Why is pay so much higher in the US? (or is it?)

Mainly because USA developed multiple geographic clusters where software developers are in high demand (Bay Area for consumer tech, New York for finance etc.) and the funding ecosystem is both deep-pocketed and culturally supports paying for talent. Traditionally European VCs and founders both operated under the assumption that startups need to save money rather than spend to get the best. And consequently those startups don’t grow into big companies that would pay for talent.

It’s worth noting that the meteoric rise of Bay Area software engineer salaries is a fairly new phenomenon. In the mid 2000s, salaries were actively suppressed by a wage cartel that included Steve Jobs. The companies paid out a $324M settlement to employees [1].

Mark Zuckerberg is often said to have been the crucial CEO who broke the cartel. Facebook started paying higher salaries and hiring aggressively from Google and others who had been suppressing wages.

[1] http://www.equitablegrowth.org/aftermath-wage-collusion-sili...

As an American living in Germany for a few years now, this is something I really struggle with.

In short, it's because Europeans are content with lower wages.

I am in a "high-demand" job as an electrical engineer at a publicly traded medical company, and getting less than €65k. This is absolutely absurd in my opinion, but in discussions with friends/colleagues they feel it's overall typical.

One colleague was in shock when I said I expect to break €100k within the next few years (Sr level)... But was also completely unaware of any basic public company financials (average value of employee is ~$350k), or salaries in our USA office (~$160k).

Unfortunately, my value is not related to anything other than my cost of replacement--since my neighbor thinks €65k is acceptable, that's what I get.

Company performance, employee benefits, healthcare, taxes, etc do play a role.... But it's nowhere near the salary gap.

Help me spread the word OP. Tell all your friends. Start demanding more. Mercedes recently announced all employees would get raises matching inflation. It's a good start but honestly we need to recognize this as the bare minimum, not like they are heroic and progressive.

Ps: Hope nobody minds me dropping numbers. I have no insecurities and don't care, but believe it can be a good help for the discussion.

Compared to Europe there is more upside and downside risk in the US. You can earn more but you are more likely to be financially wiped out if you get cancer or have an accident (high medical costs). Most countries in Europe have more social support built in at every level, not just healthcare, so its unusual to go from living comfortably to being on the street. Some argue the US way is good (more downward mobility is necessary for a lot of upward mobility) but it also leads to a lot of survivorship bias. The people who fall off do not get talked about much

I’ll assume you are talking about the average, which is a bit above $100k. You have probably seen plenty of eye-popping FAANG salaries, but those are basically outliers from monopoly companies in a top talent Cold War.

There are some currency effects due to status of the USD as one of the most stable shelters of risk. But I don’t believe this is accounts for most of the difference.

Mainly, the US does not have a high enough supply of tech workers. Other professions are not particularly well paid in comparison to the cost of living. But for tech, the size of the US tech industry combined with a restrictive immigration policy means that companies will pay a lot for most technical talent. Companies try to hire abroad as much as they can, but there are enough disadvantages to outsourcing that there will always be reasons to hire within the US.

The tech industry fights against this high pay by encouraging more people to study IT degrees, lobbying for immigration reform, and even in the past by anti-poaching agreements that amounted to price fixing.

Because that’s where all the money is.

Seriously look at global GDP, maybe American citizens aren’t the wealthiest but the country and the businesses that run it sure as shit is.

I think it's mostly culture. Compared to other regions, US favors innovation/risk taking and sees software developers as value creators rather than cost centers.

There's also the fact that USD is the global reserve currency which makes it much easier to raise capital.

Many reasons, but the most basic factor is topline revenue: American tech companies earn revenue from both their local market as well as a huge swathe of the world. Without large enough topline revenue, the companies wouldn't have the ability to offer high wages to engineers.

If you work for companies with smaller or less wealthy target markets, they simply won't be able to pay you as much (even if they wanted to).

There's also the culture of compensating talent well, the dynamic startup scene that drives demand for tech workers, and high costs of living in key tech hubs driving up baseline pay. Those help justify paying out a greater chunk of overall revenue to tech workers.

Because it's expensive as hell to live in the US.. Health insurance and rent alone is the typical salary in another country. And don't even think about having a major illness, it will bankrupt you. We have shitty public transportation so one needs a car. And we have shitty safety net so a huge chunk of your money goes to retirement or savings to avoid homelessness at all stages of life. We also have numerous levels of taxation, Fed, State, City, Municipal, Local, Sales, Property. We also have massive insurance requirements on everything from health to cars to housing which is almost like another tax. Then we have to pay for our college which is the most expensive in the world, or get massive loans to repay.

After taxes rent utilities insurance car payment gas groceries savings retirement student loan you're looking at take home of like 20% of advertised salary.

Then the average person spends 8 to 10 hours working and another 30 minutes to an hour commuting with like 2 weeks of vacation a year average.

