principle applying to the whole group.

humanrebar2• 8 years ago

If middle class means the choice to own your own home, then the maybe tech workers stayed middle class and everyone else dropped right out of it.

I'm concerned that homeownership and retiring locally are luxuries now. American culture is already far too fractious these days. We don't need to jeer at people for being able to afford roots in their local communities.

dunpeal15• 8 years ago

If middle class means the choice to own your own home, then the maybe tech workers stayed middle class

The average tech worker has not been able to afford a house in SV for at least a decade now. So by this definition, the average tech worker in SV is lower class.

I'm concerned that homeownership and retiring locally are luxuries now.

I don't know about retiring, but home ownership is certainly still widely possible outside of SF, LA, and the other usual suspects.

We don't need to jeer at people for being able to afford roots in their local communities.

If it's any comfort, I don't think the majority of residents of SF/Bay currently were born and raised there. More likely, they moved there for work. How many people were actually born and raised in places like Palo Alto, MTV, or even SF a generation ago?

Remember, MTV before the tech boom was a rather sleepy little suburb...

justboxing• 8 years ago

MTV = Mountain View? Had to think about that for a few seconds... ( flashback to 80s )

dublidu• 8 years ago

People are not reading the cited article, which proposes lowering the cost of basic needs (such as housing) as the main solution to this problem.

humanrebar2• 8 years ago

It suggests four actions, one of which is "provide affordable housing", which isn't as broad as your reading. It could just mean "build housing projects".

The bulk of the article implies some sort of zero sum problem. But Bay Area salaries in general aren't bad. The problem is almost entirely cost of living and transportation related. It's strange to think the tech elite are preventing better infrastructure and housing development.

jt2190• 8 years ago

The original report:

“STILL WALKING THE LIFELONG TIGHTROPE: TECHNOLOGY, INSECURITY AND THE FUTURE OF WORK” by Chris Benner, Gabriela Giusta, Louise Auerhahn, Bob Brownstein, Jeffrey Buchanan

http://www.everettprogram.org/main/wp-content/uploads/TIGHTR...

akhilcacharya2• 8 years ago

I don’t know if this is has evidence in data but is the income distribution for SWEs becoming increasingly bimodal? A range for individuals outside of elite tech companies and a range for individuals within it who have reaped the rewards of appreciating tech stock?

dunpeal15• 8 years ago

Are you seeing any evidence of that?

If anything, I'm seeing the opposite: non-"elite" tech pay is increasing to rival "elite" tech pay (since that's the only way you can hire a decent engineer in any of the major tech hubs in the US).

toomuchtodo• 8 years ago

If anything, I'm seeing the opposite: non-"elite" tech pay is increasing to rival "elite" tech pay (since that's the only way you can hire a decent engineer in any of the major tech hubs in the US).

I'm seeing the same in the Central Florida area. Postings open for months, the pay scale slowly increasing at the same time. I've even worked with recruiters to help drag those salaries up, explaining how to go back to their clients and explain their expectations are unrealistic. A rising tide lifts all boats.

Bahamut• 8 years ago

At least in the Valley, this is very much not true. Very few companies are willing to match the compensation from the tech giants. I work for a non-Amazon FAANG and I'll be surprised if a company was willing to match almost $300k of unvested stock (after 1 review cycle & 1 year of vesting), a healthy salary on top of my existing one, and comparable annual refresh grants - only companies I see really doing so would be another FAANG and VC firms.

jefftk• 8 years ago

is the income distribution for SWEs becoming increasingly bimodal?

Dan Luu has written some about this: https://danluu.com/bimodal-compensation/

paulsutter2• 8 years ago

Not just a nit, profits aren’t paid as salaries. The high profitability of the big tech cos is /despite/ the high salaries they pay.

increasing concentration of company profits going toward the salaries of a select few

dgoldstein02• 8 years ago

True, but really high profits also enable them to pay higher salaries. Obviously they don't put all their profits into salaries.

paulsutter2• 8 years ago

High margins allow high salaries. Any money put into salaries is not profits it’s an expense.

