Ask HN: Why do companies outside the US pay so much less?

A part of the gap can be explained by the way that work is organized in the US compared to Europe. Let&#x27;s compare e.g. Germany and the USA:<p><a href="https:&#x2F;&#x2F;data.oecd.org&#x2F;germany.htm" rel="nofollow">https:&#x2F;&#x2F;data.oecd.org&#x2F;germany.htm</a> <a href="https:&#x2F;&#x2F;data.oecd.org&#x2F;united-states.htm" rel="nofollow">https:&#x2F;&#x2F;data.oecd.org&#x2F;united-states.htm</a><p>If you scroll down to the Economic indicators, you will see that on average people in the US work around 1.700 hours a year, whereas people in Germany (and many other European countries) work only 1.400 hours. This alone can already explain 20 % of the wage gap between the two countries, and in fact if you look at the average salary per hour worked, it is almost identical (32 USD), which would support this theory. In addition, many things like education, housing, social security and health insurance are much cheaper in Europe, which leads to lower salaries (as they tend to follow the cost of living). Furthermore, regulations in Europe are stronger than in the US, which makes it more difficult (or sometimes even impossible) to fire people once they have been employed for some time. Hence the risk of losing your job is smaller, which should lead to a lower salary as well as companies face a higher risk when hiring someone, and employees have less risk.<p>And in extreme tech hot spots like SV or NY there should course be an additional effect due to the high demand of skilled IT professionals and the fact that people can usually find a new job very easily, which also makes it easier to negotiate a higher salary and forces companies to pay above average rates to attract talent, which is a self-reinforcing effect.

I don&#x27;t really care how much someone in USA earns.<p>As a software engineere in germany you are earning good money.<p>There are no killings in cities, affordable health care, high quality living standards, university costs 150$ for 6 month, no donald trump, 30 days real holiday (i take them, everyone does, every year), seldom over hours, parental leave.<p>Btw. IT is more than google, apple, facebook and twitter.<p>And no we do not have anywhere in germany rent prices like in NY or in SF. Perhaps, only, if even in the middlest of the centere.

If you&#x27;re comparing to European jobs, one factor is that the U.S. has higher income inequality then many other countries, which means generally the highly paid jobs pay more, and the poorly paid jobs pay less. This will make U.S. salaries look good in some areas, and bad in others. (The median U.S. salary is also a bit higher than most other countries, but not by enough to explain the differences seen specifically in <i>tech</i> salaries.)<p>I think there is also not as much of a general tech talent shortage in Europe, so it&#x27;s not one of the most in-demand jobs outside of specialized areas (if you&#x27;re a top deep-learning expert right now, yes, but not for general programming &#x2F; SE jobs). Many European countries traditionally have very strong STEM education, in a number of cases actually overproducing highly skilled graduates in the field relative to the local industry&#x27;s needs (which is why you see a lot of Spanish, Romanian, Greek, Italian, etc. STEM graduates working in other countries). Not quite as badly oversupplied in the &quot;T&quot; part of STEM as in the &quot;M&quot; part, but still, not a shortage.<p>edit: Oh, another factor, for right now, that I should&#x27;ve mentioned is that the U.S. dollar is much stronger against the Euro and UK pound than it has been historically (even compared to a year or two ago), while salaries don&#x27;t respond that quickly to currency movements. There are still significant differences if you use circa 2015 exchange rates, but smaller.

As someone with Canadian and American work experience, I think US wages are higher because there is more capital in the States. Both Canada and the States struggle to find qualified software devs. The companies that can afford to pay more, get their pick of devs out of a very small pool, so the wages increase. However, in Canada, the companies won&#x27;t&#x2F;can&#x27;t pay as much, so the devs end up making less, or moving south. Brain-drain is a problem in Canada for a lot of different industries (healthcare is hugely impacted).<p>The cost of housing in Vancouver, Canada is right behind New York and San Fran. I don&#x27;t think wages has anything to do with cost of living. In general I think Canadian investments are less risk tolerant, the market doesn&#x27;t shift as fast as it does in the States, and therefore less cash flow. Also, its in the employers best interest to keep salaries down and convince their employees that living in Canada (Vancouver instead of San Fran) is better (how ever you define better).

