The second question is, why do international companies like FAANG underpay their European employees compared to their American peers? The reason for that is the prevailing market wage. Any company will pay as little they can while still getting the caliber of talent they need. Given the lower economic productivity of engineers working in local tech companies, the prevailing market wages are lower, so FAANG don't need to pay as much to get the top talent.
A few exceptions aside, Europe just doesn't have VC capital. VC capital translates in Dutch as "risk capital". We have neither the capital nor the risk taking.
A fitting example of this shortcoming is Blendle. Once called the "iTunes for news", this app would let you read articles across news publications and magazines. Imagine the convenience of that, and the massive total addressable market.
I would expect that a US entrepreneur would easily put a few hundred million (if not billions) into the idea, trying to aggressively seize this new market. To try and replicate what Jobs did for music, but this time for news publishers and magazines.
The Dutch/European way is starvation. A peak of 50 employees and a payout to publishers of a few million. Next, the founders barely hanging on by raising another 1 million at best, which is an amount a SC startup may burn in a day or week or so.
The big capital just isn't there. And you need big capital to pay for large amounts of 150K engineers.
A second factor, not sure if true across Europe but definitely in the Netherlands, is that people doing actual work are underappreciated. Trade-based as this countries' legacy is, the "real" business is the finance, sales and purchasing departments. The rest are just "hands", replaceable units. The idea of an ordinary worker earning 100-200K is quite alien to Dutch society.
It's also really hard to "translate" money via exchange rates. Cost of living matters a lot. If food and housing is cheap, then the money goes a lot longer. That's also the sort of goods that the arbitrage pressure of international trade struggles to even out. Maybe if WFH becomes a big international thing, but I don't think we're quite there yet.
The truth is the pay is higher in the US and is not particularly close. It's funny trying to see Europeans argue places like London, Zurich, or Amsterdam are "low cost" compared to US cities to try justify the difference
One time I was travelling with a french colleague and while I was given an economy class ticket my friend got a business class ticket on the same flight. We were doing the same work on the same project.
There is so much disparity in this world :(
Life in London for example is just as expensive if not more than San Francisco/New York. We pay for our national health insurance too and probably comparable to what Americans pay for their private.
People can barely afford an average house/flat as a full-time senior software engineer in UK and are not paid too different than any other office based role.
And no it's not because there is more money in US for tech, because a lot of people in UK work for American companies and I guarantee you they get paid less than their US devs.
American companies outsource their tech to Europe for the sole purpose if being cheap especially to eastern EU countries.
The learning curve may be a few years, and its soul crushingly boring. But once you're qualified and competent at it, you just put on a suit and take your trolley from one large business to the other, whilst charging 200€+ per hour. You don't have to actually implement anything, only advise.
It's like the modern COBOL. Every sizable business runs on SAP, and it's complicated. The demand for high-end consultants in this space has been there for 20 years and won't go away.
As old man I will express caution that money isn't everything. Personally, I'd prefer digging holes into the ground in the streaming rain as a job over anything SAP.
Also, there is a cultural difference. If I can earn what I need to finance my lifestyle with 15 hours per week, why work more? The drive to become rich is a lot less strong in the EU because you can have health insurance and retirement money even when you're not extraordinarily wealthy.
Also, living costs are quite low. 2000€ net per month is enough to feed a family and live within waking distance of supermarkets, schools, doctors. You don't need a pricey car.
And lastly, most young people in the US have student loans to pay off. My university was free, so I started working with 0 debt.
However, current day tech companies that can potentially address a global market from wherever(Europe for argument) are in a spot where they need to compete against US labour. I for one get paid significantly higher than what you posted in NL. It’s just that the average includes local markets and lower pay(or really pay online with other local jobs) in Europe.
There are always exceptions- San Francisco salary should not be compared to Amsterdam for example - cost and style of living is very different. I pay €3 for a cappuccino and not $8 :-) I pay €600 for my kids day care whereas in SF it is definitely substantially more. I can buy a family home for €700K here, whereas in SF I can probably get a garage for that… you get the point.
If one is single, and many of these perks don’t apply, US is the best place to be and make a shit ton of money and all the connections. Once the perks start to make sense, Europe it is.
Let's look at it this way, if the top 5% of EU engineers can make literal millions in a few years working in the US, at least some percentage of them will end up in the US.
Then let's consider that money influences what careers people pick. If very high IQ people who are ALSO ambitious see that they can choose between going the MD route, or finance, or SWE, or big law, and all of them are somewhat equally lucrative, some large % of those ambitious high IQ people are going to go into SWE.
