UCB undergraduate engineering majors

College Majors Engineering Majors
21

<p>^ Engineering wages are driven mainly by market forces, since a lot of engineers are employed by either large firms or smaller consulting companies. Engineers from top schools don't command a premium, like graduates from top finance/business and law schools do. </p>

<p>Sure, you're less likely to get rich being an engineer, unless you are entreprenuerial and branch out on your own. But, you will make an above-average, decent living. </p>

<p>For me, the jobs are a lot less stressful, and more balanced than being an investment banker or high-flying lawyer.</p>

<p>Save your money, live frugally, and invest...;)</p>

22

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^ Engineering wages are driven mainly by market forces, since a lot of engineers are employed by either large firms or smaller consulting companies.

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<p>I've heard the argument before that engineering wages are driven by market forces, and it is a major cop-out. </p>

<p>The probem with that argument, as any labor economist will tell you, is that the labor markets are deeply imperfect, and in particular, are riven with information asymmetries, entities with market power, and inertia. Labor markets are therefore not some mystical entity that cannot be changed and hence have to be taken as 'givens'. </p>

<p>As a case in point, consider wage rigidity, something that has been noted by economists time and time again, and has been the topic of literally hundreds of academic papers. For just a few of the more important works, consider MacDonald and Solow 1981, Hashimoto and Yu 1980, Fehr and Falk 1999, and Campbell and Kamlani 1997. However, if you believe that labor markets are perfect, then wages should never be rigid, but should always equilibrate to whatever happens to be the market-clearing price at any particular point in time. That simply doesn't happen, because labor markets are far from perfect. Strong sociological and psychological factors are involved in setting wages. Strong inertial forces exist to impede the movement of wages, either upwards or dowards. </p>

<p>What that ultimately means is that engineering salaries (just like any other salaries) are not "set" by the market, but rather, are largely social constructs. Engineers today get paid $50k a year to start because engineers have always been paid $50k a year (after adjusting for inflation). What I mean by that is that, in the real world, organizations really consist of multiple competing political entities that settle upon negotiated outcomes, even if they are not the truly most optimal outcome (Cyert and March 1963), and any attempt to change that negotiated outcome will run into great political resistance, as organizations do not like to revisit 'settled decisions' of the past (again, see Cyert and March). Hence, engineering salaries of today in a particular company are really a function of the negotiated salaries of engineers of the past, and are not a true reflection of market value. Attempts to reduce the salaries of those engineers would obviously run into great political resistance by engineers, but any attempts to * increase* the salaries of engineers would run into political resistance by the rest of the company. </p>

<p>You can also look at the situation in terms of value creation vs. value capture. The truth is, it is hard to assess the economic value of any specific individual in most companies, as most of the output is generated by teamwork. This is especially true of white-collar work like engineering, where everybody's productivity is dependent on the work of others. {For example, if you do great work on your part of the project, but everybody else does terrible work, then the project will be terrible.} Hence, wages in the company cannot be set by the market, as that presumes that the market can actually assess everybody's marginal productivity. Rather, individual wages are now set by internal political power. Whoever has more power within the company will be able to capture more of the value. Engineers in most companies do not have a lot of political power. Hence, while they may create a lot of value, they are unable to capture it. The value then flows to those entities who actually have political power in the company (i.e. managers, financiers, strategists, etc.) </p>

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Engineers from top schools don't command a premium, like graduates from top finance/business and law schools do.

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<p>And that's exactly what I'm talking about - why not? More specifically, as I have pointed out, many of the top engineering students will then become some o the top finance/business/law people, whereupon they will earn much higher wages. For example, many of the best engineering students at MIT, Stanford, and Berkeley will never work a day in their lives as engineers at all, instead opting to become investment bankers or consultants. Why not? Money. So then that begs the question of why those engineering companies couldn't offer them the same money.</p>

<p>I'll give you a poignant example. I know a guy who graduated in EECS from MIT. He was offered a job at a large tech company. He declined in favor of working for a strategy consulting firm, because it paid him much more. One of his clients ended up being that very same tech company that he turned down before. Isn't that ironic? What that means is that that tech company ended up effectively paying him a very high salary anyway. It's just that it paid him *indirectly<a href="as%20a%20part%20of%20the%20large%20fees%20they%20were%20paying%20to%20that%20consulting%20firm">/i</a>. That begs the question: if you were just going to end up paying this guy a huge chunk of change anyway, why not do so directly? Why use the consulting firm as a conduit (and have to pay extra for that conduit)? Again, this speaks to the deep inefficiencies in the labor markets. </p>

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[quote]
Sure, you're less likely to get rich being an engineer, unless you are entreprenuerial and branch out on your own. But, you will make an above-average, decent living.

