Silicon Valley Wages

by John R. Carlsen – 31 May 2022

Disclaimer: Opinions expressed herein are my own and are not intended to represent those of organizations other than Syncopated Systems.

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

Silicon Valley’s largest technology companies provide good bellwethers for local compensation rates. These companies include Google (via its parent umbrella company since 2015, Alphabet) and Apple. Each have about 150,000 employees worldwide and about 25,000 locally.

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. 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.)

On average, Google pays about 8.5% higher than Apple; Apple and Google both pay their hardware engineers about 3.4% to 5% lower than their software engineers and managers. Though Facebook (since 2021 operating under the umbrella company Meta Platforms) and Netflix are often compared with these two, they each employ only about one-tenth as many workers; Facebook pays about 14% more than Google.

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.)

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. To increase understanding, I include compensation totals and major components (and their percents of totals), subtotals, and equivalent hourly rates (based on a typical 2000-hour working year of 8 hours per day × 5 days per week × 50 weeks); the totals may vary slightly due to rounding.

Demand for skilled professionals (and all workers) has recently increased, with the COVID-19 pandemic likely a contributing factor.

Related: Why Hire a Silicon Valley Computer Scientist?, How I Started