In the EU if the only way to big bucks is finance or consulting, and SWE is a normal peasant like life stlye, aren't ambitious high IQ folks going to be more likely to choose finance or consulting instead of SWE?
Isn't it likely the median US programmer, because of incentives, is going to be higher than the median EU programmer? This isn't to say there aren't brilliant EU programmers or that the US on average is smarter than the EU, it's just a combination of brain drain and what smart people end up doing.
thats a huge difference already!
also mind that those online figures not necessarily include 8% vacation money, 13th month, 25-30 days pto and pension fund (up to 100%, usually 50%)
source: i had this salary myself after 6 yrs and subsequently hired a lot of people in this segment for roughly that amount.
contractors can demand even more. its not unlikely for React senior people to charge 100-120 p.h.
Let's say you are from the EU. Why wouldn't you work for a while in the US, accumulate wealth with low taxes and no social safety net (but good insurance, etc.), then when you don't want to work, move back to Europe and retire (or work much less) with the social safety net and your American wealth? ;)
Moreover, if you are not from the EU, but have an in-demand skillset, why wouldn't you make the money, and then get a gig in Europe for however long it takes to get PR (looks like it's only 4 years in Germany), to get the benefits? :)
As an American engineer working in Switzerland I see this far too often, people wanting to come here from Germany, Poland, Czech Republic etc as the salaries there are crap, and really cant blame them. Germany for example, highest tax bracket is reached at like 50k and things arent that cheap relatively speaking. If it were me and I lived in any of those countries, I would be starting my own company or moving to a higher paying country immediately and working the majority of my career there, then retire somewhere cheap.
At the other end of the scale, the largest US companies are simply more efficient than NL companies. Just compare the revenue pr employee for the 10 largest NL companies to the revenue pr employee for the 10 largest US companies and you'll see a stark difference. More revenue pr employee means more money to pay salaries (very simply).
OTOH, we all know how some salaries are crazy high in high COL areas like SF, which I'm sure don't represent the whole of the US. I work with devs in Florida and NC that don't get pass the 6 figures.
This EU programmer got his education for free, and despite owning two houses, has never had a loan.
Housing costs might/will be higher in parts of the States than elsewhere, and one pays in life quality to get the cash at times. It depends on what you're interested in doing I guess.
Then health care, social security and pension costs. That could easily half your US income to get to the same standards. Also taxes, NL or DE has very high taxes comparingly however NL also has a amazing public infrastructure you get for that. You won't need a car for example.
Best of both worlds is Switzerland. Wages are more or less in between your examples, taxes are low, standard is super high.
Fun historical fact: Apple, Google, Intel and others didn't like salaries growing so entered into illegal anti-poaching agreement. [0]
[0] https://en.wikipedia.org/wiki/High-Tech_Employee_Antitrust_L...
I suppose the big attraction of the U.S is being able to keep the money you make and pay less for a lot of things, but for the people talking about attractions of the U.S I don't think I know a lot of people willing to go unless earning a lot more (or if leading companies and have to be in SV for a bit)
1. Productivity - US is a large English speaking country, the mobility and productivity is great. Having a slight edge over others will make you very valuable, especially considering that many US companies are global.
2. Unionisation & socialism - At least in the Scandinavian countries my observation is that management/govt/unions holds a position that software developers should not be paid a lot more than other employees. And developers accept that, because "that is how it is down here". I pity the condition of highly qualified doctors, who after spending a decade in study/residency get only a small premium above average. And in contrast taxi drivers who started early in life own a lot more in assets.
There are other US based tech companies in the city which helped drive up the compensation. And at senior levels (staff+) employees are much much harder to replace.
These are individual contributors with 10 years of experience.
These same engineers were getting paid 50k 3 years ago, but the current job market (and I guess, competition from remote work) increased wages that much.
Adjusting for cost of living, I would say that very close to SF.
* https://data.oecd.org/lprdty/labour-compensation-per-hour-wo...
The US jumped much higher in 2020, but they've been historically very close.
Looking at tails seems to me to be more prone fluctions based on outliers or other characteristics. The median might be a better comparison, and would likely be less than 2x. Employer costs/benefits/taxes would also need to looked at, and then compare total comp vs salary.
Economies are faith-based.
Not every software engineer in the U.S. works at FAANG or even in the bay area or other hotspots. If you'd exclude venture capital backed companies and limit the statistic only to companies with a sustainable business model that will stick around for longer than they can raise new capital, then your average will certainly be a lot lower (and it will still include extremely high salaries by FAANG companies). But venture capital brings me to the first key aspect.