I&#x27;m in the US and a friend just moved to The Netherlands to accept a much lower paying job. He swears he has more disposable income due to cheaper health care, Internet, transportation (no car required!), etc. The basic assertion being that the cost of living is higher in the US.<p>I would love to see salary vs cost-of-living comparisons globally. I suspect this might account for the disparity, but I&#x27;m afraid I don&#x27;t have the data to confirm or disprove this assertion.<p>Update: Spent 5 minutes googling with no luck. Found some moving company (?!) sponsored data showing most of the EU having a very high cost of living. Makes me wonder if that takes into account free-or-cheaper-than-US health care, child care, transportation (owning a car is $$$), education (most US tech workers are paying a high student debt &quot;tax&quot;), and other lifestyle&#x2F;political differences between the two regions.

Supply and demand?<p>I think there&#x27;s a large variance in the US as well between different geographical areas. I would expect you can find x2 differences even within one geography.<p>There are a lot of factors in play:<p>- In SV there&#x27;s a lot of &quot;easy&quot; money and a shortage of people.<p>- There&#x27;s a lot of friction preventing this from equalizing. Immigration policies being one example.<p>- There have been significant currency movements over the last couple of years and those take some time to reflect back to things like prices and salaries. The strength of the US dollar means that at least temporarily you make that much more if you work in the US.<p>- Cost of living. If you have to pay more to own a house, pay for your kids education, commute, health, etc. then you can expect upwards pressure on salaries to make up for that.<p>- Risk premiums.<p>I think it&#x27;s important to realize that these things can take a while to play out. When I look at today&#x27;s salaries compared to 10 or 20 years ago I don&#x27;t actually think they&#x27;re very high but that&#x27;s against a backdrop of erosion in other middle class salaries. Time will tell.

I suspect a partial cause from right-to-work laws. It&#x27;s much harder to fire an employee in Europe, so companies are less willing to bid on employees, and so compensation is lower. Plus the employees themselves value the job security, which substitutes for wages when evaluating offers.<p>For specific predictions from this model:<p>1. Public-sector programmers in general should get paid less than private-sector programmers, due to employees valuing the job security<p>2. The public&#x2F;private gap should be larger in the US than in Europe, since there&#x27;s a smaller job security gap<p>3. Public-sector programmers in the US should have higher wages than public-sector programmers in Europe, due to having to compete with more vigorous private-sector activity in the US

Everyone throwing around &quot;free&quot; healthcare as a valid explanation for this wage gap needs to account for taxation levels too.<p>using estimates via Google:<p>&quot;average programmer salary usa&quot; -&gt; $84,360<p>&quot;average programmer salary in sweden&quot; -&gt; $54,264<p>According to <a href="http:&#x2F;&#x2F;www.economist.com&#x2F;blogs&#x2F;graphicdetail&#x2F;2012&#x2F;10&#x2F;focus-4" rel="nofollow">http:&#x2F;&#x2F;www.economist.com&#x2F;blogs&#x2F;graphicdetail&#x2F;2012&#x2F;10&#x2F;focus-4</a>, average effective taxes in the USA (including social security) are 25%... but 35% in Sweden. Even if those particular numbers are off, the point is that higher taxes may further expand the gap with lower pre-tax foreign salaries.<p>So the Swede keeps $35k and gets state-sponsored healthcare. The American keeps $63k and probably has decent health coverage from his employer. I&#x27;m not sure about this but I suspect that the American can use a fraction of that $28,000 difference to upgrade the health insurance to Swedish levels or better.<p>(There are also smaller but still significant expenses like housing, affected by property taxes, and consumption taxes like New York City&#x27;s 8.875% relatively-high-for-the-USA sales tax vs Sweden&#x27;s 25% VAT.)

