Ask HN: Why do companies outside the US pay so much less? • Hacker News Board

Re: Ask HN: Why do companies outside the US pay so much less?

#21

Post by ivemadeahugem » Mon, Feb 06, 2017, 9:18 PM UTC

TheTrotters wrote: post #7

ntlk wrote: post #3

The cost of life is lower. Healthcare is included in taxes.

The cost of life argument makes no sense. By this logic we should be seeing janitors, or translators, or piano teachers in SV being paid much, much more then they are. If there was a coal mine near San Francisco I suppose the miners would be paid 100k/year as well?

Probably closer to $75K? If coal miner had a choice (most don't) of whether to work in Ohio for $50k or SF for $75k, I'm assuming they'd pick Ohio.

Thats why someone wouldn't start a coal mine near SF.

People are only going to be paid up to the point where a company still makes money from them. This has a high ceiling for software devs, a low ceiling for janitors.

Re: Ask HN: Why do companies outside the US pay so much less?

#22

Post by kat » Mon, Feb 06, 2017, 9:19 PM UTC

As someone with Canadian and American work experience, I think US wages are higher because there is more capital in the States. Both Canada and the States struggle to find qualified software devs. The companies that can afford to pay more, get their pick of devs out of a very small pool, so the wages increase. However, in Canada, the companies won't/can't pay as much, so the devs end up making less, or moving south. Brain-drain is a problem in Canada for a lot of different industries (healthcare is hugely impacted).

The cost of housing in Vancouver, Canada is right behind New York and San Fran. I don't think wages has anything to do with cost of living. In general I think Canadian investments are less risk tolerant, the market doesn't shift as fast as it does in the States, and therefore less cash flow. Also, its in the employers best interest to keep salaries down and convince their employees that living in Canada (Vancouver instead of San Fran) is better (how ever you define better).

Re: Ask HN: Why do companies outside the US pay so much less?

#23

Post by thehardsphere » Mon, Feb 06, 2017, 9:19 PM UTC

LeoSolaris wrote: post #2

There are a few reasons I have seen. The US has a higher cost of living than most other countries. Those who are comparable pay somewhat more competitively with US jobs. This becomes really clear with remote work. Outside of the major tech hubs, the pay for IT drops off to comparable levels with European companies. We have a culture that doesn't require a business degree to open a business that investors would take s…

>The US has a higher cost of living than most other countries. Those who are comparable pay somewhat more competitively with US jobs. This becomes really clear with remote work. Outside of the major tech hubs, the pay for IT drops off to comparable levels with European companies.

This is partially true but I thought the cost of living in Europe was generally higher than in the US.

Re: Ask HN: Why do companies outside the US pay so much less?

#24

Post by ThrustVectoring » Mon, Feb 06, 2017, 9:23 PM UTC

I suspect a partial cause from right-to-work laws. It's much harder to fire an employee in Europe, so companies are less willing to bid on employees, and so compensation is lower. Plus the employees themselves value the job security, which substitutes for wages when evaluating offers.

For specific predictions from this model:

1. Public-sector programmers in general should get paid less than private-sector programmers, due to employees valuing the job security

2. The public/private gap should be larger in the US than in Europe, since there's a smaller job security gap

3. Public-sector programmers in the US should have higher wages than public-sector programmers in Europe, due to having to compete with more vigorous private-sector activity in the US

Re: Ask HN: Why do companies outside the US pay so much less?

#25

Post by CamMacFarlane » Mon, Feb 06, 2017, 9:24 PM UTC

civilian wrote: post #14

mjn wrote: post #5

If you're comparing to European jobs, one factor is that the U.S. has higher income inequality then many other countries, which means generally the highly paid jobs pay more, and the poorly paid jobs pay less. This will make U.S. salaries look good in some areas, and bad in others. (The median U.S. salary is also a bit higher than most other countries, but not by enough to explain the differences seen specifically in…

Uhhhhhhhh income inequality does not have that kind of effect. Income inequality may effect the taxes paid by people, but it doesn't change salaries the way that you're suggesting. America just has more highly paid jobs, because we've got some of the biggest companies and highest GDP per capita in the world. And this has the effect of creating a greater spread of income. It's a bigger, richer, pond.

>[USA] has the highest GDP per capita in the world

Not quite, it has the 18th highest. Below Hong Kong, Switzerland, and Ireland all who pay less for engineering.

https://www.cia.gov/library/publications/the-world-factbook/...

Re: Ask HN: Why do companies outside the US pay so much less?

#26

Post by freddyc » Mon, Feb 06, 2017, 9:24 PM UTC

UK-AL wrote: post #4

ntlk wrote: post #3

The cost of life is lower. Healthcare is included in taxes.

Is it removed from your salary in the us? Or it assumed to be on top of your salary?