Venture capital barely exists in the EU. There are some VC funds and there are some European startups that managed to raise a decent amount of money, but they don't reach anywhere near the valuations of even early stage US based startups. With more money being in the game, it's obvious that those companies will pay impressive salaries to attract the top talent available. The have the means to do it and having a company with many FAANG devs onboard is almost a guarantee for a successful next capital raising round.
The next thing is the difference in how software is approached. For most European companies software is a cost center, not a profit center. The biggest EU based companies have a few digital products at best, most of them only being complimentary to the products they actually sell and make money off. That is a stark contrast to the US (especially certain areas) where a strong focus on digital products exist. And if you don't make money off your digital products its obvious that you want to keep costs down.
Next I want to go back to my initial reference to the SV area. The reason why salaries are continuing to rise is the extremely high cost of living around those companies. Is a $10,000/month really that high if you have to spend 3,500€/mo on rent alone (I have absolutely no clue about rental prices in the U.S.)? There is no doubt, software engineers in the bay area are far from poor, but especially with salaries that are so far above what you'd find anywhere else, its important to consider the actual cost of living for the area where those kinds of salaries are actually paid. As soon as the cost of living decreases, the salary decreases as well, even within the U.S. And the discussion about FAANG companies wanting to cut salaries for people who are full on WFH just shows that the costs of living are an important reason for the high salaries. The costs of living also include things like education (incl. higher ed), childcare, elderly care, health insurance, etc. All of those things are largely taken care of by the government in most EU states, unlike in the US.
Another reason for lower salaries is the actual cost of having employees (this is limited to my experience in Germany; can differ from other EU countries). Here in Germany taxes, public health insurance and public pension premium is deducted from your salary. But the cost of the employment goes far beyond the salary since your employer also has to contribute roughly the same amount to public health insurance and pension as you have to from your salary. So take the salary of a employee, multiply it by 1.2 and you get the true cost of the employees salary (excluding benefits like vacation time, bonuses or the 13th salary). Additionally, most EU countries actually have employee protection. Not being at risk of loosing your job from one day to another is a pretty nice thing if you'd ask me, but it also reduces the employers flexibility.
To summarize: American software engineers probably really make more money, even if you'd adjust to all the factors I mentioned above. However, the difference is nowhere near as dramatic as the numbers mentioned by OP make it seem.
how much of that data is flawed because of inflated prices in California?
75k a year in NY
https://www.glassdoor.com/Salaries/new-york-city-computer-pr...
* Making $1 in the US != making $1 in the EU: There are all sorts of things built into the society here that simply don't exist in the US (or Cali anyway). For example, in Cali I was absolutely required to own a car, which means paying registration and insurance and fuel costs. Here in Dublin the public transit is good enough (amazing from my standard, but don't talk to a German about it) that I can get around perfectly fine without a car. So that's something like $10k/year that I don't have to pay.
* School/University: This is a big one. When I graduated from a California State school (great education, fairly cheap), I had about $25k of student loans to pay off (way on the lower end of the spectrum). I was able to pay these all off in the first couple years of professionally writing code, but someone in the EU wouldn't even have to think about that. So there's around $10k/year for the average engineers salary that just literally doesn't exist (not taking into account the stress and economic inequality caused by having a system based on giant loans to teenagers).
* Childcare: Although I dont have kids, plenty of my Bay Area co-workers did, and were paying on the order of $3k/month for childcare. This is absolutely bonkers nutszo crazyness, but it's a fact of life for many in the US. Doing a quick google search tells me (I have no practical knowledge here) that childcare here in Dublin is something on the order of $250/week which although expensive is still waaaaay cheaper then what you would be paying in California. So here's another $20k/year price difference between the US and EU.
Adding it all up, cost of living here is something like $50k/year cheaper then in California (without even talking about house prices), so getting paid $50k here you're going to be seeing roughly the same value as someone making $100k in Cali and although it might shock some of the hackernews crowd, not all US programmers make $100k/year! I havent done an in depth analysis, but if you look longitudinally across all costs, I would bet that the average software engineer in the EU is being paid in more value (not $, but life value) then the average engineer in the US, especially since people here (on average) report having much higher levels of life satisfaction, and live longer.
Exercise for the reader: I have a friend that recently took a huge pay bump to move to the Washington are and work for Microsoft. He just paid $1M for a 3 bedroom house. What does $1M get you in the EU? Is he actually making more value by taking that job, or is he effectively paying microsoft for the pleasure of living in Seattle?
The reason that perception exists is a misalignment between how developers are produced, the skills required by industry, and the things employers are willing to do to compensate for that supposed gap.