When it comes to salary, software engineers are known to have a higher salary when compared with other professions. In the US, the average American salary is $51,480, while the average salary of a Software Engineer is $87,797 at the moment of this writing. As you see, software engineers get paid a lot, and they can get paid even more. However, why do software engineers have high salaries?

Answering why software engineers’ salary is high is complex to justify with only one, but a mix of multiple reasons. However, software engineers have high salaries because they are highly scalable for businesses, good talent is hard to find, as well as the supply of engineers can’t meet the demand due to nowadays almost every company needs a software engineer in their team.

In this article we are going to explain each of the reasons why software engineers have a higher salary, becoming a decisive factor in why people consider software development as a good opportunity for a career change in hopes of better pay.

Reasons Why Software Engineers Are Highly Paid

Good Software Engineers Are Hard To Find

If it is hard to hire software engineers, hiring good ones is even harder. The quality of a software engineer’s job is often associated with their ability to write code. While this is somewhat true, we would fail at understanding other aspects that make an engineer stand out among others. However, we are going to start by focusing on the coding abilities first.

First and foremost, software engineers have to ensure the code they write works. However, good software engineers are able to write code that is also elegant, reusable, extensible, maintainable, and scalable. Unless you are an engineer, some of these words won’t make more sense. Let’s understand each of these aspects and the impact they have:

Elegant Code

Who would have thought it is important how code looks? It is more important than you think. Have you ever read an article that doesn’t have correct punctuation or has a giant paragraph instead of multiple paragraphs?

Did you read that article?

Chances are you quickly closed that article and decided to find another as it would take longer to try to understand what the author was trying to explain in the first place.

In a similar way, we could talk about code. Going through code that is hard to understand or follow slows down the development process. Hence, costing a fortune to a company as they would be paying engineers to “understand” code, not even writing code.

The difference in this situation is engineers can’t run away and find other code just like you can when you find an article that is hard to follow. They will have to go through the painful process of figuring out what other engineers were thinking when they wrote a piece of code. Sometimes it can make engineers wonder whether a legit developer wrote a piece of software.

Reusable Code

Writing reusable code saves development time. Hence, it saves money for a business. When writing a software application, there are pieces of code that can be used for different functionalities.

A good example is developing a popup for a web page. Good software engineers wouldn’t write code for a popup for each popup used in a website. They would develop a generic popup that can be customized based on the content of each popup.

Extensible and Maintainable Code

Do you understand what extensible code stands for? Extensible code is code that can be modified or manipulated without affecting the core codebase and functionality. Maintainable code is another way to say code that is easy to modify or change.

It is very similar to a car. You can paint a car of your favorite color, change the wheels, add newer bumpers, add a louder stereo system, change the mufflers to make the car sound louder, etc. without ever affecting the main functionality of a car: to move people from one place to another.

Can you imagine if your car wouldn’t run because you painted it a different color? Certainly, that example is a little extreme, but in a similar way, we could talk about code. Code that is not extensible creates more trouble for adding new features or making improvements.

Scalable Code

Thinking about scaling is like having an image and expanding it in any direction, increasing the width or the height. However, it is not quite the same definition when talking about scalable code. You can’t make code increase in width or height for instance.

When talking about scalable code, we are referring to code that can work regardless of how much it is used. For example, it is not the same driving in a busy city like Dallas on an early Sunday than on at 5 pm on Monday to go to a gym.

In the world of software development, this wouldn’t be scalable as traffic affects the amount of time spent to get to one place in Dallas based on the day and time. Code that scales would work the same way regardless of how much traffic there is. In a programmatic context, it should take the same amount of time to go to the gym in Dallas regardless of the time, day, and traffic.

Remember, all of these technical skills are only one part of what good software engineers are about. However, software engineers go beyond the technical/programming skillset.

Software engineers should not only be smart. They should be good at solving problems, communicate effectively with other team members, be capable of working independently and providing deliverables, be sitting on a chair and staring at the screen of a computer all the time, make a company profitable by developing solutions in the shortest amount of time possible, interacting with other software vendors, etc.

In short, there is a lot that goes into software development. Saying that finding engineers with a good mix of all of these skills is hard is an understatement as it is extremely complex to find the right talent, and good software engineers know it.

That’s why providing a competitive salary and compensation package is a way to at least get the attention of qualified software engineers.

Software Engineers Are Constantly Learning

There are certain careers that require continuing education and software engineering is one of them. Just like lawyers, teachers accountants, pilots, doctors, architects, software engineers have to learn something new to keep their skills up to date.

Would you trust a doctor who uses the same medical procedures from 20 years ago even though there have been improvements in the medical industry?

I wouldn’t, and I hope you wouldn’t either.

In a similar way, companies don’t hire engineers with outdated skills. They are constantly looking for those engineers with knowledge in the latest technology to adopt newer software practices and solutions.

Software engineers know they are learning something new, not every year, or every six months, or every month, but on a daily basis. Having additional knowledge can be the difference between developing software that works for hundreds of people, or software that works for millions of people. Depending on what kind of things an engineer learns, some skills will have more impact than others for which companies will be willing to pay for.

Companies paying a high salary to engineers for this knowledge is a synonym of getting an advantage against their competitors as they use up-to-date information to make improvements to a product, reach out to bigger markets, or generate innovative solutions that haven’t been implemented in the industry.

Think of it in this way: paying a high salary to access more knowledge will eventually lead to more profits for the company. In the end, it is investment companies are willing to make when hiring engineers with the hopes of getting much higher returns.