It's a little of both. If your employer doesn't cover 100% of the premium then your share is deducted from your pre-tax salary. Healthcare is often one of the factors up for negotiation in salary discussions. It's not a 1-to-1 ratio, but generally if you opt out of an employer's coverage you can try to use that to ask for a higher salary. I've found it's been far more successful the older I get! The reason is employers want young healthy people in their insurance census (young people are cheap to insure and lower the cost for everyone), not middle-aged people with kids.

Re: Ask HN: Why do companies outside the US pay so much less?

#27

Post by LeoSolaris » Mon, Feb 06, 2017, 9:25 PM UTC

egwor wrote: post #10

LeoSolaris wrote: post #2

There are a few reasons I have seen. The US has a higher cost of living than most other countries. Those who are comparable pay somewhat more competitively with US jobs. This becomes really clear with remote work. Outside of the major tech hubs, the pay for IT drops off to comparable levels with European companies. We have a culture that doesn't require a business degree to open a business that investors would take s…

> Traditionally, the US had been the only place to get any form of quality IT. The training programs and college degrees are more established. Not sure that I agree with that! Compare to the UK, I don't think this is at all true. Compared to say, India, then that was definitely true.

I don't see is as a reality, merely a common perception. Having worked with several French software devs... I can say that the US devs are far more innovative. The impression that I have formed is that there is a major cultural difference in how the term expert is used. In the US, we tend to be willing to buck authority and expert opinion when we have facts to the contrary. Many of my French counterparts are not willing to even contradict their non-technical bosses over blatantly stupid things. It has lead to such a huge technical debt that it is drastically cutting into production.

Now part of my experience is with a multinational manufacturing company not an IT company. That likely makes a major difference.

Re: Ask HN: Why do companies outside the US pay so much less?

#28

Post by mjn » Mon, Feb 06, 2017, 9:26 PM UTC

civilian wrote: post #14

mjn wrote: post #5

If you're comparing to European jobs, one factor is that the U.S. has higher income inequality then many other countries, which means generally the highly paid jobs pay more, and the poorly paid jobs pay less. This will make U.S. salaries look good in some areas, and bad in others. (The median U.S. salary is also a bit higher than most other countries, but not by enough to explain the differences seen specifically in…

Uhhhhhhhh income inequality does not have that kind of effect. Income inequality may effect the taxes paid by people, but it doesn't change salaries the way that you're suggesting. America just has more highly paid jobs, because we've got some of the biggest companies and highest GDP per capita in the world. And this has the effect of creating a greater spread of income. It's a bigger, richer, pond.

In what sense does it not work that way? And what do taxes have to do with it? I'm not talking about progressive tax rates, but about wider dispersion in incomes (which is what income inequality measures). If you have wider dispersion of incomes, generally you have more people making quite high salaries as well as more people making quite low salaries. I.e.: The 95th percentile American worker makes considerably more than the 95th percentile German worker, while the 5th percentile American worker makes considerably less than the 5th percentile German worker. And yes, the U.S. median is also higher, which is an additional effect, but not enough alone to explain the (larger) difference in tech salaries (they aren't identical income distribution curves just shifted by a +$X constant in the U.S.'s favor).

Re: Ask HN: Why do companies outside the US pay so much less?

#29

Post by conductr » Mon, Feb 06, 2017, 9:30 PM UTC

The non-US companies either don't see the ROI potential or may actually have a capital problem. Or, they may know that world-wide they can get someone to do the work at 1/2 of what their US counterpart would pay.

The US companies paying double what everyone else does could be caused by them having the capital and ROI to do so. But, I don't think so. Within the US, why do so many tech companies open shop in SV. They value the culture and team and integral parts that lead to success. They want top talent. Even when they hire out of the US, they don't want to subject the project to the risk of failure by being cheap and hiring cut rate developers.

There's also a culture of paying sticker price. And perhaps, price ignorance. We know what things cost locally, but we aren't the best judges of knowing what a top developer should cost if they're based in another country. Maybe we pay them 75% of local rates and that's still 2X what they would get paid from a non-US company, we don't really know.

Re: Ask HN: Why do companies outside the US pay so much less?

#30

Post by thehardsphere » Mon, Feb 06, 2017, 9:30 PM UTC

A possibly flawed analogy follows:

Hollywood is the biggest city in the world for acting, followed by New York, and maybe Vancouver is in third place. I'm pretty sure people working as actors in any of those three cities are going to be paid more than actors working elsewhere, because there's greater demand in Hollywood/NYC/Vancouver than there is Omaha, Nebraska.

The biggest cities for software are San Francisco, Boston, Seattle, New York, and Austin. Probably not in that order anymore, but that's where most of the action is. If you're not working in one of those places, you're probably not making as much because there's less demand in your area for software people. All of these cities are in the US and none of them are in Europe.