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.
Also, the global market forces (i. e. the demand for engineers from US companies and the overall increased impact per engineer thanks to globalisation) are driving the salaries upwards globally. However, this effect seems to be less pronounced in the EU than it is in other countries. As an example, in Russia in the last several years engineering salaries (while remaining modest in absolute terms compared to UK / US) have become a multiple of those of other white-collar workers, making engineers quite a privileged class. However, in Western Europe, a senior engineer’s salary and a (for example) bank compliance officer’s salary are still within the same range.
And note carefully, from Wikipedia:
> In April 2016, Ek and Lorentzon wrote an open letter to Swedish politicians demanding action in three areas that they claimed hindered the company's ability to recruit top talent as Spotify grows, including access to flexible housing, better education in the programming and development fields, and stock options. Ek and Lorentzon wrote that to continue competing in a global economy, politicians needed to respond with new policies, or else thousands of Spotify jobs would be moved from Sweden to the United States.
The "and stock options" seems hugely overlooked but is not at all trivial. It seems to be one of the most important pressures on US companies to push all developer salaries way, way up.
We're somewhat better off here in the UK, we have a well developed s/w industry in games, defence, embedded systems and finance. The difference is maybe only 2x instead of 3x.
On of my daughters is considering going into s/w engineering, so I'm resigning myself to the thought there's a good chance she'll head west on graduation (I'm a Brit). The pull of the US isn't quite so strong here in london if you get into finance, but if you're a top flight talent in say Ireland or Scotland what are you going to do? There are few local opportunities, and no good reason to go to London as against SF or Seattle.
Actually, London is a bunch easier in that case, as you can freely move there and not need visa sponsorship (specifically talking about Ireland here).
London is far too expensive for the tech salaries though, if you're not working in finance.
BUT, I don't think it is because of the scale of the US market. As others have pointed out, Spotify from Sweden and many companies from Israel are also very successful.
I believe the real underlying reason is the strong VC ecosystem, which was established decades earlier in the US has led to the success of the tech companies there. In mainland Europe, VC is just getting started. My bet is, that we will see similar companies in 10-20 years from now.
I mean it's tech, the US market is open to everyone no? I don't know of many European tech companies that think they'll get anywhere only addressing their local market.
My feeling is that European wages are gradually increasing due in part to the successes like Unity and Spotify, plus FAANG companies effects on local offices. It's a bit lopsided at the moment, someone noted there is almost a bimodal distribution of salary which I'm sure exists in the US as well but is more stark here. Remote work is also starting to have an effect. I earn quite a bit more (still nothing to write home about in terms of the salary I could earn in the US) working remotely for a US based company.
I work at one of the FAANGs and this isn’t exactly true for our case. We pay a wage competitive with other local companies, and it’s certainly a fraction of the same role pays in the US.
The US was the largest scale market back when tech companies were starting in the 80s and 90s. Not any more though. But the momentum is already there.
Only that US companies with offices in other countries pay less than in US
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.
They don't, period. At $45,284 the US has the highest household net disposable income per capita in the OECD (<http://www.oecdbetterlifeindex.org/countries/united-states/>), where "disposable income" (<http://stats.oecd.org/glossary/detail.asp?ID=46>) accounts for healthcare and government benefits.
Even with wider geographic distribution of US startups, there are still a lot of fish in the US VC pond. A deep-pocketed firm could pretty easily differentiate themselves in Europe with aggressiveness and comp.
Sure but why would they if they can already do that in the US?
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
Now, you can get a lot more for your money outside of San Francisco while staying in the US, but that applies to European cities as well.
Don't get me wrong – US pay still outweighs these lower costs as a young engineer without children. If you're planning on starting a family, things get a little muddier. Having a child is free in Sweden, whereas it ranges from thousands to tens of thousands in San Francisco. Childcare in Sweden is progressively prized and never goes above ~$100/month, while it ranges from thousands of dollars a month in San Francisco, to hundreds in other parts of the US. School? Yup, that one's free too – college and the works. Got elderly parents? Elderly care is also subsidized to ~$300 a month (although private alternatives do exist).
However, there's no such thing as a free lunch, and these things do need to be paid for. This is done by many different taxes. Working as a contractor, you become painfully aware of a few of these – I've contracted for an American company while based in Sweden, at American rates, and I still end up with way less than I did working in the US.
First off you have your payroll tax at ~31%. Normally this cost is quietly absorbed by the employer, so from the get-go almost a third of your salary is gone without you knowing it. After that point, you have a progressive income tax that can go as high as 60% – which is what employees see on their pay stubs.
So they're just different models. The European model largely optimizes for a high common denominator, whereas the US model seems to optimize for extremes.
Both my mother and uncle have had hip replacements. Mother waited 6 months. My uncle was wait-listed for years before going private.
Walk in centres appear to be universally bad everywhere. Canada's are meccas in comparison.
i.e. not very much. Like on £100,000, top 1%, you pay £5,879 in NI
The state pensions is higher than that per year. Plus free health care.
So how you feel you're paying 'a lot' when you can get full treatment for cancer, for free, boggles my mind.
> without realizing that high paid workers in the US are well taken care of in this regard.
Do these benefits go on if you quit your job? As in can you quit your job and get paid a little less for a while you search for a new one? If you only work a few years in a high paying job the rest in other industries, can you still expect a pension that pays enough money for your last 20-40 years of life? Can you afford proper health care you got in your great job in case you can't work in it anymore for whatever reason?
I’m glad that these sort of protections apply to more people in Europe, too, rather than just some small privileged set of highly-paid employees.