> Cost of Living Comparison Between Seoul and San Francisco, CA

> You would need around 12,056,794.18₩ (8,727.42$) in San Francisco, CA to maintain the same standard of life that you can have with 6,600,000.00₩ in Seoul (assuming you rent in both cities). This calculation uses our Cost of Living Plus Rent Index to compare cost of living. This assumes net earnings (after income tax). You can change the amount in this calculation.

                                                       Seoul                       San Francisco, CA
    Preschool Full Day, Private, Monthly  :   509,352.94 ₩ (  368.70 $)  3,160,145.20 ₩ (2,287.50 $) +520.42 %
    Apartment (1 bedroom) in City Centre  : 1,063,680.37 ₩ (  769.95 $)  4,542,563.97 ₩ (3,288.18 $) +327.06 %
    Apartment (3 bedrooms) in City Centre : 3,410,888.38 ₩ (2,469.00 $)  8,160,113.43 ₩ (5,906.77 $) +139.24 %

https://www.numbeo.com/cost-of-living/compare_cities.jsp?cou...

Basically - in some parts of US people would be homeless and starve to death on the pay of the most European citizens. And if you don't know - there are way too many homeless people in US for a developed nation.

https://en.wikipedia.org/wiki/List_of_countries_by_wealth_pe...

It’s really interesting to sort that country list by median, then by mean, each time looking for the USA.

First look at the top N tech (and tech adjacent) companies in the US and work out their revenue pr employee. Now do the same for Europe and Korea.

Second, look at how much VC money is invested into tech companies each year in the US, and compare that with Europe and Korea.

A lot of US companies simply have a lot more money sloshing about, and as such can afford to pay a lot more money to attract talent, driving up the price for the whole market.

So the real question is, why are European and Korean companies so bad at attracting investments and making money.

The biggest insight I am gaining from this thread is how many misconceptions about the US are rampant.

Everyone: we have doctors in the US and if you have a job you get health insurance. Also we have paid leave, and software developers often have great benefits including for example paternity leave.

And if you want a walkable city and not own a car we have New York.

And if you want a good free education for your kids we have small towns and suburbs.

True you can't combine those last two. Otherwise, the quality of life in the US for a professional worker is pretty awesome.

Things to keep in mind in comparisons like that:

- Where in the us? SV will have absurd salaries, but also absurd cost of living.

- What do you pay for in your country? How much is your health insurance? GP visits? Family education?

- What's the environment like compared to a $random_us_location. For example do you need to own a car to survive and do you spend lots on daily driving?

- What are your benefits? I've got twenty something days off and take even more. Had a paid months of leave as a parent. This is not common in the us.

I see this as a chicken and egg situation. Even within any country if you see the salaries are higher in cities where you also have most job opportunities. This attracts workers who seek more opportunities and higher rewards. Those who are not able to compete or not interested to compete would not migrate to the city. Companies that operate in these places have to offer more to get the best among those available. Companies that need to get the best talent have to be ready to bear these higher costs to operate from these cities.

Reading up on the history of California, I see from a long time back since the times of the gold rush it has been a place which attracted people seeking more opportunities and the best people would stay there when they are rewarded for moving there. There may be multiple such cities and locations in the US , but even within the US salaries would differ in different cities.

I think the best answer may have to come from an economist who would understand these better.

No mention of time off.

Salaries might be higher in the US but how should the increased time off factor into the calculations?

I'd love to work in the US. But the lack of days off is off putting. I have yet to come off a holiday wishing I'd been working instead — from a short, medium and long term perspective — even when work is great.

In Britain you typically work 37.5 hours per week and get five weeks vacation. Over 47 weeks, those extra 2.5 hours an American works is three extra weeks of work. If you only get 10 days vacation per year then an American works 3 more weeks, for a total of 6 more weeks than a Brit.

I know this isn't an answer to the question, but an observation I'm seeing and experiencing personally.

I spent my 20s and 30s gathering wealth in the US, helped built 2.5 unicorns, and saved enough for an early retirement.

In my 40s, I'm living in Europe and enjoying more family-focused cultures.

What are the best ways to get hired in the US as a software engineer from the UK? I’ll be graduating with a masters in CS from a top university in 2023.

One factor for a minority of jobs is extreme profitability of large American companies, (FAANG mostly), but the bigger portion is that they need to pay that much.

Friends I know in the US who make about 40k more than I do actually don't come out ahead because they pay thousands for private schooling (for a school on par with public education over here), daycare, two cars, high rent and so on.

When I stayed in the US I paid 3.5k in rent for a one bedroom apartment, in a trendy part of Berlin you pay half that. Cost of living in the US where the popular jobs are is high. People seem to be unable to save a lot even if they earn 100k+ salaries. In many other countries social security, education, loans, healthcare etc is simply priced in publicly.

The US not having healthcare and higher education for all is a big factor. They also have worse infrastructure (condemned bridges in use...)

