Sometimes I wonder why companies even pay developers so much in the US. I'm a specialised medical embedded software developer in the UK and I'm not even halfway to six figures, and will likely never hit it.
It astounds me that companies don't hire twice as many non-US developers for the same price and get more work for their money.
Note, I'm not talking about outsourcing to the absolute cheapest bottom of the barrel developers who cost 1/20 of the price and the quality reflects the price. Just equally skilled developers in non-US countries.
For context: I'm an American who's currently working as a software engineer in France (for a French company).
I agree that engineering salaries are much higher in the US than in Europe and other non-US countries, however it's worth considering that there are additional expenses to hiring in other countries. My french salary is ~30-40% lower than I was making in the US. However, my cost to my employer is nearly as high. Employer taxes are much higher, my company is required to reimburse my transit and all-but-obligated to cover lunch as well. Certainly, many US software companies do some/all of that, but not all.
And beyond those pure costs, there are more liabilities to the employer. For instance, if they want to fire me, they're legally on the hook for four months of severance. And, I get ~7 weeks of combined vacation time and "comp time" (based on the fact that I work more than 35 hours a week). In the US, I got 2-3 weeks.
I don't have exact numbers, and I don't disagree that there are potentially savings to be had, but I don't think it's nearly as clear cut that you could get anything close to twice as many developers.
It's not 100% accurate (the exact amounts depend on many variables) but gives a good idea. For example, a cost to the employer of USD 100k (87460€/year) gives a before-taxes salary of USD 70.5k, and a salary after all taxes of USD 47k.
> before-taxes salary of USD 70.5k, and a salary after all taxes of USD 47k.
What!? That's over 30% of your income gone, and for a relatively average income. That's not even counting VAT and other taxes.... No wonder there's so much "free" stuff in Europe.
€61k before taxes isn't really a relatively average income in France. A junior engineer (with a Masters) starts around €35k ($40k) before-taxes. Country-wide median salary is €28k ($32k). But across all those salaries it doesn't change the fact that around 45~55% of the employer's cost isn't going to the employee.
And yes, taxes and cotisations are very high. On the other hand they cover most higher costs and risks in life (education, health, basic retirement…).
Still, €61k isn't an average salary. An engineer reaches that after about 10-15 years (from personal experience and some statistics I have access to). It's double the national median.
Even with the stronger safety net, it doesn't make up for the difference compared to the US for well-paid employees (such as engineers, or tech in general). US employees are much more well-off, there's no denying that. US levels for engineers compare more to Swiss level of living.
However the safety net is much more beneficial for less-paid people, at a relatively low cost for them.
I only visited the US so others might be able to provide a more detailed comparison. It seems to me that rent is generally significantly higher in US cities (might be different in lower CoL areas), and groceries and other smaller budgets were slightly higher in France (restaurants, tech purchases, cars…).
I have worked in the US and Europe, and may give a direct comparison.
US healthcare and education consume a vast portion of your pay. We paid cash for our daughter's college (biomedical engineering) at a total of over $300K. That buys her freedom of choice when it comes time to take a job, get an advanced degree, etc. Her colleagues will have more than $500K USD debt hanging over their heads when you factor interest payments.
The company pays for a portion of health insurance, but much of the cost is picked up by the employee, either though co-payments or deductibles.
We live modestly, drive low-end cars and don't dine out often. We see our European friends taking great vacations and their children bounce in and out of college programs. We see free healthcare, mountain cottages, and other perks unavailable to us.
Without going into numbers all I can say about US vs Europe: for people with low income,Europe is much much better. For middle class, it boils down to some difficult choices( kids, education, leisure) and is probably equal. While upper middle class or highly paid professionals have it better in the US.
I'm in Scotland, my salary is about £45-£48k. I take home about £31k.
The median salary here is about £21k nationwide.
I bought my home for £170k, now worth about £230k. it's a decent sized apartment in a nice area in the city where I work. For an indication of size, my living room is about 23ft by 28ft, 2 bedrooms, 2 bathrooms.
Some perspective on the costs that look "scary" for the people outside of the USA. I'll share some personal data based on my 20 years since moving here. I have started with $60K and now I am making close to $250K. All this time I was living in a median cost area (one of the top 20 US cities, east coast).
My average effective tax rate over the last 20 years is 19.6% (this includes federal, state, social security and medicare taxes)
My average medical expenses for a family of four are at 3.6% of my gross salary (includes health/rx/dental/vision insurance premiums and out of pocket expenses)
I've paid cash for my oldest child's education at top 10 public university - ~1.5% of my earning over the last 20 years. I am expecting to pay similar cash amount for my other child.
We live in a 4000 sqft McMansion near the best public schools in the state. My mortgage is ~$820 at 2.5% APR
It does look like your effective tax rate is 31-35%, which is more than my all-inclusive rate of ~24.7%
Did you have a large down payment? That looks like a small monthly cost for such mortgage. Or maybe the interest on such loan in Scotland is very small.
Well damn, I don't think there is anything below 3.00% (3.50% more common) where I live.