Also, the Canadian healthcare is not exactly stellar. For some reason, dental care in Canada is "only cosmetic" and not covered by insurance.
This is the case in at least some western european countries as well - for example, dental is not included in Sweden (except for children, which get this coverage for free).
But most of my friends (non-IT) didn't have any such employer coverage.
A lot of Americans will jump into this conversation without realising homelessness rate is 10s times higher in US and EU country with lowest literacy has higher literacy than highest literate state in US
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 :(
Not sure this is the case but FYI.
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.
To clarify something, in the UK there are two main deductions on personal income - income tax and National Insurance. National Insurance doesn't pay for healthcare, it pays for things like state pension and other support benefits - https://www.gov.uk/national-insurance/what-national-insuranc.... The National Health Service (NHS) is funded through taxes.
National Insurance is also de facto a payroll tax in the UK and a pretty steep one at that it will be over 15% come April if the NIC increases are implemented as is.
That's not saying much since the NHS covers far more than what private insurance does in the US. Furthermore, in the US we have to deal with the absurdities of deductibles, co-insurance and "out of pocket" maxes (private insurance in the US does not kick in 100% until all of these are met). So on top of high monthly premiums, you still wind up with large bills and even larger if you go to a facility that is "out of network". Also dental/eye care are most often separate insurance policies with different companies. I'd take the NHS any day over the asinine system we have here in the US.
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.
To be honest I haven't seen any SAP or ERP consultant who only advises and doesn't implement or write code and I have been doing this for 10+ years. I think its very interesting job because you will get access and understanding to the most granual levels of very different businesses. I mean you work with from general ledger entries to manufacturing to e-commerce while also understanding all the business context.
I'm sure those people exist, but every successful SAP consultant I know in Europe also spends a lot of time coding and implementing.
spent 5 great years there :) inbox is never empty, but yes I would need to wear a suit again
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.
Due to the (extremely steep) progressive tax system, there’s a lot of friction in (serious) pay raises. Why give someone a raise of €1,000/month when at the end of the day they will end up with less than half that?
Or why would you keep working full-time if by working 4 days you only give up 10% of net pay? Your ‘hourly wage’ actually goes up.
And it doesn’t stop with progressive taxation: a huge number of expenses are income-linked. So with your net pay increase of €500/month, you also start paying a lot more for child care or loose other benefits.
Instead, you could start working 4 out of 5 days: 1 day less to pay for childcare, and the cost per day of the remaining 4 days also goes down because your pre-tax income went down by 20% (all while net income only reduced by 10%)).
So in the end I don’t think people are getting paid less in Europe simply because taxes are higher or because there are more general benefits, but rather because there are actual systemic incentives to getting paid less. And I think this really affects typical upper-average income, where realistic incremental pay raises just aren’t really worth it for a lot of people. There’s a hurdle to reach a much higher level of income (let’s say top 10% bracket) where the increase in expenses and loss of benefits becomes insignificant (or you’ve already reached maximum levels of income-linked expenses) compared to the massively higher income level.
Just do the math; let’s take the 2K Euro you are talking about. That’s 24K in 1 year. 240K in 10. 480K in 20. Now, 480K euro is the price of decent house in Western Europe. Let’s say you are able to save 50% of such decent salary, that means you’ll need 40 years to pay the house (I’m keeping it simple for the sake of the example: no inflation, no taxes, etc.)
Fine by me, I went solo 4 years ago and never looked back.
And what do you think US software contractors make?
Everyone I've known (and I've known dozens of contractors across many companies). In Europe, contracting practices truly are a normalized pathology.
I don't know the US contracting market, and if the pathology is as normalized as in Europe (i.e. if you can reasonably expect to treat it as a full-time job).
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.
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.
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? :)
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.
No, quite often it’s both. The holiday allowance is by law but an additional 13th month is also often paid out. Depends on the company.
i dont have sources but as I said. i was hired for that cash and already hired multiple people for that amount myself during my tenure as Director at a boutique consultancy
edit: check this: https://www.codeguild.nl/software-engineering-vacatures/?spe...
first result. java dev 93.5k
second: 95k + 5% bonus
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.
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.
Fun historical fact: Apple, Google, Intel and others didn't like salaries growing so entered into illegal anti-poaching agreement. 
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.
I'm glad to have the shelter, warmth, and relative security that many others don't, but living as a software engineer in this country is nowhere near comparable to other 'similar' countries, whether the US, Canada, or European neighbours.
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.
I've seen this first hand. Was trying to help a Swedish company recruit for a new customer request. They would not budge their fixed mindset on salaries. Not even 10%. In the end they lost the contract, costing them on the order of SEK20M/y.
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.
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.
The US jumped much higher in 2020, but they've been historically very close.
Contracting will make you even more money in US too
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
* 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, <i>not all US programmers make $100k/year!</i> 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?
> I had about $25k of student loans to pay off... EU wouldn't even have to think about that.
I went to UK university after 2012 meaning the price per year was £9000 so for 3 years that was £27000. Then I did a master degree and the loan cost of that was £10000 so here we have £37000 on education which is over $50000. Literally paying double than what you are paying and I'm on a lower salary than US so check that.
>He just paid $1M for a 3 bedroom house. What does $1M get you in the EU?
It gets you a 2 bed average flat in a bad area in London, assuming you can even qualify to get one
Brexit aside, I think most people think of Western/Northern continental EU when talking about Europe than UK.
This is crazy low, it's more like 300+ euro per week, which is a lot of money.
Sounds like munich.
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.