Why dont we get paid more.

College Majors Engineering Majors
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<p>
[quote]
Management positions typically pay more because they are harder to replace. It takes a long time for you to get used to a company's system before you can effectively manage a part of it. The learning curve for an experienced engineer to replace another experienced engineer is much smaller than that for management positions.

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<p>I completely disagree with this statement. </p>

<p>I work as a systems engineer for a well known airline ticket information systems company (i.e. the management of information regarding tickets sales in the hospitality and travel industries) and the upper tier of management and often the middle management get changed out every 6 months. Many of the engineers who are responsible for and know the INs and OUTs of current systems are treated very well and are not laid off. Granted, the company is very large and has 100s of huge individual systems that all talk to each other, so replacing the engineer that has worked there for 10 years is going to be a lot more difficult than replacing some middle manager or even a upper tier manager such as a VP. The complexity of large-scale systems has more of a cost of replacement than some manager in an office pushing paper. [ The exception of course are those managers that manage client relationships which could end up costing the business revenue. ]</p>

<p>In fact, just this last month, there was a massive layoff where an entire level of middle management got eliminated. Only about 5 engineers were laid off in comparison to the 100s of managers that got laid off. I suspect this is due to the fact that most of the management is done by the lead engineers over the various systems. What does a middle manager really do if they aren't working in the trenches on the actual product? They push paper, send emails, coordinate meetings, and other BS that can be done by the lead engineer. Lead engineers tend to operate at the high level anyway and oversee a project as a whole and will create meetings only when they are necessary and not to justify their existence like some middle managers. If the lead engineer doesn't have time, the company can hire an administrative assistant to handle the rest of the busy office work. Of course, SOME middle management is necessary, but I say a lot of it is redundant and the salaries are way too high for the services they are providing the company.</p>

<p>I just found this forum a few days ago. The various threads here in the engineering forum and the USC forum are quite stimulating. I look to post here more in the future.</p>

<p>--Diode four nine four.</p>

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<p>
[quote]
Management positions typically pay more because they are harder to replace. It takes a long time for you to get used to a company's system before you can effectively manage a part of it. The learning curve for an experienced engineer to replace another experienced engineer is much smaller than that for management positions.

[/quote]
</p>

<p>Yes, management is almost always the highest paying career field. If you want to make a lot of money, focus on becoming a manager and obtaining management skills. Sales managers will always make a lot of money if they are good, because a lot of the money comes from bonuses and commissions on top of 35-40K salaries. However, sales managers also put in a lot of time... even when they're not at work, they're always thinking and stressing over ways to improve sales as it's consistent pressure to do so... it sure takes a certain personality to do it. All in all, however, management is where the money's at... almost every time.</p>

<p>In regard to the above post, I disagree that high level management is that replaceable.... if the manager is just a manager, and didn't work his/her way to being a manager (i.e. learning how to be a lead engineer, and then also learning how to facilitate high level discussion and get results), then they are replaceable... but often times that is rare, usually managers are very skilled at the company's function and with leading others in a positive and effective way that drives results.... very irreplaceable.</p>

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<p>Management is not necessarily the only way to go for a good salary. An experienced Design Engineer can make more than a manager, something I gathered from a couple of top semiconductor companies. An experienced Verification Engineer's salary isn't far behind.</p>

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<p>Suppose you have a manager at Boeing overseeing the development of a new aircraft. He should know how the Boeing aircraft department works, how to schedule and lead project design reviews for this new aircraft, how to show off the company’s strengths to lure in contracts, how to sell ideas and products to Boeing’s aircraft customers, the aircraft department’s idiosyncrasies, etc. Basically, he oversees the entire project but doesn’t actually do all the detailed engineering work such as programming a chip or designing a circuit because that’s what the engineers do. To replace him, you would need someone who is an experienced aircraft engineer, who also knows all about the Boeing aircraft department and also knows how to deal with aircraft customers. </p>