This may sound like a nit but it’s important because they have high profits despite high salaries. It shows the lopsided value of well managed network effects businesses.

liftbigweights• 8 years ago

You are correct. Salaries are actually liabilities for companies. Profits are used to pay dividends to shareholders, not to pay the salaries.

dunpeal15• 8 years ago

This article is terrible:

Tech companies are spending a large portion of their capital toward paying a limited number of research and development staff to design new products and software, but not toward maintenance and service staff like factory and maintenance workers

The entire article and everyone it quotes then proceed to argue that this wealth should be redistributed downwards.

This is not just unfair - it will also never work. Because some roles (like "low-skilled maintenance and factory work") have far more candidates than openings, while other roles (like high-skilled engineering) have the opposite supply/demand curve.

Now, suppose every single company starts artificially inflating the wages of low-skilled roles, and suppressing the wages for high-skilled roles, to keep everyone "equal" just like this article suggests. What will happen?

Nobody will invest the huge amount of time and effort required to become engineers, since that investment won't pay off. Why waste 4 expensive years in college, if I can get the same pay as a janitor, straight out of highschool and without the student debt?

All tech companies will become desperately starved for high-skilled talent. Eventually, one of these companies will realize it can fill its many vacancies by decreasing the wages for the low-skilled work (with huge surplus of candidates, it will still have plenty to choose from) and increasing the wages for high-skilled work, where candidates are scarce. This company will fill all its openings, poach the best engineers, increase its profits, and destroy its competition. At that point, all other companies will have to increase high-skilled pay to match... And we'll be back where we are right now.

In fact, that's how we got here in the first place.

qznc• 8 years ago

That logic should also work in reverse: If high-skill talent is rare their wages should rise. I do not see that happening. Well, at least not here in Germany. Industry is crying about a skill shortage but the corresponding wages are stagnant.

My theory is that wages are not that much about demand and supply of skill or labor. More evidence is that wages differ so much regionally. A Silicon Valley software engineer is paid more than a Montana software engineer even if skills are equal. The companies are willing to pay the premium so their engineers are close to the headquarter. The startups need to be close to the venture capital, but I still wonder why the big companies stay there. Why don't Google and Apple move away?

nathanvanfleet2• 8 years ago

So in the bay area they found out that the largest employers actually conspired to not hire each other's senior employees. Which serves to decrease mobility for people and makes it so their wages become lower. When I worked in Canada it seemed like companies were very desperate for talent but weren't really willing to pay beyond a certain amount. It's hard to say if there is just a natural ceiling for pay or if it's actually some sort of setup to keep the compensation at that level.

dan-robertson• 8 years ago

Industry is crying about a skill shortage

Perhaps they are crying because a skill shortage means they would have to pay more, but instead they would rather the government encourage more people to train as software developers, increasing the supply so that salaries could be lowered.

dunpeal15• 8 years ago

If high-skill talent is rare their wages should rise. I do not see that happening. Well, at least not here in Germany. Industry is crying about a skill shortage but the corresponding wages are stagnant.

Businesses resist increasing pay, because that eats into their margins.

Even in capitalist America, SWE pay stagnated until fairly recently. Employers actively fought against increasing SWE pay, even as their shortage was getting worse. They kept wages artificially low, and successfully lobbied the government to fill their openings with cheap H-1B employees - the H-1B quota back then was over twice its current level.

That was a short-term victory, and long-term loss for the industry. If more engineers made $150,000 in SV back in 2005, there wouldn't be such a shortage today.

Eventually this flimsy dam broke, and now we're seeing pay more in line with where it should be according to the supply/demand curve. Arguably it's still not quite there, even in SV, where engineers with their "outrageous" pay still can't afford a home.

So in Germany, apparently employers are still in the "resist and whine to the government" phase. I bet they're begging for the government (i.e. taxpayer) to fund skill-building programs, import more high-skilled workers from 3rd-world countries... the usual stack of solutions.

I'd also suspect higher taxes have something to do with it. Why should I stretch myself paying $120k to an engineer, if he's only going to get $65k out of it? I don't know too much about the taxes in Germany, but I've seen this problem in other foreign locations where we were recruiting: increasing pay did not result in more or better candidates, and all the best candidates were just trying to get to the US any way they can.

djrogers5• 8 years ago

That logic should also work in reverse: If high-skill talent is rare their wages should rise.

