Research into the earnings of software engineers

By · Published January 6th, 2014

Software

Introduction

We recently did a case study for an individual who has worked at Google for several years in an East Coast city, earning between US$140k and US$180k, and donating a large fraction to GiveWell recommended charities and 80,000 Hours. They asked us the following questions about their expected earnings in software engineering:

  1. What are my prospective earnings if I continue as an engineer at Google?
  2. Could I earn more by moving to Google HQ in California?
  3. Could I earn more by joining a start-up in Silicon Valley?
  4. Could I earn more by becoming a programmer in finance?

We interviewed five people about these questions (see full details at the end of this post) and did a simple analysis on Glassdoor. In this post we present notes on our findings.

Summary of findings

In summary, we found:

  1. They can expect their salary to increase 2-6% per year if they stay at Google.
  2. They probably can’t earn more by moving to Google HQ in the Bay Area, though we encouraged them to ask more people about this.
  3. They can probably expect to earn more by joining a start-up. But we’re still investigating this issue so aren’t confident.
  4. We’re unsure whether they can earn more by entering finance, though there is potential for significant salary increases so we recommended they speak to a head-hunter, and eventually apply to several companies.

Full analysis

Prospective earnings in Google

We asked two other Google engineers, who both thought our candidate’s earnings would increase by 2-6% per year in his current position. This matched our candidate’s own assessment of their prospective earnings.

We also asked whether they could earn more by moving into management roles. Both of the other engineers agreed that a manager wouldn’t necessarily earn more. It may be possible to rise up the ladder more quickly in management, but the skill set is very different from that of a software engineer.

For further reading about earnings within software engineering, check this, and if you’re working at Google, check Google Magnet (an internal Google site that explains how to be promoted).

Bottom line: Annual salary increases of 2-6% seem realistic. Entering management doesn’t seem to be an easy way to boost earnings.

Prospective earnings at Google HQ

Initially, we thought our candidate could earn more by moving to Silicion Valley, because previous investigation showed that software engineers generally earn more there. Moreover, Glassdoor showed that software engineers in Mountain View (Silicon Valley) earn about 20% more than engineers in East Coast cities.

Nevertheless, when we used Glassdoor to compare average total pay within Google between Mountain View and East Coast cities, we found no significant difference for any engineers, including level 3 engineers (as defined on Glassdoor) or engineers with 4-6 years’ experience.

Neither of the people we interviewed had experience with people moving to HQ, so they weren’t sure whether earnings would increase.

Overall, it seems that although software engineers in general earn higher average salaries in Silicon Valley, they don’t earn more within Google. The explanation for this could be that there are more high paying jobs available in general in the Valley (boosting the overall average), but people doing comparable work (e.g. engineers with similar levels of experience at Google) don’t earn more there.

Bottom line: We tentatively conclude that our candidate couldn’t earn more by moving to Silicon Valley, although we encourage them to ask around for examples of people who have made that move.

Could I earn more by joining a start-up in the Valley?

Probably yes. See our prior analysis, which is being expanded. Our candidate also thought they could probably earn more by doing this. We’re still working on more detailed estimates of the expected earnings in tech’ entrepreneurship.

Could I earn more by switching from software to finance?

The people we interviewed were divided over this issue:

  • One person currently working in finance thought it was unclear.
  • Two people currently working in finance thought yes, with several caveats: (i) one’s earnings might go down in the short-term; (ii) much of the extra potential benefit comes from the small chance of making a lot of money; (iii) it would depend on whether you could demonstrate a willingness to learn and an interest in finance.
  • Alexei (a Google employee) said he had considered this path and thought the expected earnings were higher if you can break in, but that it’s difficult to break in without experience or connections.
  • One person also mentioned that many people make the switch by taking a Master’s degree in financial engineering at a good school, which then helps you find jobs.

Finance jobs are not generally publicly listed. Firms are reluctant to release data, and we weren’t sure how to use Glassdoor to make the relevant comparisons.

Bottom line: We’re unsure whether our candidate can earn more in finance. We recommend speaking to head-hunters (a step recommended by one of the people we interviewed) and then completing some applications in order to get more concrete estimates.

Interview process and excerpts

We interviewed the following people by e-mail. We chose them because (i) they worked at Google or within quantitative finance, and thus seemed well placed to answer our questions, and (ii) they are active in the effective altruism community, or are former coachees of 80,000 Hours and were happy to take our questions.

  • Alexei Andreev – a Google engineer who has invested a great deal of thought in maximising his earnings.
  • Another Google engineer with 5 years’ experience
  • David – a former coachee with 7 years’ experience in quantitative finance
  • An 80,000 Hours supporter with 1 year’s experience working as a trader in quantitative finance
  • An 80,000 Hours coachee working as a quantitative financial analyst

Here are some of the most interesting excerpts which we can share publicly:

Interview with Alexei

My questions:

  1. How would you expect their salary to grow if they continue as an engineer?

  2. Is it possible to earn more by becoming a manager? How do you do that?

  3. (If you have any experience with this) how much more do you think they could earn by switching to finance?

Key excerpts from the respective responses:

  1. Hard to say. It really depends on the person. If they just continue slugging along, then I’d expect their salary to grow by about US$10k/year. I bumped up my salary by US$30k last year, and I’d say I was already getting paid at the high end for my level of experience, but the increase came from me switching from a somewhat underpaid game industry to Google. Very experienced engineers (7+ years) at Google can make around US$400k from salary alone, but I believe you can get there faster than that.

  2. Also hard to say. Managers don’t necessarily make more. Google has very clear steps outlining what it takes to rise up through engineering levels. It’s all about creating value. You can do so as a software engineer or as a manager, which is a bit easier, but you need a different set of skills.

  3. I’ve looked into it, and it’s a very hard switch to make unless you already have experience and connections in that world. While the cap is higher there, so is the competition, and the cost of switching unfortunately makes that not a good move for those who value donations.

Interview with David (7 years’ experience in quantitative finance)

My questions:

  1. What kind of jobs do you think someone like our coachee should look for?

  2. Roughly how much do you think he would earn?

  3. Would he be able to go straight in or would he need to take another degree?

We filled David in with the details of a candidate’s experience and CV.

His respective responses:

  1. I think the key point here is to make sure that he goes for a front office position vs. middle/back office. I think the best roles for him would be at a quant-focused hedge fund. But as an aside I would suggest that he also considers moving within the online media world – I’ve heard of some very nice salaries in that area (some of my friends have even set up their own company and are doing quite well).

  2. I think he should be able to transition into the industry at least at his Google salary (whatever that may be). Then medium-term he can expect to be on a good six-figure salary. Of course beyond that the sky is the limit depending on how his fund does. The far tail of the distribution is made up of guys who start their own funds and earn hundreds of millions if not billions. But for a typical person, earning millions isn’t statistically unlikely.

  3. I don’t think getting another degree or even taking a certificate is necessary. But demonstrating a willingness to learn would be very important. That is, reading books, papers, online forums. These materials could be on finance, trading, gambling, poker, etc. If I were a hiring manager I wouldn’t rate someone with a degree and experience at Google that much higher than someone with just experience at Google. But I would want someone who demonstrated a willingness to learn and pick up the terminology quickly, so that I didn’t feel like I was always holding their hand.

An additional point – If you can get yourself an interview without a recruiter, then obviously you would save the hiring company the recruiter’s fee, and this could be used to increase your starting pay. But in practice this is highly unlikely as the industry is so used to using recruiters. So I would suggest going out and talking to a bunch of head-hunters who will take you for coffee and give you better answers to your 3 questions than I can.