So you get low taxes and lots of money into your pocket, but then you fork it out again. Remember, those grads landing a job at a FAANG have hundreds of thousands in student debt that is attracting interest to pay back.

It’s also the cheapest developed country to buy “stuff” For similar reasons - cars, appliances, electronics. Even food, beer and cigarettes are drastically cheaper than other Developed countries.

I live in Europe, work remotely and earn ca. €3000 (net, after taxes etc.), which is quite low by American standards. I had an offer from the USA but when I calculated the cost of living it turned out I could save less than here. Plus I'm a bit anxious about medical care. From what happened to my friends it seems that as long as your health is good or you have minor problems, everything is fine. But as soon as you need more complex help, things can go downhill.

I would say the peak 0.1% are paid much higher in the US. But the median pay might well be higher in Europe.

(EDIT: Wow, look at the numbers cheschire linked to. Median wealth per adult: US is 26th place after Israel.)

In my opinion, the cause is strong competition for the top talent worldwide. And because raising money is easier in the US and because taking risks is more common in the US, they will compete more strongly for the top talent, too.

Also, some jobs just have to pay really well to make them acceptable. In the area where I live, $60k annually will pay for a very nice lifestyle for a small family with kids. Little house with garden, hiking in nature, free childcare, schools, university, etc. But if you have to live in San Francisco, $60k annually with kids is almost impossible. Rent over there is like 5x to what I pay, so it makes sense that people will need 3x the salary to do okay. And if you then add the cost for childcare, school, and university, you really need 5x the salary in San Francisco to get a comparable lifestyle to rural Europe.

the outcomes of WW2 are a large part of the answer to this question

I would say it is because of less social security.

In my country your pay will be significantly lower, but we get "free" healthcare are insured against unemployment&unable to work because of injury/sicknes, have a pension and have various social programms, etc.

The real question is why are salaries so low everywhere else? It's a highly technical job with a high knowledge base to do well. The problem is that in a country with a billion people the value of ones labor is next to nothing.

The us is more of an individualistic than social country. And it’s only for certain jobs in certain areas. Some things, however, are the responsibility of the individual rather than “society” and I suspect raising children is one such area. There’s more to life than money, so consider all aspects of any transition to/from the us carefully.

Edit: there are good comments on this thread. Props to the HN community on this one.

Edit2: cars. City centres, for the most part, are not anywhere near as liveable as elsewhere. If you’re used to living on foot or on a bike, and shopping for food on the way home, etc, it’s not there.

I would also like to know why. I’m at the salary limit for my role essentially everywhere other than the US and so I’m considering a move.

https://fred.stlouisfed.org/series/M2SL

I think you could make a good case that like all things going up and up the past years, it is just money printed at the FED. Thinking long and hard on the implications of that can inform your moves in the coming decade.

Out of curiosity, has anyone managed to get into contracting with US clients while being physically based in EU?

When real estate is at such a premium in big cities (even with recent slides)[1], good schools free from teachers having to pay for their own materials expensive[2], and going to the emergency room potentially costing you thousands of dollars[3], you need a lot of money to attract and retain people.

Also, profits are higher because companies pay less tax[4], so even with higher salaries it's still good business to pay more to attract higher talent.

[1]: https://www.redfin.com/city/17151/CA/San-Francisco/housing-m...

[2]: https://newsdirect.com/news/teachers-spending-more-out-of-po...

[3]: https://www.talktomira.com/post/how-much-does-an-er-visit-co...

[4]: https://www.taxpolicycenter.org/briefing-book/how-do-us-taxe...

Working remotely for a US based or US funded company while living in a country that has a social safety net is really the sweet spot. My salary is roughly 2-3 times higher than I’d make working for a canadian company.

SF salary in a not SF rent market.

It's because the areas around the US that employ software developers are expensive to live. Software developer salaries are similar to what doctors and many other middle class people make.

What pushes salaries into the higher part of middle class is demand and value: It's very hard to find good, trustworthy software engineers who can work without lots of supervision, and the overall value of the work to the company.

I tend to point out that software is an "economic force multiplier." The value of what software implements (automates) is often many multiples of what the engineer is paid; so why would a software engineer accept a low pay to work on low value work?

Cost of living, demand & supply (not all places are paying well) and built in cost of at-will employment.

cost of living in US metro areas is about 4x that of mainland europe.

add to that the lack of social safety net and the cost of real estate, and generally high risks compared to being in europe (risk of getting sued, going from rich to poor in the blink of an eye etc).

infrastructure, it pays but we also have to pay for it

I would really advise you to look into how stuff is organised in the US compared to your country. I once did and came to the conclusion that it looks like they earn more. I pay a really low healthcare insurance fee compared to the US. Their system for pension is also completely different from other countries. They have a 401K. In my case my company pays for my pension. I am Dutch from my stance it would be unwise to move to the USA. Certainly if you take in account that (in my POV) the country is moving backwards (Gun violence, abortion, right-wing, etc. etc.)