Is 400k/yr overpaid for a SWE?

Everybody is currently so desperate for this talent, there's been a big shift toward remote work meaning competition that used to be highly localized is now everywhere, and giant companies are on hiring tears so it's driving up the market rate for the talent and companies that can't afford that are having a huge problem hiring.

We're already seeing the knock on effects of this as contracts with IT vendors come up for renewal and we're being charged XX% more this year for no marginal benefit from what we had last year.

At some point the customers of those companies can no longer afford their products at the rates they have to charge to pay engineers that much and hiring freezes, layoffs and pay cuts will start happening. Until then everybody's trying to suck as much money out of the system as they can - that's just capitalism.

No he isn't. His point is that some potential business models need $X amount of software engineering work to have a viable product, has a potential customer base of $Y, and the market will bear a price of $P for the software. Gross income is $Y * $P.

All else being equal as SWEs get more expensive the amount of $X you can get drops. If that puts you below the threshold for a viable product and your business doesn't have the power to raise $P then you don't have a viable business.

This is obviously a simplistic example but the principle still holds.

Upward pressure on our salaries is in large part driven by the compensation packages given at Google and Facebook, etc.

Those compensation packages can be that high because they've tapped into (and in large part monopolized) absolute firehoses of revenue in the form of online advertising. Those companies do "other" things than advertising, but advertising makes up the vast majority of their revenue.

Without it, they could not compensate so highly.

The problem comes from the fact that these companies eagerly hoover up all the engineers they can get. And rarely to actually work on the core advertising and ad-tech portions of their business, but literally almost anything. There's very little that Google doesn't do. And they're always starting to do new things.

So upward pressure is applied on compensation across the whole job market. And Google at least seems to always be hiring.

Also, Google will happily pay $400k for a SWE if it means that SWE is not creating new revenue sources for potential / future competitors. The cost to them is minimal compared to the revenue they make.

I leave it as an exercise for the reader what this does to the health of the industry as a whole.

The value you deliver depends strongly on the company but can easily be orders of magnitude above $400k.

Everything in between is a matter of negotiation, supply and demand. If there are enough companies that can make their business model work at $400k to hire all the capable engineers at $400k, then the business models that can only pay less won't work, just like many other unprofitable business ideas don't. That is not a sign of a problem.

Quite the opposite, actually. If that is the limiting factor, it means that the demand is very elastic, i.e. if there is an increase in supply, prices (salaries) will not drop too much.

I'm not sure where you're trying to go with that.