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There are a number of reasons.Probably the biggest is that the UK doesn't have the number of large tech companies in one place needed to push up wages. ARM is in Cambridge, Rockstar is in Newcastle, Dyson near Bristol. The only exception is in Banking where the salaries are much higher than the UK average (but still lower, as tech is views as second to other roles, not as the primary focus). Other reasons are that the UK has a better social safety net. That to many people in many places in the uk there is no such thing as an engineer, if you work with computers you work in IT (and can you fix my laptop please?). There is in many places (especially older companies with non-tech middle managers), also a management problem. You can't pay an engineer more than a (non-technical) middle manager, because the manager is (obviously) more important, as they can tell then engineers what to do. And all the engineers do is what management tells them to, so they're replaceable. This is obviously not a good environment for productive engineering, but explains why some companies see engineers as a cost centre rather than a revenue generating centre. | |
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What's so interesting is that the same companies that do this will tell you that there is a very serious shortage of software developers. And they'll say this, with a straight face, with absolutely no mention of the pay, as if supply exists completely independently of demand. | |
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This is typical european business culture. Times are changing, though, more and more engineers start their own company. | |
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I think what most people are missing in these comparisons is that London's tech market is hugely contractor oriented, and so it makes more sense to compare day rates. Finance in London pays typically £500-600 per day for average level frontend and backend work. There's the potential to earn much higher if you're good at what you do. | |
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> London's tech market is hugely contractor orientedIs that because of labor regulations there? | |
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Not in my experience.Most companies I know much rather have permies than contractors. Pay tends to be quite a bit higher for contractors but without all the perks like pension contributions and leave that a permanent position has. However, as a contractor, you have more control over your life. As a contractor, it's also easier to get exposure to different tech, rather than be stuck doing the same thing day in and out. | |
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Aren't the high US salaries themselves extremely location-specific? It's more like CA/NY vs rest of world in terms of salaries. | |
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would be interesting to know, people talk about SF only, but how salaries look in places like Phoenix or in states like Wyoming, Montana and Vermont ? are there any sw jobs there ? | |
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Anecdotally, and when compared to America, it could be due to a combination of many factors including:- More regulation around employee protection - Excellent talent drawn from less wealthy EU states who may be willing to accept a slightly lower wage than locals - Lots of STEM graduates from UK universities - A different work life balance - Tech skills are not seen as valuable as law/banking/medicine - A more profit-first rather than growth-first startup mindset | |
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It's not STEM supply pushing down the salaries. Japan has fewer per capita stem graduates than the US, with a highly developed technical economy, and dramatically lower engineer salaries than the US (with a GDP per capita roughly the same as the UK). | |
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This makes me think the question is better phrased the other way around. Why is SV compensation so high compared with the rest of the world? | |
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A virtuous circle of people who make a fortune investing in other people hoping to make a fortune in the hope of making their fortune bigger. Silicon Valley is the place where agglomeration economics kicked in for information technology. That’s not really surprising. It had to be somewhere. Film has Hollywood, Finance has New York and London, Chemistry has the Rhineland, high fashion has Milan, Paris, New York and London.What’s special about Silicon Valley is that nowhere else comes close, that the minimum efficient scale for a great many software ideas is small, that it’s new, the addressable market is close to the entire global economy, and most importantly, they’re talent constrained, not capital constrained. | |
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Thanks, to me that is definitely the simple and obvious answer. It’s the one I come to as well viewing things from the outside. I do wonder if it’s too simplistic and appealing because it is so neat though. | |
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Huge tech industry profits, high demand for skilled programmers, limits on foreign workers who tend to drive wages down. | |
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Have you been to SV ? Engineering is 80% foreign workers | |
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Because outside of financial services, there aren't that many highly profitable companies, Google or Facebook profitability levels are not common in Europe. Salaries have been rising though, and London salaries are twice or more than much of Europe. | |
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They aren't common in America either! | |