Five things:<p>1. We are taxed on income <i>heavily</i> in the US.<p>2. Insurance is expensive here.<p>3. In the hubs, rent is <i>very</i> expensive.<p>Take-home pay after considering these three things is a lot less than you might think. And also:<p>4. Generalizing the salary of positions across the whole US is misleading. An average engineering job in the midwest or outside of a hub can pay half the salary of SF or NYC.<p>5. It really depends (1) where the company you&#x27;re considering is based and (2) if it&#x27;s a remote gig, whether they adjust your comp based on your location. One example of this is Buffer&#x27;s extremely transparent salary calculator [1].<p>The holy grail is to geoarbitrage by getting paid by a company in a location that pays highly while living remotely somewhere the cost of living is much lower.<p>[1]: <a href="https:&#x2F;&#x2F;buffer.com&#x2F;salary" rel="nofollow">https:&#x2F;&#x2F;buffer.com&#x2F;salary</a>

Hum, I don&#x27;t know how the system works in the US, but in France a lot of money is taken from the salary to cover for health insurance, unemployment insurance and retirement plan. Plus we have 5 weeks paid vacation automatically included. And I think cost of life is lower than in the US, even in Paris which is the more expensive area. To go with numbers, I currently earn 50k€ per year (gross), which makes for 3k€ per month (net). I don&#x27;t have a car (no need in Paris). This income is enough for me to live my life without any privation, going to bars, cinema, restaurant, weekend trips, etc whenever I want, and still save 10 to 40% of it each month. Last year I bought a new computer, a new phone, and 2 weeks vacation in Iceland without even touching my savings account. All that knowing that if I go unemployed, I stay at full pay several months, if I&#x27;m sick I&#x27;m covered, and when I reach 65 yo I&#x27;ll get retirement rent until end of life. Oh, and I&#x27;m only in my early 30&#x27;s, meaning I get to get paid more and more. After my next raise, which should occur this year considering I got a title upgrade, I&#x27;m even considering stopping asking for money and asking for additionnal time off instead. So, I don&#x27;t know how your 100k+$ reflect on your life in the US, but sorry I don&#x27;t feel any need for it :)

So i think it&#x27;s partially values and markets. Enough US companies know the transformational effect tech can have on a business where that&#x27;s not really understood elsewhere. Just having part of the market get it means it drives up all prices. In the US you are quoted a price before taxes, many countries quote offers post taxes (including after income tax is taken out). That can make US salaries look MUCH higher. Because the employer doesn&#x27;t think about taxes, if you&#x27;re outside the US as a contractor or freelancing, you can get a much better deal.

A possibly flawed analogy follows:<p>Hollywood is the biggest city in the world for acting, followed by New York, and maybe Vancouver is in third place. I&#x27;m pretty sure people working as actors in any of those three cities are going to be paid more than actors working elsewhere, because there&#x27;s greater demand in Hollywood&#x2F;NYC&#x2F;Vancouver than there is Omaha, Nebraska.<p>The biggest cities for software are San Francisco, Boston, Seattle, New York, and Austin. Probably not in that order anymore, but that&#x27;s where most of the action is. If you&#x27;re not working in one of those places, you&#x27;re probably not making as much because there&#x27;s less demand in your area for software people. All of these cities are in the US and none of them are in Europe.

There are a few reasons I have seen.<p>The US has a higher cost of living than most other countries. Those who are comparable pay somewhat more competitively with US jobs. This becomes really clear with remote work. Outside of the major tech hubs, the pay for IT drops off to comparable levels with European companies.<p>We have a culture that doesn&#x27;t require a business degree to open a business that investors would take seriously. As a result, companies pay highly skilled IT employees more to keep them happy enough to not start up their own business.<p>There is more direct competition between deep pocketed firms for talent. High demand always skews the price, and it is faaaar easier for the US firms to hire US based workers.<p>Traditionally, the US <i>had</i> been the only place to get any form of quality IT. The training programs and college degrees are more established.<p>We also see that many of our outsourced maintenance IT jobs may be done cheaper, but they are often worth far less than what they charge. That negative impression reinforces the stereotype of US based IT professionals are more competent.

