Tech salaries probably aren't dropping from remote work

Tuesday, December 22, 2020

Not even a year ago, most software companies and software engineers were some form of remote work skeptical. Remote work existed (I've been working remote for most of my admittedly short career!) but it was not widespread. When I talked to recruiters at big tech companies they would all insist that remote work was not feasible for them, and even at the companies I worked for, there was pushback that this definitely wouldn't work for us because reasons. But now, I think we're seeing one of the real reasons people were skeptical:


There are lots of very real reasons to like colocation, and there is a lot that's hard about remote work. But I haven't seen a lot of discussion around the role of salaries in affecting whether or not people prefer remote work. Imagine this (and for some of you, this might be really easy): you're working in New York or San Francisco, pulling down an absurdly high salary. You know that in the Midwest, salaries are much lower, not even comparing to other countries where salaries might be much lower. In this situation, it seems pretty rational to oppose remote work. If you only allow colocation, then you're competing against other workers who all have the same cost of living as you and all have the same sky-high salary demands as you. But if you allow remote work, that great dev from Akron, Ohio might be willing to do the same job for less money. Right?

Well... it isn't quite that simple. Right now, tech salaries have been going up consistently for a while (anecdotally, I've seen this as long as I've been here, so at least since 2013). This is consistent with demand for software engineers outpacing supply of them. Companies like Basecamp and Stripe are employing software engineers anywhere at California rates. These companies aren't charities: they are doing it because they understand that, in the market conditions we have right now, to get the employees they need for their business to be successful, they have to pay those rates.

Now the pool of software engineers who are available for remote work has expanded dramatically. So has the competition, as many companies are leaning into this advantage in hiring (including my employer) by looking for the best talent, regardless of where it is. When you do that, you have to pay what the competition is willing to pay, and right now that's going to be... *checks watch*... a pretty high salary and good equity compensation.

The gut check on this is to consider outsourcing to other countries. This has been a trope and fear as long as I've been aware of computers. For most of my life, people have been talking about how software development is all going to go overseas to whatever the current country of interest is: India, Russia, Ukraine, China... you hear people saying these countries with cheaper labor are going to eat our industry and we'll be out of jobs. Well, it hasn't happened. So why not? There are a few advantages to hiring an engineer in the US: you get someone who is on a compatible timezone (you could also get this in South America), who shares the same language, who has shared cultural touchpoints. And you're working within the local legal framework, which is easy: hiring across US state lines is harder than hiring in the same state, and hiring out of the country is harder than hiring within the same country. So it's just far more convenient to work with people who are in the same market, usually. But we are hiring people globally, and many teams are distributed around the globe. The effect of that? It's buoying salaries everywhere. The countries which once had the cheapest labor have been getting wealthier and salaries have been rising, and before you know it, the labor arbitrare will be hardly worth it (if it even is now).

So you can rest easy, probably: your tech salary is safe with remote work.

But of course I'd say that, because I work remote and like my salary 😉. So make your own judgments, and take your and others' biases into account. From where I sit, it looks like remote work doesn't dramatically change the market forces that are keeping salaries up. I'd be more afraid of bootcamps (and maybe when those threaten our salaries, you'll see a sudden push for licensing to keep salaries up and add barriers to entry).

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