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I think there are lots of reasons, both sociological and economical, but my hunch is that demand for the most productive tech employees is lower since it's so easy to lean on American-produced innovations and services rather than build our own in the UK.Consider that Azure, AWS, Google Cloud Platform, etc. are all huge in the UK, yet most of the work on them is taking place in the US. Ditto for Oracle, Office 365, the Google Suite and even consumer stuff like Craigslist, Reddit or Apple's services (that the UK never home produced something like Reddit continues to boggle my mind). Why pay for the best people in the industry to work in the UK when we can just stand on the shoulders of work being done in the US? If you look at industries where the UK does take an innovative role like finance or bioinformatics, the salaries seem a lot more competitive, though are still not at US levels due to the UK's lower cost of living I guess. | |
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The UK has a higher cost of living, with London pretty much equal to NY or SF and other high cost cities. The other equivalents are cheaper in the US. | |
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I've lived in both SF (and Berkeley) and London. Accommodation in London zone 1 is a good bit lower than SF without the same level of competition. Accommodation further out is (overall) significantly cheaper than the BART accessible parts of Oakland and Berkeley with a drastically better public transportation setup. Pretty cool and inexpensive but (by London standards) not that accessible areas like Peckham are about as long of a commute into zone 1 as my Civic Center to Berkeley BART commute, and probably much shorter once you factor in the time spent waiting on platforms at before getting on and/or a connection at 19th Street/MacArthur.It's actually possible for me, a not-especially-good junior/mid developer to consider living alone with a <40 minute commute in London; that seemed to be a no go for guys making far more than me in SF. All that being said, I saved a stupid amount of money in SF working on intern level wages. If your goal is to slum it and accumulate money, London does not come close.SF is a place to go and pile up money with a get out plan in mind. | |
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I was curious about this since it seems unlikely SF can be so much more expensive than London. When I looked into it a couple of months ago, I found zone 1 London rents are a fair bit higher than equivalent apartments in SF if you compare by square-footage and quality. I speculate that the idea SF is much pricier than London is caused by significantly lower standards/expectations for London. | |
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Well it's needless to speculate, the variation is because London has the public transportation infrastructure to keep demand in prime areas under control. Wanting a large high quality apartment in zone 1 of London is a trio of luxuries that most people will happily compromise on, and they have the ability to do so without it being a big issue.As far as space is concerned, in my experience one of the Bay Area's biggest problems was inefficient use of space in every which way possible. Even beyond the lack of usage of vertical space, every room I had was pretty huge, double bed, desk, room to do just about any kind of yoga I could think of and still a ton of extra on top of that. I'd have happily traded half of it for a few hundred off my rent. I'd need to know what metrics are being used for quality (e.g. I'd take an absolute slum of a single room over sharing in prime apartment). | |
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Thanks for the input! I haven't lived in London for long, but I found I had much more disposable income in SF, even compared to living in a non-London uk city.Talking to people from around the US, it's just generally cheaper in other places in the US. Gas is cheaper, insurance, (non-SF)rent etc. | |
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¯\_(ツ)_/¯ That's not my experience of both places, and I've not found any data that supports London being as expensive as SF including https://www.numbeo.com/cost-of-living/compare_cities.jsp?cou... - I've found it much easier to live in London on a budget than SF where you'd throw your personal safety and comfort into jeopardy by cutting too many corners. | |
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Those numbers look quite wrong, I don't think they're comparing like-for-like.For consumer goods it seems they're comparing a cheap UK supermarket to Whole Foods in SF, and for rents they must be ignoring square footage and/or using different definitions of city center to get those comparisons. I checked out rental prices in SF on a recent visit and found SF pretty good value compared to London. | |
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In the US you also need to put aside much more every month. | |
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UK companies do not produce as much value, hence they are not able to pay as much as FANG. | |
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LOL. I'm sure all the investors up to their eyeballs in the loss-making, ever hyped unicorns would beg to differ. | |
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Which UK company makes the same profit per employee as FANG? None. | |
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Isn't N in FANG Netflix? I thought Netflix was loss making. And Amazon has spent years being break even or making losses (albeit for good reasons). | |
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Which one of your so-called value-adding unicorns are actually making a profit? | |
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Because when tech companies come to places in the us they become gentrified and everything becomes expensive. In most cases tech companies coming to an area has a devastating effect as people who had lived in an area forever are forced out due to the insane spike in cost of living. | |
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No. You are putting effect before cause.It's the high salaries that cause gentrification, not gentrification that causes high salaries. | |
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When high paying companies come to London/Oxford/Cambridge/Bristol the effect is just the same, it's not a US only phenomenon. | |
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Cambridge and Oxford have been gentrified for a very long time | |