It&#x27;s simply due to the competitive hiring environment for the best software engineers in USA. The difference in pay cannot merely be explained simply by the difference in cost of living. I have personally worked in Singapore as a software engineer before moving to USA (worked for companies in SF &amp; Seattle). A very good senior software engineer in SG might make SGD100-120k&#x2F;yr with 10 years of experience. Singapore is a world-class city but it&#x27;s also a very expensive place to live. In USA, the same engineer could be making USD400-500k&#x2F;yr with 10 years of experience provided they work for top-tier companies like Google&#x2F;FB&#x2F;Apple&#x2F;Amazon. These numbers obviously include stock-based compensation. The key is to be in the 95th percentile - I think the difference in pay (between USA vs world) is less drastic if you are just in the 50th percentile.

Don&#x27;t underestimate the impact of social norms. If I were looking for work in the USA, I&#x27;d expect a salary which I would feel very uncomfortable asking for in Canada.

So a lot of the comments have argued the relative merits of one economy over another, or simply invoked &quot;supply and demand&quot; or &quot;availability of capital&quot; to explain the difference.<p>What I very often see in Europe isn&#x27;t a marketplace of employers saying &quot;We will pay X&quot; and then finding a developer who will work for that. Rather, it often is a company <i>desperate</i> to hire a talented engineer, but when quoted a totally-not-outrageous-by-US-standards salary, respond with &quot;Oh, we&#x27;d never pay that&quot;.<p>I suppose in some cases the employer literally couldn&#x27;t pay that, but to me it seems more like there&#x27;s some kind of cultural block, like &quot;engineers make this amount and that&#x27;s all there is to it&quot;.<p>Managers&#x2F;executives don&#x27;t seem to have any such restriction, again based on what I&#x27;ve been privy to, so I don&#x27;t think that it&#x27;s (completely) a case of just &quot;salaries are lower here&quot;

Since salaries are so much lower everywhere but the US, doesn&#x27;t it make more sense to flip this argument around and instead ask: &quot;why are software engineers&#x27; salaries so much higher in the US than everywhere else?&quot;

It may sound obvious, but most foreign companies will typically hire foreigners, rather than Americans, at least most of the time.<p>If you&#x27;re a foreigner, working for a company in your country of origin, compared to an American company, offers the following benefits:<p>1) The right to work in the first place - getting an American visa is rather hard 2) Not needing to pick up your life, your family&#x27;s life, and move far away from extended family and friends 3) Work in the same time zone - have a job during normal work hours, without an expectation to show up to meetings late at night 4) A work environment where most communication happens in your native language<p>Most development salaries are pretty high compared to the median salaries in the surrounding region, they&#x27;re just low compared to American developer salaries, but few people abroad make American salaries, so people tend to be happy with their &quot;I&#x27;m upper-middle-class compared to the people around me&quot; salaries. And since American jobs aren&#x27;t really under consideration, for the reasons listed above, foreign employers don&#x27;t feel the need to boost salaries even further, to a level comparable with the US, since the labor pool doesn&#x27;t apply for jobs with those salaries.

