Salaries don't only compensate for performance, they also compensate for responsibility.

Do you want to be the person that loses the company some amount $x, comparable to your yearly salary, when you make a mistake? Or are you willing to lose the company 100($x) for making the wrong decision, be fired for it, and have your entire team looking for jobs?

I tend to think of it as "how much of the buck are you expected to stop?"

(http://en.wikipedia.org/wiki/Buck_passing for non-US HNers)

Hi, thanks. I completely agree, if you have been given more responsibilities, that should (in theory) imply that you're good at what you do and so your hours are worth more than the average (I didn't just think of performance, but value in every sense). That's something else than just scaling salary with age though, or?

Ideally, things should work that way.

But in reality, salary worth is determine by your negotiation skill within that limited time window before you accept the new job. And that's another industry's dirty little secret.

I'm pretty sure that at least some companies compensate for negotiation skill at annual raise time. Google, for example, tries to normalize salaries by performance & job function when they grant raises. So if you're a really good negotiator and managed to get a salary much higher than your equally-performant peers, your annual raise & bonus will be less than if you're a really good programmer but suck at negotiation.

My guess is that all other things being equal, a bad negotiator won't actually catch up to a good negotiator. If things are not equal though, and the good negotiator sucks at his job while the bad negotiator is absolutely rocking it, I think that the strong technical person could easily make up the difference through promotions and bonuses.

Negotiation skill and how desperate you are. Some will do anything to get a foothold in The Land of Opportunity, while others are already there and can afford to wait for a better offer.

> Shouldn't salaries reflect the value you provide to your employer

Maybe they do.

An hour of one person is not always worth the same money as the hour of another.

Experience is a differentiating factor, and older people tend to have more of it.

That doesn't mean that every older person is worth more than every younger person or that every older person is more experienced than every younger person.

But if I can decide between hiring two guys, one that is experienced and gets the job done by working 40 hours and has a life and the other that works 60 hours and has no life I'd go for the one that works 40, whatever the age.

So if you're afraid to be out of a job at 50 because you're going to be 'expensive' work smarter, not harder. Provide the same value without having to put in the same number of hours.

That's the best way to guard against obsolescence.

The variation in productivity between programmers is somewhere from 1 to 10 to 1 to 100 (although I like to point that for a certain level of problem difficulty there's a cutoff below which productivity is 0 (ADDED:) ... and then there are those who's contribution to the organization is negative, but that's a different problem...).

If it were the case that "salaries reflect the value you provide to your employe" we'd see some people making 10, 25, 50 times as much as "average" or below programmers. And I'm sure you can figure out a bunch of reasons why that would never fly in addition to the other replies to your query.

> The variation in productivity between programmers is somewhere from 1 to 10 to 1 to 100

I agree with your sentiment, but I think you're missing something important: it is possible (and, unfortunately, quite realistic) for a low-level programmer to be "negatively productive". For difficult problems, it may simply not be possible for someone without the required skill and experience to find a solution. Even for easy problems, though, it's possible that the solution found by a weak developer will in the long run cost more than the benefits it offers, for example, because they reduced the overall design quality of the system and later a stronger developer has to spend their valuable time fixing the design to clear the technical debt.

You're very correct and I added a note to that effect apparently while you were composing your reply. And your point about the easy problems is really important to highlight (and wasn't one I was thinking about).

The question I have about these 100x (or 10x) productive programmers is why they wouldn't jump ship on employment and sell their 100x productivity on a project basis? Presumably they would make multiples of their salary if they are really multiply productive.

Some of us did. As a contractor, you certainly can earn a significant multiple of the hourly rate you would make as an employee in most companies. If you set up your own business and build your own stuff, then you have almost astronomical potential: the software development business has low barriers to entry, and the right idea can scale from a small team to serving thousands or millions of customers.

However, it's not as simple as that: you absolutely must have a broader set of skills to work effectively in these ways. There are many management and communication skills that you wouldn't need much working in a technical role as an employee that are quite simply essential to working independently, and more still if it's not just your own work to be organised but a whole team/company. Also, you are operating without the safety net that being an employee provides: you typically bear all of the risk if you're on a high-margin fixed-price contract that overruns by a year, or if you put your own money into starting a company and your idea just doesn't work out.

A lot of us including myself just don't have what it takes to work on a multi-client consulting basis. Plus at least back before the net became really big Gerald Wienberg said that the correct hourly basis to set is 5-6 times what you want to earn because of all the overhead and downtime that comes with this business model. That's still a factor if you're charging on a project basis, which is extraordinarily dangerous in our field due to the inability of our customers and ourselves to correctly scope a project before it starts.

> we'd see some people making 10, 25, 50 times as much

Ha, I hadn't thought about this aspect at all, thanks. But would you necessarily need to assume the pay should be directly proportional to performance? Perhaps earning double as much when you're 10x more effective is more reasonable, and then triple at 100x - say, a logarithmic scale? Also, productivity and hours spent are both only partially reflecting the total value someone brings.

Well, in any case, I was thinking about _some_ kind of system where your value would be expressed and not some irrelevant metric like age.

I think it depends how you define "effective" and "performance."

For reasonable definitions, I think compensation would have to be directly proportional to effectiveness, such that being twice as effective results in twice the compensation.

That would be the case if "effectiveness" meant "your responsibility for the firm's revenue." Otherwise, what are you measuring, such that you can be "10, 25, 50 times" as effective? Efficiency of coffee making?

I agree. Salaries should correlate more directly with performance but in a lot of companies you steadily collect your yearly raises and after a while they add up. This can be very dangerous for people in tech though. In fact I just left a job after ten years of steady raises because I felt I was stagnating. I'll probably take a considerable pay cut in my next job but I think staying put would have been a lot riskier in the long run.

At least I'm not chained to an S.F. mortgage that means I can't live on < $90k/year.

Unfortunately, you're wrong. Salary really only affects the upper limit of how much you're willing to pay an individual.

In reality, you pay an employee just enough to keep them happy. As long as they're below the threshold where they're worth the cost, that is. Better employees have a higher threshold, but not necessarily a higher salary. It all depends on what they need and demand - which only has a marginal correlation with actual value.

Speaking from experience - there have been a few times we've given raises to great employees who were already happy with the salary they were getting. It didn't have much of an effect, really - we would have been better off investing that money in a better work environment - which would have a much more positive effect on our employee happiness.