In this way, it works as a win-win deal for both, software engineers and business owners. However, there are bigger winners depending on the investment outcomes. When the investment is done right, business owners are the biggest winners for getting knowledge that is translated into the innovation of a product or service. When the investment doesn’t bring the desired outcomes, the biggest winners are software engineers as their salary is already high.

Highly Scalable For Businesses (Leverage)

Recently we were discussing how software engineers should write scalable code. However, in this case, we are going to talk about scalability for a business.

When a company with a physical product grows its customer base, the company has to grow and bring on more employees. A quick example is to hire more people for customer support to have enough availability when a customer has complaints or wants to return a product.

This is linear growth. For X number of new customers, the company has to hire one more person for customer support. Let’s say a person is able to provide support to up to 30 people per day. That’s the maximum. There is no more scalability one person can provide besides helping 30 people.

What if one person could provide support to thousands, millions, or even millions of people per day? Now you wouldn’t have to worry about hiring more talent for customer support.

That’s exactly when talking about scalability software engineers can do for a business. A single engineer can produce a product used by millions of users. In the same way, they can generate millions of dollars in profit off after adding more features to a product. That’s why it is common to hear the word scalability when talking about the software industry.

On top of that, there is no additional cost that comes with a typical product such as a physical supply chain to manage, manufacturing costs, or the finances to scale a product from thousands to millions of dollars. That doesn’t mean there are no additional costs associated with the software, but they are much lower in comparison to a traditional physical product.

At this point, the question to ask is: How quickly can we scale the business?

You could pay a less experienced software engineer $50K to build a product but it will take them more time to complete and probably will have a lot of bugs, or hire an experienced engineer for $120k capable of delivering a quicker and better product. How much can a business be losing on profit by saving $70k a year on salary costs?

It Cost Too Much Money When Software is Down

Have you heard when Facebook, now called Meta, suffered from a power outage? That cost the company $163,565 in revenue every minute, roughly $60 million based on more than six hours of downtime.

That’s a lot of money.

In some ways, it might look insignificant for a company with a revenue in 2020 of $87.97 billion. Yet, it is still a significant amount. What does it have to do with a software engineer’s salary?

When you build a product that constantly crashes, revenue goes down along the way. Depending on the revenue model, whether it is based on advertisements, subscriptions, etc. this could have a higher impact in the revenue, just like Facebook’s case. Also, you lose reputation and users look for other alternatives.

Qualified software engineers are capable of not only bringing products back and running quickly when the system is down, as well as designing better software architecture to prevent future downtime. They are saving the company money by developing good software infrastructures. Can you imagine how many software engineers could have Facebook hired per minute at a $150K salary during their power outage?

Software Everywhere

We are at an age where software is everywhere, whether it is used for entertainment or for medical research. It is rare to find something that doesn’t have a software application for it. However, when someone discovers it, they will create an application for it.

There need to be enough engineers out there to develop and maintain all of this software. Are there enough software engineers and developers out there to meet the demand?

The short answer is no.

As of 2021, the global talent shortage amounts to 40M skilled workers worldwide. If the shortage trend keeps continuing, the global talent shortage is predicted to reach 85.2M workers. Can you think of how much revenue is lost because of the lack of skilled talent?

With the boom of bootcamps quickly teaching people all the skills needed to become software developers, and more students interested in pursuing a Computer Science (C.S.) degree, wouldn’t it be enough to satisfy the demand?

According to an iCIMS report, this shortage is not related to the number of people applying for jobs, but a shortage of qualified tech candidates. Although new CS or bootcamp graduates can have the skills to get into the job market, the reality is companies require experienced and knowledgeable engineers to grow at the rate they want to grow. The amount of time training new hires is reduced more and more and as there is an emphasis on delivering quicker. Therefore, qualified engineers will spend less time understanding and applying concepts taught during the training phase.

Is It Fair Software Engineers Make so Much?

When people hear about software engineers earning a salary of over $150K, they start questioning themselves whether they took the right career, especially when an entry-level engineer, usually just graduated from college makes about $135K. Is that fair when compared to someone making less than $100K a year in a different industry working for more than 5 or 10 years?

The first thing to do is to understand the context. FAANG companies [Facebook, Amazon, Apple, Netflix, and Google] typically pay well their engineers, including entry-level engineers. Now, entry-level salaries of $135K are not that high in places like San Francisco, where many of the big tech companies are, as the cost of living is much higher than the average.

If we remove cities like San Francisco or New York where the average pay is above the six figures, there is a likelihood those entry-level engineers would earn between $40K to $60K in most of the US, in some cases even higher depending on their skills. However, the chances of making the national average of $87K is still low as someone will need at least two to three years of experience. Depending on the city where a person lives, making above $40K for the first job is still good enough.

Now, think about the impact a software engineer can have. As discussed in the article, you don’t have to have an army of software engineers to build product features that impact hundreds, thousands, or millions of people. That’s the power of technology.

Generally, software engineers are paid well because it requires a multidisciplinary set of skills to be good at it. On top of that, they have to constantly learn and keep up with technology’s changes. In some scenarios, the biggest winners are the companies hiring engineers as they are the ones keeping most of the profit off of a product developed by a few engineers, making it look like they are not paid that much when looking at the big picture.

Finally, we cannot say whether it is fair for someone to make a certain amount of money because they don’t have as much experience working in a profession. There are multiple factors to take into consideration, for example, we have to look at the supply and the demand of each industry, and how that impacts salaries of each profession, or understand what are the industries that bring the most revenue.

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