The main reason seems to be linked to the cost of living: salaries in EU are lower only numerically. 50K€ have the same purchasing power of 150k$ in SF (EU devs pay rent, a car, savings, have holidays, etc.)<p>However the really STRANGE thing is that only a few USA companies exploit that by hiring EU devs for remote working. (ie: paying only 30% of a USA salary for an almost as good developer)

Other than the cost of living, (compared to India) I think one of the reasons is that most US jobs are &quot;at will&quot; where an employer can fire any time or an employee can leave anytime, with no notice. But often, employer&#x2F;employee gives adequate notice (2 weeks) in US as a courtesy.<p>In India, most jobs are tied up to a contract. If you have a 2 yr contract with an employer, and you want to leave after 18 months, you have to pay the 6 months salary to the employer. If you dont, you wont get the next job, because the next employer expects a &quot;relieving letter&quot; from the previous one, which is given on completion of the contract or on paying the fine. Sounds atrocious right? Such practices, bring down the salaries or at least keep them from going up, unlike in US.<p>I dont know how often such contracts are enforced in India, especially when companies were going on a poaching spree.

A lot of it is cost of living in a given area can vary a lot in the US. Also, if you&#x27;re looking for an EU job, that may well be post-tax, include better medical benefits (US contract jobs often don&#x27;t), not to mention potentially better retirement options and last, but definitely not least upwards of 8-weeks of pto&#x2F;year.<p>A lot of US jobs, you&#x27;re lucky to see even 2 weeks of PTO, and even then, if contracting, you don&#x27;t see that. I wound up taking about a month and a half off due to a bad relocation&#x2F;project cut experience last year, and that has a huge impact on your hourly&#x2F;annual salary. The culture is just different and the tax models very different.<p>In the US variety in income taxes at the state level, or cost of housing can vary a <i>lot</i> and you&#x27;ll see similar variance in IT&#x2F;Developer pay as well.

I haven&#x27;t heard anyone suggest that overall demand for developers is higher in the USA.<p>The US has more companies that can see how to make more money off tech talent.

The cost of life is lower. Healthcare is included in taxes.

There is a chart in Piketty&#x27;s book, Capital in the 21st century, a that shows GDP PER CAPITA for several countries, including the US.<p>I guess US companies pay well because their share of the global GDP is higher (although it is decreasing slowly from he peak in the 50s).<p>Before seeing that I just thought it was that way because the US makes stuff (now intellectual property not physical goods), thus making profit of whatever is produce outside its borders.

In Sweden as far as I know the percentage paid on top of your salary by companies is around 33%, and I&#x27;m not sure that includes all of the fees and taxes related to hiring someone. From what other people write here that&#x27;s a quite high number even compared to European standards, but it sure does explain why the salary paid to an employee would be lower here than in the US.

Tech companies in the US are extremely profitable and there is a stronger demand vs lower supply than in Europe. A typical tech company in France usually manage to make $100k of revenue per employee, so it is understandable that they can&#x27;t pay them more than $60k on average. Then it&#x27;s &quot;market rate&quot;. Foreign companies just have to pay what local companies do.

The non-US companies either don&#x27;t see the ROI potential or may actually have a capital problem. Or, they may know that world-wide they can get someone to do the work at 1&#x2F;2 of what their US counterpart would pay.<p>The US companies paying double what everyone else does could be caused by them having the capital and ROI to do so. But, I don&#x27;t think so. Within the US, why do so many tech companies open shop in SV. They value the culture and team and integral parts that lead to success. They want top talent. Even when they hire out of the US, they don&#x27;t want to subject the project to the risk of failure by being cheap and hiring cut rate developers.<p>There&#x27;s also a culture of paying sticker price. And perhaps, price ignorance. We know what things cost locally, but we aren&#x27;t the best judges of knowing what a top developer should cost if they&#x27;re based in another country. Maybe we pay them 75% of local rates and that&#x27;s still 2X what they would get paid from a non-US company, we don&#x27;t really know.