That's nominal - 3.5% - 4.0% is the effective interest rate. I don't know much about mortgages, so not sure if I'm missing something. Congrats on your place - it looks great!
Effective interest rate is, to my understanding, not related to inflation. It's just a way to make loans with various compounding periods easily comparable (I'm mostly citing this from Wikipedia, I'm far from expert here: https://en.wikipedia.org/wiki/Effective_interest_rate )
I just mentioned it for the sake of providing more information to whomever was reading my comment.
Notably, I doubt you could get family healthcare coverage in the US that reduced your financial risk as much as France’s does for under $25,000/yr. Even at that rate I bet your exposure’s still worse.
> I doubt you could get family healthcare coverage in the US that reduced your financial risk as much as France’s does for under $25,000/yr.
I'm not so sure. It looks like the average liability for a family (12 monthly premiums plus deductable) comes in at just under $23k[1]. That's the max the average family would pay. Obviously for just a single person total liability is a lot lower.
So for a person like me who makes good money being an engineer, I am still better off in America where I can make a lot of money but also pay a little more in COL / healthcare stuff.
Wow, that’s... much cheaper than I’ve seen. In my non-coastal middling-wealth state, you’re looking at $1500/m for an HSA family plan that still leaves you with tens of thousands in risk per year, and reducing that risk gets expensive fast (often it’s even worse, and you end up guaranteed to pay more per year than you might pay if something goes wrong under one of the cheaper plans)
The US salaries in IT are huge, but you need to take into account that they have to pay a lot to have a quality of life comparable to what a minimum wage worker is getting in west Europe.
If you have a few kids, I would bet you are not that bad in UK with one fewer digit.
Yes, This is the main difference. In Germany the education is free and medical insurance not something to worry about ( I have no idea about what deductables, deletables etc mean). This is where the difference lies.
As simple rule of thumb an employer in the EU has to pay roughly double the net salary amount, so on top of the salary pocketed by the employee yet another similar amount goes to taxes. The education/insurance aren't "free", they're just managed better and give more direct benefits to the taxpayer.
It depends. When I was a student, I did not have to spend a penny on medical biils, my wife got paid by the government for some courses (+ cost of rent etc) that would have costed us around 20K € at that time. Now that we are earning enough, I have no problem in paying back, so that others who need it will be also be able to achieve their dreams.
In the United States, you can spend 6k on health insurance and 12k out of pocket for unlimited family health care.
So as long as a US job pays 18k more, it's pretty similar.
People talk about vacation, but my job pays so much I'll take months off between contracts. (Engineering)
Also it's hard to compare lifestyles in the US vs Europe. Homes in the US are gigantic, often newish, and have Air Conditioning. Cars in the United States are more feature rich and have higher safety standards (when I was an airbag engineer in 2015)
I'm sure in terms of money, working in the US as an IT person is a good deal.
But you have to think not only about you but also the others. I don't know whether you have children or grandchildren , but if you do I'm sure knowing that they will never have a bad situation is pretty nice. You can't expect all your children and grandchildren to have a well paid job and you can't finance all of them forever.
Workforce mobility means people can always move for a system that makes more sense for them. If grandpa was a good IT engineer and made some nice money in US, but the grandchild is the village idiot then moving to Germany or France is a solution. Germany has an open door policy to foreigners (there are millions of Turkish descendants of "guest workers" invited after WW2 for reconstruction), East Europeans and now "refugees" from all over Middle East and Africa. No idea how immigration works in France, but there are huge Magrebian communities and lots of other foreigners as well, so I think it is doable.
One can live in Western Europe on welfare. Most of my colleagues in France are not born in France, they are foreigners. The trend is growing in Germany too, in our department there is no German in Germany but people from Brazil, India or Eastern Europe.
> In the United States, you can spend 6k on health insurance and 12k out of pocket for unlimited family health care.
Where? How? I... this total is about what I’m seeing for shit-tier covers-nothing insurance. Like, there are plans out there that are HCA non-conforming and not that far under $18k/year just for the premiums. Who do I talk to to get total max healthcare spending of $18,000 without an employer-provided plan, in the US? Who’s offering $12,000 annual max-out-of-pocket family plans for $500/m?
Although I don't really think it makes sense to compare costs based on OOPLs. For most people, the deductibles, coinsurance, and copays are much more relevant to actual costs.
> Sometimes I wonder why companies even pay developers so much in the US.
Presenteeism.
The office "has to" be in Silicon Valley. The employees "have to" be in that office, in an open plan, so the manager can physically see them working. Therefore they have to be paid huge wages to compete against the other employers doing the same.
Housing supply is the variable that can act as a release valve. If cities don't want to expand vertically, that's fine, but they'll inevitably end up in a Bay Area type rent spiral.
I think the real issue is that homeowners vote so much more frequently than renters (who would love to have more housing and lower rents), even though they're technically outnumbered.
Indeed, but eventually a ceiling is reached over which it would be impossible to make a profit having on-site employees.
I don't envy the locals though. I spent 2,5 months in Zurich, during which I saved so much that in pre-corona times it would be enough for the minimal allowed down payment for an apartment.
