Silicon Valley Wages

by John R. Carlsen – 31 May 2022, updated 27 April 2024

Disclaimer: Opinions expressed herein are my own and are not intended to represent those of unaffiliated organizations, including any named herein.

California and especially Silicon Valley are expensive places to live, largely due to high demand for housing relative to its supply. As a result, local compensation rates also need to be relatively high.

California’s New Requirements for Wage Transparency

Effective January 1, 2023, California Senate Bill (SB) 1162 adds new transparency requirements, including that employers of 100 or more include reasonably-accurate expected pay ranges in their job postings.

Major Technology Companies Driving Wages

Silicon Valley’s largest technology companies provide good bellwethers for local compensation rates.

For the last several years, a few major high-profile technology companies have been referred to collectively as “FAANGs”: Facebook, Apple, Amazon, Netflix, and Google.

Google (via its parent umbrella company since 2015, Alphabet) and Apple each have about 150,000 employees worldwide and about 25,000 locally. Facebook (since 2021 operating under the umbrella company Meta Platforms) employs about half as many (66,185) and Netflix employs only about one-tenth as many (12,800). Amazon is the giant at ten times the size of Google, employing 1,684,853 (as of November 2023), though many in non-technical roles.

On average, Google pays about 8.5% higher than Apple and Facebook pays about 14% more than Google.

Earnings by Role

Apple and Google both pay their hardware engineers about 3.4% to 5% lower than their software engineers and managers.

Housing Burden

The United States federal Department of Housing and Urban Development (HUD) implies that one good indicator of quality of life is the portion of income used to pay for housing: low when reaching “cost burden” at 30-50% (originally 25-50% in 1969-1981) and worse when portions exceeding 50% cause “extreme cost burden.”

One factor raising California’s housing costs appears to be the 1978 California Proposition 13—“People’s Initiative to Limit Property Taxation,” commonly known as “Prop. 13”—which limits increases in assessed value usually below rates of inflation. This effectively discounts the taxes assessed on real estate—not just owner-occupied homes but also rental and commercial properties—thereby giving incentive to property owners not to sell. By lowering the housing supply without lowering demand, prices increase.

Comparing Earnings by Level versus Housing Burden

As has been common practice since at least as early as the 1990s, these companies stratify their workers into levels based roughly on years of education and experience. (I generally calculate education by counting the nominal years required for the highest degree earned, plus half that number for each additional degree. For example: six years for a graduate degree plus two years for an additional undergraduate degree, even if earned in the same field.)

They also draw parallels between often-diverging technical and administrative leadership paths, which I believe builds upon a foundation in the matrix management that evolved in the aerospace industry in the 1950s and entered the computer industry in the 1970s. (In contrast, I observed a uniquely collegial management structure when I worked in IBM’s research division in the late 1980s.)

In the following table, I include data from levels.fyi and I approximate minimum qualifications (years of education and experience) and classes of housing cost burden, and I extrapolate titles and amounts for levels below L3. (Though Google considers L3 its entry level, I recognize levels below it.)

To increase understanding, I include totals for compensation at each level, the major components of the compensation, and the percentages that each component contributes to the total. (Note that the totals may vary slightly due to rounding.)

I also present equivalent hourly rates, which I base on a typical traditional USA working year of 2000 hours (8 hours per day × 5 days per week × 50 weeks). Please note that the number of working hours expected by each employer can vary significantly; for examples, each week, Sony’s PlayStation division works nominally 35 hours, Google expects 50 hours (40 hours on project plus 10 hours of self-directed research), and a department of Apple where I once interviewed (the iPod group, before the release of the iPhone) required 70 hours per week.

Freelancing

A 2024 news article describes some types of work-from-home freelancing as high-paying, including “programming” for $250 per hour.

For much of my career, I have worked as a freelancer, and I often design and develop software, which includes programming. Though some who program computers are self-taught—as I once was (though with some excellent mentors)—I now do this with a degree in computer science (plus six other degrees) and have taught this at the college level.

For an hourly rate of $250, I would expect such a programmer to have at least a four-year degree in computer science and many years of professional experience.

Moving Forward

With the COVID-19 pandemic likely a contributing factor, demand for skilled professionals (and all workers) has recently increased and this may increase compensation more than the 4% annual average rate of inflation that I observed in years prior to the pandemic.

However, the cost of buying housing continues to increase at 8%, making Silicon Valley unattractive for those who cannot afford to purchase housing immediately.

To slow the rate at which housing appreciates, the benefits conferred by Proposition 13 should be limited to only owner-occupied properties (including residential, commercial, and industrial).

Related Reading

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