I wouldn&#x27;t mind seeing a chart of effective salaries around the world. In the US, San Francisco is one of the lower paying hubs, Austin the highest: <a href="http:&#x2F;&#x2F;posts.thinkloop.com&#x2F;top_tech_salaries_by_city_adjusted_for_cost_of_living&#x2F;index.html" rel="nofollow">http:&#x2F;&#x2F;posts.thinkloop.com&#x2F;top_tech_salaries_by_city_adjuste...</a>

Well, there&#x27;s way more software out there than just the ones you mentioned - some companies you won&#x27;t hear of unless they&#x27;re hiring.<p>As for the pay, a lot of it goes indirectly to Quality of Life. You might not be paid as much, but benefits are generated in other ways.<p>Here in the US, if you have money, you can have a great QoL. Conversely, if you don&#x27;t, well, you won&#x27;t. Personally, I think I might like living in the EU (maybe The Netherlands), once I got over the culture shock.<p>One commenter brought up the killings in the US. It&#x27;s not like there&#x27;s killing all around you every day - it&#x27;s spread out over a very large geographical area. The USA Death Panels work to ensure that the killings are distributed according to an arcane metric that no one understands.

It definitely seems to be to be a supply and demand issue (I guess by definition of market prices this is obvious). On the demand side, there are less venture capital dollars and the sheer volume of companies is lower. On the supply side, there are plenty of local qualified engineers (just look at upwork and how much you can get developers for in other countries).<p>If you want to get a better idea of specific compensation at tech companies, check out <a href="https:&#x2F;&#x2F;www.transparentcareer.com" rel="nofollow">https:&#x2F;&#x2F;www.transparentcareer.com</a><p>We collect data in native currencies as well. Full disclosure, i&#x27;m the founder, but if you have any specific questions about data in other currencies i&#x27;d be happy to pull information for anyone who asks.

Your salary is irrelevant. What matters is your <i>buying power</i> in the country you live. Plus safety, health, vacation time, racism, culture etc. etc. It is a complex issue. In the same way that choosing a job based on salary only is a big mistake.

If I were to make USD 200K&#x2F;year as a Software Engineer in Bangladesh, I&#x27;d probably be richer than the CEO of that company.<p>I believe you&#x27;re referring to the ration salary&#x2F;cost_of_living rather than comparing difference currencies, countries, politics, taxes, etc. In this case, I&#x27;d say that the ration is fairly even, minus stocks&#x2F;bonuses. The base salary puts you in a similar spot in terms of buying power in your respective country if you&#x27;re a software engineer. That&#x27;s the beauty of this job... you can work anywhere in the world and maintain roughly the &quot;same&quot; buying power.

One reason right now is that the US Dollar is high right now. 10 years ago the Euro was 20% higher, GBP was 60% higher. AUD was 5% higher(but getting stronger).<p>Despite forecasts I think in 5 years the USD is likely to fall back again.

To me, it is just currency difference and does not matter on engineer or skill. For example, when I was offered to move to the US from India, I was offered 3 times my Indian Salary to suit US expenses. Basically, the pay you get should match your expenses. So, if you earn in Dollars, you spend in Dollars providing your net savings be same as someone who earns in GBP and spends in GBP.<p>If you choose to work remotely, the story is different. You may want to negotiate to suit your local expenses and then it is up to the hiring company to decide if it can match your local expenses.

The way to calculate pay is:<p>(monthly salary + equity) - (studio apartment rent + tax + health care + 30 cappuccinos + 8 steaks + 50 lbs of tomatoes)<p>edit: times 12

It doesn&#x27;t make any sense to compare salaries solely by numbers and without comparing the buying power related to the salary in the given country. This is the most basic economic understanding. It just does not work out, no matter what you take in account to &quot;justify&quot; the the higher or the lower one.

............................................................................ these countries still pay remote contractors like shit. They don&#x27;t get &quot;free healthcare&quot; or whatever shitty free thing you get in there, and also get the lesser pay.

I&#x27;m an outsider to a lot of the tech world, and not a tax guru, but could it be because US corporations have such low taxes to pay?

In Montreal, with 70k (53k USD), you can have a nice house, free healthcare and send your kids to the university.

Developers in Australia and New Zealand are really well paid.