The Swiss don't have a Switzerland of Switzerland where they could pull off the same trick.
That is going to happen. Big corporations are finally waking up to 1st class remote work, and that’s the gateway to lower US wages. I say this as a remote worker, and a huge fan of remote work. But I do think the high US salaries are going to mean revert a bit.
Now, admittedly I'm a skeptic of unions by default (in my view they're mostly just another layer of bureaucracy/waste), but isn't unionization of tech workers in the US the quickest way to make themselves even less desirable?
Why hire a US union member when you can hire an Eastern European who both works for peanuts and doesn't have union hang-ups? (Admittedly outsourcing has its own problems, especially when there are language/cultural barriers)
EU has very strong employee rights, so that will come to the same point as a union in the US. The lower pay is an advantage but the time zone difference of 8-12 hours can be a disadvantage. There are no language barriers in IT between the US and Europe, by the time they graduate college the average European has gone through more than a decade of English courses. Cultural differences are minor, management style is very similar (in the East) and so is the communication culture.
So yes, lots of American companies already outsource to East Europe. There are lots of "Silicon Valley"s across EE thriving on Western outsourcing from companies who aren't quite desperate or cheap enough to go to India.
There are some phenomenal outsourced shops in EE. Those that do pay 2-4 higher the going rate in the country. These aren't wordpress sweatshops. These are usually small teams and people work on interesting,specialised projects. Management style is usually very pragmatic ( a means a and let's cut the crap) .But the best part about these is that people do get exposed to things,build experience and eventually start on their own. 10-15 years ago there was hardly any product driven company in my country.Now the ones most worth working for do have successful software product that are sold in western markets.
There is probably more to the story here. If you’re only at about 50k, you’re making $24 an hour. There’s even cheaper labor than you. It’s going to be a disgusting race to the bottom if we start paying everyone 20, 18, 15 ... dollars an hour.
At this point in my life you would have to pay me around six figures for me to do CSS seriously on a daily basis (and it’s likely I’ll still burn out and leave). The cross browser and device testing alone is so tedious and stress inducing that I simply won’t do the job below a certain price point (or I will out of desperation but definitely will bounce ASAP). The unsaid thing about doing heavy CSS work is that it doubles as a QA job from all the testing required.
And again, I’m someone that’s good at it. You can’t pay me enough to do it, not if I have choices.
If you think CSS is tedious, then you've never dealt with medical device regulations. cross browser testing will seem like an absolute breeze. If a UK employer were paying £90k for CSS, absolutely everybody and their dog would be applying for a job that pays double a typical dev salary.
I think we've already experienced the race to the bottom and come out the other side, with $24 being fairly average for the world and the US being on the high side. This all happened years bacj when companies started outsourcing development and IT to India at rock bottom prices, but then received a lot of low-quality work (you get what you pay for). I believe India has a much different approach to software quality than many other countries.
It's taken many companies years to realise that mistake, but I wouldn't call $24 a race to the bottom for skilled labour as that will land you comfortably above average income in the UK
There's a whole world outside SF in the US where people do make ~$24/hr. It is well above the median salary in the US. Things may be closer to equilibrium than a lot of people think. I used to work for an outsourcing company that was roughly 50-50 people in the US and in India, and there was never any indication that the US people would be fired en masse, probably because they were somewhat more productive, and somewhat higher paid, and the differences weren't huge.
I think the important bit of info is that they work for a bank, not that they write CSS.
If I look at the equivalent compensation for people who work for me, the vast majority of developers in the UK and US earn > $100k. Like for like the US employees earn more but that's almost wholly swallowed up in other costs (basically healthcare and our US healthcare plan isn't particularly bad).
And the FAANGs and hedge funds, in my experience, have a reasonably similar dynamic.
The simple fact is that we generally don't hire for PL knowledge except in very specific circumstances (KDB for example). If all we wanted was a coder, there are much more cost effective options than hiring someone, regardless of location.
1. Why do you think UK software companies aren't more successful compared to American ones. Aren't they saving tons on development costs?
2. Have you considered that you are terribly underpaid?
The only European countries where costs are as high as the US for tech salaries are basically Switzerland and Norway. In the rest of Europe you have access to a very qualified workforce for less money. But they also have more protection than in the US (fewer unpaid hours, more holidays, no cheap dismissal…).
I think (hope, really) that gp is just one heavy "/s". The knowledge presented in the article is so basic that it is hard to believe that a person who does html for two years and six figures doesn't know these. As for the article, I fail to see any reason for it to exist beyond cheap media presence. Or maybe I should start a blog, because I'm not even halfway too.
Sometimes I wonder why companies even pay developers so much in the US. I'm a specialised medical embedded software developer in the UK and I'm not even halfway to six figures, and will likely never hit it.
It astounds me that companies don't hire twice as many non-US developers for the same price and get more work for their money. Note, I'm not talking about outsourcing to the absolute cheapest bottom of the barrel developers who cost 1/20 of the price and the quality reflects the price. Just equally skilled developers in non-US countries.