Which is precisely why the top 10% in the Silicon Valley are earning more money. Some of what would otherwise be localized gains are offset by globalization and offshoring, but income is definitely going up for those people in the Valley.

I don’t know about Germany- that’s not where the article was about so it’s not terribly relevant here.

thowsourcinghr2• 8 years ago

I work on HR software that provides sourcing. We have a feature that allows you to skip candidates from certain companies.

We need a law that would make wage fixing a crime with harsh sanctions and better data from IRS about wages.

Here is a free statup idea. Create a better version of Unions that would maximise people's earning potentials and improve working conditions.

BurningFrog7• 8 years ago

If high-skill talent is rare their wages should rise

Not if wages already are high.

barrkel4• 8 years ago

Because good engineers won't move away, because they like being paid well.

roymurdock3• 8 years ago

To improve workers’ wages across the board, the report calls for local and state government to support workers’ rights to organize, adopt better labor standards for subcontracted workers, increase taxes on corporate headquarters and provide affordable housing.

Nobody claims the solution is CEO-mandated "artificial" wage inflation, the report emphasizes the need for strong workers unions that can demand more equitable pay.

The problem is that the unionizing workforce needs to have some basic level of skill or expertise with machinery or the business process that isn't easily replaceable. That and they need to be legal citizens, which isn't always a given in agriculture/food services/landscaping jobs. And provide something that a team in India/Ukraine can't.

We are "here" (large and growing inequality) because our educational system is failing to emphasize and produce the necessary amount of high skilled workers that can replenish the middle class through the value of their skilled labor.

But more fundamentally we are here because the pace of innovation in technology is slowing to a crawl, there are hardly any new machines being invented in silicon valley that take new skills to operate and generate real returns to raise the average American's standard of living. Most of what I observe from startups is either garbage powered by the ad economy, solutions looking for a problem, or get-rich blockchain/AI/ML get-rich-quick schemes looking for an easy VC buck.

dunpeal15• 8 years ago

Nobody claims the solution is CEO-mandated "artificial" wage inflation, the report emphasizes the need for strong workers unions that can demand more equitable pay.

The report suggested multiple policies to attain "wage equality", including increased taxation and forcing companies to increase pay for subcontractors. The result of such policies would be downwards redistribution: less pay for high-skilled workers, more pay for low-skilled workers.

I'm sure you don't think that "wage equality" means that janitors in SV start making $250+ like senior engineers. That is not sustainable. Any realistic solution would bring engineers way down, while lifting the bottom a little bit higher.

I'm not sure when "equitable pay" became a goal. In a healthy free market, people are rewarded for their effort in developing rare and valuable skills. As far as I know, a market in which the government actively intervenes to keep all wages equal is called communism.

If the government wants to take action, perhaps they should work to make SV more affordable for everyone, for example, by lifting ridiculous NIMBY restrictions that keep housing expensive.

All those "high paid engineers" still can't afford a home anywhere near SF. Somehow I doubt the solution is to cut further into their pay.

mattmanser• 8 years ago

The world simply doesn't work the way of naive economic theories.

One solution, that was common until neoliberalism became the defacto in the western world, was high taxes for the rich.

Neoliberalism has been an obvious bust, growth is anemic, wealth distribution is becoming civil-war causing bad, political corruption rampant, but because no-one else has a meaningful alternative we're all still stuck in this 'the rich getting richer means we all will' fallacy.

You have a nice story, but it's simply not true.

jpdus• 8 years ago

I don't understand the uncommented downvotes here. OP is provocant to make his point which is a valid one.

It IS pretty obvious that the raw, uncontrolled market is not increasing the quality of life for a majority of the population and arguably your luck (your family bought some hectars of land in SV in the 80s? Or even simpler: you were able to go to a good college?) is way more important for your economic situation than your own hard work. This is not healthy for society in the long term and if you are not closing your eyes you see more than enough alarming signs for wrong developments. Better to share some wealth with everyone than being constrained to gated communities and let everyone else fight for meager rest in my opinion.