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</p>

<p>Look, again, I've always agreed that engineering is a pretty good life for most people for, as you've said, it dos produce an above-average living.</p>

<p>But the question is, is it really a good deal for Berkeley engineers? After all, Berkeley is *supposed * to be an above-average engineering school. Students there should rightfully expect to get an above-average living. But, after accounting for cost-of-living, they are probably only getting an average living. </p>

<p>Consider this. Compare the chemical engineering salaries of 2006 for the graduates of Berkeley vs. the graduates of SJState. Yes, the Berkeley grads make more, but only by a smidgen (about $1500 a year). Berkeley chemical engineering is supposed to be one of the best and most rigorous ChemE programs in the country, and far better and tougher than the program at SJState. Yet the Berkeley grads do not make much more than the SJState ChemE's. </p>

<p><a href="http://www.careercenter.sjsu.edu/download/SalarySurvey2005to2006.pdf%5B/url%5D"&gt;http://www.careercenter.sjsu.edu/download/SalarySurvey2005to2006.pdf&lt;/a>
<a href="http://career.berkeley.edu/Major/ChemEngr.stm%5B/url%5D"&gt;http://career.berkeley.edu/Major/ChemEngr.stm&lt;/a&gt;&lt;/p>

<p>That's why you have students legitimately asking themselves why they worked so much harder to get into and survive Berkeley engineering, when they could have just worked less hard and gone to SJState, and ended up with almost the same salary. In other words, the return-on-investment of their effort to get into Berkeley is very low.</p>

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<p>Sakky, I agree with your post. I think its important to point out as well that engineering might not be a great career for top students as you have outlined quite well I think, but that majoring in engineering is a great idea for top students as it can further develop their potential to employers in basically all markets. I'm having difficulty thinking of an industry worth noting that doesn't hire engineers. So the potential is certainly there and I would never discourage them from majoring in the subject, but could see strong reasoning to support the claim of not pursuing a career in the subject.</p>

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<p>On the other hand, as UCBChemEGrad mentioned, engineering tends to give people the best balance in life. I went to school with someone who decided to work as an investment banking analyst; he makes good money, but leaving work before 7pm is a short day for him. For some, that extra money is worth it, but for others it isn't. Depends heavily on your lifestyle. </p>

<p>If money is all that matters though, engineering is definitely not the best route to take for top students.</p>

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<p>My point was simply that pursuing an engineering degree arguably leaves the most doors open upon graduation. You can pursure a career in nearly any field with an engineering degree where as with most other degrees you can't. I dont think engineering firms are highering business majors to do their engineering work, but the reverse is true. Engineering, and maybe pure science stuff like physics/math/chem, can say this but most majors can't.</p>

<p>So for an 18 year old student that doesn't know what they want with their life is there really a better major to start with than engineering? You can switch out and still graduate in 4 years but the reverse isn't true. You leave yourself with every door open; the possibility with an above avg. salary and good lifestyle with an engineering career or an opportunity for go for the money and work 100 hours a week. While it might not be the best route, though I will not confirm or refute this assertion, if money is all that matters it is certainly near the top of a very short list, and it still affords you the ability to pursue other careers very easily.</p>

26

<p>I agree (and in fact, have always agreed) that engineering is still probably a good field to major in, as it is certainly true that it gives you a wide range of options, and that by itself, is a strong reason to study engineering.</p>

<p>But I would reiterate the point that there is a big difference between majoring in engineering and actually working as an engineer. The sad truth is that the top engineers (i.e. the superstars coming out of MIT, Stanford, Berkeley, etc.) can almost certainly make more money pursuing non-engineering careers, and many do exactly that. For example, 25% of the BS EECS graduates of MIT do not take engineering jobs, instead opting for jobs in finance or consulting. Another 50% will go to graduate school, but even many of them will end up in non-engineering jobs. {If you look at the list of employers who hire MIT PhD graduates, you will find a conspicuous number of consulting firms and investment banks.} Because of (sad) institutional and historical factors, engineering firms are simply not designed to provide high rewards to high performers, the way that other industries can. </p>

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[quote]
I went to school with someone who decided to work as an investment banking analyst; he makes good money, but leaving work before 7pm is a short day for him. For some, that extra money is worth it, but for others it isn't. Depends heavily on your lifestyle.

