This is absolutely not how wages are set anywhere and certainly not in tech. Workers are paid according to the prevailing wages and what they’ll accept, not according to the value they generate for the firm.
Having had real conversations with company leadership about "the board being concerned about engineer salaries being above industry norms" despite "having the highest revenue per engineer in their portfolio" I can... anecdotally confirm.
I've been in the board room when discussing salaries and told that we need to offer the lowest that the candidate will accept - "it's just good business".
I was arguing against that mentality as responsibilities and retention are a more important metric to my mind when thinking about compensation. But even there, I'm part of the problem as I would set my "retention" target to some measure above industry standard: where-by I am still thinking in industry standard terms. (as per this thread)
In theory, it could re-invest those profits into the company, in hopes of further gains down the road. (But like all things, there's a healthy balance.) In practice, I think the answer is "executive bonuses" and [short-term] "stock buybacks".
(But morally I agree; there is no reason every company has to be Scrooge, and I think it's to their long-term unprofitability to be so, by effectively ensuring a lack of experience & growth within the employees generating the value in the first place.)
How much value a worker generates is of course much harder to quantify in tech, vs a finance trader, but the market forces will produce a rough equivalent result over time.
But to get back to the topic, tech wages are definitely not set by comparing with finance wages!
> the market forces will produce a rough equivalent result over time.
No, they absolutely will not. Absolutely not. The entire history of the labor movement and of labor law is testament to this. We’ve tried this, repeatedly, in the real world, and labor gets fucked every single time. Employers do not pay according to the value generated by the employee, they pay the minimum they need to get an employee. Get this model out of your head, it is wrong.
Every once in a while someone recognizes that paying good workers good wages works out well for the business, but that never makes it back into the textbooks somehow.
I would love a study, which compared how well a company did, and what their overall expenses were:
1. For paying a team of N people the going wage.
2. For paying a team of N/2 people, double the going wage. Aiming for the best workers it could find.
3. Paying a team of 2*N workers, whatever the bottom of the market is.
This would be for teams where high functioning workers resulted in high value results, i.e. creative/design/technically challenging work.
I have no idea how a study like this would work, but the more challenging the work, the higher likelihood that you save money going high salary, high talent.
Some AI researcher seem to be falling into this category, with really high salaries. Researchers certainly have 10x talent. But I bet there are a lot of 2x, 4x engineers, designers, whatever, that are being overlooked and/or under motivated. That would be cheaper to pay, and produce more value, in small numbers, than others in larger numbers.
I think/hope we're talking about different things.
I think you're saying that employers pay employees as little as they can, not according to some formula based on the value each employee generates. Aside from some very specific exceptions, I think that's very true.
But then we need to explain why all companies don't just pay minimum wage!
I claim that prices (wages) on a labor market, like on most markets, is determined by supply and demand. Obviously, companies that pay employees more than the value they generate will run out of money and die. This sets an upper limit on wages.
The lower limit comes from companies outbidding (demand) each other for workers (supply) as long as it's profitable. In aggregate this means wages will converge on on some large percentage of the value generated by the typical employee.
I made a former company $100M p.a. And all I got was a 30K bonus paid out over 6 years. Not even a promotion as I was on a visa. The asset required maintenance and without me it slowly degraded away. Every now and then I offer to go back and fix it for a flat $1M but instead they would rather believe that it’s impossible. You could imagine the sheer dysfunction required to let that much money go.
A former colleague built a program that would have saved $30M p.a. in OpEx but as a policy they can’t deploy something unless more than two people understand it and they wouldn’t pay enough to hire someone capable enough. Probably would have taken $600K.
It’s about power and in general management does not want to yield power to ICs no matter how much money they could make with it. The more productive the IC the more power management loses.
My advice is to sleep on those kinds of improvements. Optimize things that are making your job/team's daily life more difficult, which directly translate into better WLB. You can sometimes knock significant hours-per-week off of your actual work done.
We are giving away this expertise for fractions of a penny, but companies react to market pressures. Let them spend the extra $36 million for not keeping up with it. When they offer incentives, then do the work.
Heck, maybe you can make an underhanded pitch to whatever cloud provider it was that you earned them millions by not fixing the issues.