_ppnw3• 8 years ago

Amazon's biggest R&D team of AI / facial recognition engineers is based in Ukraine. They make less than minimum wage in San Francisco. The point is capitalism focuses on keeping costs down over paying people what they are worth, regardless of their country or zip code.

seankimdesign• 8 years ago

Who should determine the metric of "what they're worth" if not the market? The engineers in Ukraine agreeing to work for the wages that Amazon promises them seems to me like a mutually beneficial relationship to me.

dunpeal15• 8 years ago

They make less than minimum wage in San Francisco.

Minimum wage in SF would be $30k. I very much doubt a strong AI researcher would be making less than that, even in the Ukraine.

joejerryronnie2• 8 years ago

Capitalism is just taking advantage of Globalization here. So if you're in favor of free trade and open borders, you're also gonna get low paid Ukrainian engineers.

nathanvanfleet2• 8 years ago

It could happen if those people unionized. I don't think the company would do it because its heart is so big.

alcio2• 8 years ago

Not only is it terrible, but misleading too.

Google has 88k employees and had a $32B revenue last quarter. Let's assume 25% of employees are R&D, each paid $250k/y: Google would spend $5.5B a year on R&D, or 4.2% of revenues ; not quite a "large portion of their capital".

chrisseaton• 8 years ago

Let's assume 25% of employees are R&D

25% of people are researchers at Google? Are you saying that's what you think it is at the moment or hypothetically? Research is a tiny tiny proportion of Google's work.

dunpeal15• 8 years ago

It's arguably Machiavellian: "Hey you, minimum-wage security guard, you know all these engineers you greet at the gate? Each one of them is making x5 your salary! Capitalistic pigs, eh?"

(But let's not talk about the executives you never see, coming in through private entrances straight from their private landing strips and making x1,000 your salary.)

thedufer2• 8 years ago

Comparing to revenue doesn't make much sense. If you look at profit margins they could easily be spending more than all of their profit on R&D.

Also, that's a rather low estimate for average compensation for devs at Google. If, as you mentioned elsewhere, the 25% number is a purposeful overestimate, then combining it with an underestimate of compensation means that your total number is murky; it could easily be a drastic over- or under-estimate.

That said, 25% is also an underestimate - in 2016 Google reported that ~38% of full-time employees were in R&D. So it sounds like you think you're overestimating how much they spend on R&D, but in fact you're way underestimating it.

Synaesthesia• 8 years ago

This assumes that salary is all that motivates people. In fact people like to work on challenging and prestigious tasks, and not only for money. Salary aside, given the choice, would you rather be an engineer or a janitor?

dunpeal15• 8 years ago

This assumes that salary is all that motivates people.

First of all, much of my argument is about the effects of one company paying more for the same work than its competitors.

The company in my example pays its engineers better.

So there's no assumption that these engineers would rather become janitors if it paid the same. There's a much more reasonable assumption that given equivalent work, they'd rather be paid more for it.

As for people flocking to professions with the best pay prospects: that is not only logical, but has been proven many times over, including in our specific profession. I can link you some curves if you haven't seen them already.

Of course, there will always be exceptions. But even then, it's not a reliable way to recruit thousands of hard-working employees.

If engineering paid exactly the same as being a janitor, some of the most brilliant candidates will take a part-time job as a night guards, and spend all their time reading calculus books or playing chess.

P.S. even brilliant people won't willingly go into $200k in debt to attend an elite school for engineering just to be saddled with that debt for the rest of their lives. They'll become night guards and spend their time reading physics textbook for fun.

P.P.S. anecdotal evidence: some of the most brilliant people I know studied physics or pure math in top schools, then switched to tech because it pays.

xg153• 8 years ago

Ah yes, that old argument.