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<p>I agree that, in general, engineers work less than investment bankers do.</p>

<p>But I think it should be noted that many engineering companies work their engineers like dogs. As one notorious case, consider Electronic Arts(the developer of video games like Madden NFL, Medal of Honor, the Sims, Need for Speed, and other popular titles). EA is notorious for driving their engineers into the ground.</p>

<p>*To Joe Straitiff, it was clear that video game giant Electronic Arts expected its employees to more or less live at the office. </p>

<p>His manager hung a neon sign that said "Open 7 days" and "constantly sent out e-mails to his whole team, saying that he'd see them over the weekend," said Straitiff, who worked as a software developer at EA for about a year and a half until being fired a few weeks ago. Straitiff says his termination owed partly to his refusal to put in 80-hour weeks for months on end.</p>

<p>...A number of former EA employees charge that the company--one of the largest game publishers in the world, with $3 billion in revenue for the year ended March 31--regularly pushes its employees to work 80 hours or more per week *</p>

<p><a href="http://news.zdnet.com/2100-3513_22-5457274.html%5B/url%5D"&gt;http://news.zdnet.com/2100-3513_22-5457274.html&lt;/a&gt;&lt;/p>

<p>*For around $60,000 a year in an area with a high cost of living, he had been set to work on a six-day-a-week schedule. On weekdays, his team worked from 9 to 10 (that is, 9 a.m. to 10 p.m.), and on Saturdays, a half-day (that means 9 to 6). Then Sundays were added - noon to 8 or 10 p.m. The weekly total was 82 to 84 hours. *</p>

<p><a href="http://www.nytimes.com/2004/11/21/business/yourmoney/21digi.html?_r=1&oref=slogin%5B/url%5D"&gt;http://www.nytimes.com/2004/11/21/business/yourmoney/21digi.html?_r=1&oref=slogin&lt;/a&gt;&lt;/p>

<p>Hence, many engineering students rightfully see that as a raw deal. They figure that if they are going to work the hours of a consultant/investment banker, then they should be paid like a consultant/investment banker. But sadly a lot of engineering companies try to have it both ways. They demand that their employees work extra hours, but they refuse to pay extra for those hours. </p>

<p>Now, to be fair, many (probably most) engineering firms are not like EA. Nevertheless, we should be aware of the fact that not all engineering jobs out there offer fewer hours and a better quality of life than do other careers. Some engineering companies require that you work more * hours and get paid *less. Sad but true.</p>

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<p>I think its pretty misleading and naive to look at an engineer's salary to determine his income. In the bay area, (and this was especially true a bit less than a decade ago), many tech engineers made most of their income from bonuses, and not salaries. In fact, generous stock options+bonuses in larger companies were and still are common. They frequently double, triple, or quadruple the amount of income the engineer receives compared to his bare salary.</p>

<p>Just look at John Chambers, the CEO of Cisco (no he isn't an Engineer, but he serves to illustrate my point). Several years ago during the tech downturn, he changed his yearly salary to 1 cent. Doesn't matter much, since he regards himself with millions of shares of Cisco stock. Yet his contribution to a measured average salary is 1 cent. Jerry Yang's salary is $1, yet his income was reported to be something on the magnitude of millions.</p>

<p>This is true, on a smaller scale, for many engineers. Nearly all Cisco employees are issued stock options. It's no big deal if the stocks tumble. But a person who has 30,000 shares might have made something like $500,000 from exercising his stocks several years ago (before outrageous state+federal taxes of course). His salary would have paled in comparison.</p>

28

<p>
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They frequently double, triple, or quadruple the amount of income the engineer receives compared to his bare salary.

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<p>Well, I don't know that they 'frequently' double/triple/quadruple one's income. For a tiny percentage, that does indeed happen, and in rare cases, may actually increase your income by more than a hundredfold. But stock options pay off only mildly in the vast majority of cases. Stock options are like lottery tickets. Only a small percantage of them truly cash in big. </p>

<p>
[quote]
This is true, on a smaller scale, for many engineers. Nearly all Cisco employees are issued stock options. It's no big deal if the stocks tumble. But a person who has 30,000 shares might have made something like $500,000 from exercising his stocks several years ago (before outrageous state+federal taxes of course).

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<p>Trust me, no Cisco entry-level engineer is receiving 30,000 options to start. He may be able to accumulate 30,000 options during the course of his career, but that will take years of solid work and probably promotions. Hence, whatever final payout he receives from his options are derived from his many years of working for the company and can therefore be considered akin to a lump-sum pension.</p>

<p>We also have to keep in mind that almost no engineers receive all of their options upfront. The vast majority of them will receive them proportionally over a vesting period which is usually several years. If you quit or are laid off (or fired) before that period is over, then you don't get the remaining unvested options. Heck, many engineers are provided only a cliff-vesting package where all of the options vest only after a certain number of years, and hence if you quit or are fired before that time, you get nothing. </p>

<p>The point is, salary is a far more stable way of being compensated. You can predictably know what your salary is going to be. Every week that you work is another week of salary that you earn. Options, on the other hand, are highly risky. The stock price might not increase, or you might get laid off before all of your options vest.</p>