Even Walt Disney was apparently shocked to hear that people were actually working for him to make a living and not just out of reverence for his projects.

leetcrew• 8 years ago

i like coding a lot more than i like sweeping floors, and i like sweeping a lot more than most people do. this doesn't imply that i would prefer to code "useful things" to sweeping floors. when i code in my free time i usually make weird 3D simulations to watch for my own pleasure. afaik, no one is lining up to pay me well for the things i actually want to do.

sulam• 8 years ago

Here's the concrete suggestions they make:

To improve workers’ wages across the board, the report calls for local and state government to support workers’ rights to organize, adopt better labor standards for subcontracted workers, increase taxes on corporate headquarters and provide affordable housing.

All of this seems reasonable and structural to me, ie it maintains a level playing field for businesses.

pteredactyl6• 8 years ago

More taxes. That's the answer. How has the government spent our taxes so far?

xg153• 8 years ago

To be honest, I haven't seen any article about wages on HN, where the highest-rated comment wasn't some variation of "this article is terrible".

pteredactyl6• 8 years ago

Fundamental economics are missing from our education system.

Supply and demand is a foreign concept to many.

PopeDotNinja• 8 years ago

Why waste 4 expensive years in college, if I can get the same pay as a janitor, straight out of highschool and without the student debt?

I partially agree with the sentiment. However, I'd rather be intellectually challenged in a low paying role than bored out of my mind in a high paying role. Money isn't the only factor that goes through my mind as I look for a job.

smrtinsert2• 8 years ago

Thanks I hadn't laughed hard enough today.

barrkel4• 8 years ago

Labour supply is not elastic like your naive market argument assumes. The lag is too long and people are simply not responsive enough to the incentives to change how they think to make themselves good engineers, which requires a particular mindset not easily taught, far more often discovered.

dunpeal15• 8 years ago

Nonsense. Look at the trends for enrollment in CS and engineering programs. They clearly follow monetary incentives.

ohyes• 8 years ago

Why waste 4 expensive years in college, if I can get the same pay as a janitor, straight out of highschool and without the student debt?

Because I’m smart and would be bored cleaning toilets.

mc32• 8 years ago

From what people relate to me, many smart, intelligent people in the USSR would become something like the quintessential DMV worker. Yeah, they become scientists and mathematicians but the also learned to slack off massively.

khuknows• 8 years ago

If low skilled jobs paid the same as engineering jobs, I’d still prefer to invest my time into learning to become an engineer as the work is more interesting. I assume this would be the case with enough others too.

With that being said, the gap in pay betweeen low and high skilled jobs is unlikely to ever be 0, but that doesn’t mean it couldn’t be reduced in a way that would benefit all of us.

dunpeal15• 8 years ago

And who decided that reducing the pay gap "would benefit all of us"?

Different people put vastly different levels of effort into their careers. Who decides that they should now benefit equally?

dirkdk• 8 years ago

Silicon Valley is not a geographical area, it is the tech industry within a geographical area.

The tech industry wages have been going up, but the wages of the people around our industry have been stagnant. Sensationalist title.

closeparen5• 8 years ago

As a software engineer, I make approximately the median income for my county. I don’t know who these top-10% tech workers are, but they’re certainly not my colleagues.

aidenn02• 8 years ago

You are likely wildly underpaid then. I live in a fairly affluent area and right out of college I started above the median income for my city, which was considerably higher than the median income for my county.

djrogers5• 8 years ago

You clearly don’t work in the area the article is about them, do you? It sounds like you likely don’t even live in the same country, let alone that specific region of that specific state.

closeparen5• 8 years ago

I do work in the Bay Area. Santa Clara, San Mateo, and San Francisco counties all have median household incomes over $100k. It’s not at all unusual for a single software engineer to be in that ballpark. Look at college graduate incomes and you will find software engineering compensation even less exceptional. At the national level, anyway, personal college graduate incomes around the same as overall household incomes.

EpicEng• 8 years ago

It's not like every SWE working in the vast is making $200+ / year. Not even close.

twblalock• 8 years ago

As a software engineer, I make approximately the median income for my county. I don’t know who these top-10% tech workers are, but they’re certainly not my colleagues.

They are at FAANG companies. Engineers there with 5+ years of experience are pulling down more than $200k total comp in most roles, and many of them make a bit more than that.

In Silicon Valley wages are down for everyone but the top 10 percent

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