<p>Even at a lower level of management, say the flight test manager. He needs to know how to negotiate with the government and other agencies to schedule dates, the method to direct engineers to ensure a successful flight tests, how to deal with regulations and safety issues, how to deal with internal and external political issues and pressures if a flight test should fail.</p>

<p>However, to replace an super-smart senior VLSI lead engineer, the person in charge of all the VLSI design for an aircraft, you can probably hire another VLSI genius from another company like Lockheed, and he can pick up on the task after a short period of time by following the design notebooks. The only type of irreplaceable engineer is someone working on something so cutting-edge that no other expert in the field knows about. I believe these types of engineers tend to work at research places like Bell Labs or Lincoln Labs.</p>

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<p>Suppose you have a senior lead design engineer at AMD designing a new processor. He should know how the design department works, how to schedule and lead project design reviews for this new processor, how to coordinate junior engineers under him, how to adhere to the company's unique design philosophy, the verification department’s idiosyncrasies, etc. Basically, he oversees the entire project but doesn’t actually do all the detailed paper pushing work such as lure contracts or sell ideas because that’s what the managers do. To replace him, you would need someone who is an experienced microprocessor design engineer, who also knows all about the AMD design department and also knows how to implement particular design philosophies.</p>

<p>However, to replace a super-smart senior manager, the person in charge of managing the budget and selling ideas, you can probably hire another management guru from another company like Intel, and he can pick up on the task after a short period of time by following the management notebooks. The only type of irreplaceable manager is someone...</p>

<p>Surely by now you've noticed my sarcasm. The axe swings both ways.</p>

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[quote]
I am in full agreement with S1185. When I signed up for chem eng, i believed the crap they told me that there were plenty of jobs blah blah... useless garbage. </p>

<p>I have no innate sense of enititlement. But the department told me everyone gets good jobs in the field without any problem.

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<p>I've asked before, and I'll ask again. Why don't you move away from Toronto? I think that's your sense of entitlement right there - you want to stay in Toronto and you feel entitled to get a job without having to move. Yet the fact is, moving is part of getting a job.</p>

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<p>I think the message is that I would not become an engineer because I want to make alot of money. I am sure we all can come up with examples of other things we can do legally....to make alot (what's alot?) money.</p>

<p>That said, simply salary is a function of supply and demand. I think that lower cost overseas supply is affecting salary. </p>

<p>I would say that the salary is fair for the job. No one is going to get rich by being an engineer and working for someone else. Yes, I'm sure everyone wants to be employee number 4 at the next Google. But, the probability is that most engineers (middle of distribution curve) will make the average salary.</p>

<p>Now, If I was interested in making alot of money, I probably would not be an engineer...</p>

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<p>
[quote]
That said, simply salary is a function of supply and demand. I think that lower cost overseas supply is affecting salary.

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<p>In the final analysis, engineering salaries (like anything else) are a function of supply and demand at an equilibrium. </p>

<p>But it does beg the question of why is it that certain other jobs not seem to have problems with lowered salaries? For example, why exactly are consultants and bankers getting paid so well? One might argue that there is a supply of low-cost engineers overseas, but one could then also argue that there is also a potential supply of low-cost bankers and consultants overseas too. Just like how plenty of Indians are being trained to become cheap software engineers, there is no theroetical reason why Indians (or other foreigners) couldn't be trained to become cheap consultants or bankers too. So why are the top Wall Street investment banks paying, salary + bonus, up to 150k for first-year analysts (right out of undergrad), or 300k for guys right out of MBA programs? Why exactly is private equity paying up to 450k+ for guys fresh out of top MBA programs? Why don't they just hire a bunch of cheap foreigners instead? That's what the engineering companies do. If labor arbitrage works so well in the engineering labor market, then one would think that it would work equally well in other markets.</p>

<p>But, ay, that's the rub. Labor markets are notoriously complex beasts, possibly with multiple equilibriums. Hence, labor markets can actually be tipped one way or another. Employers are not simple price-takers. In many cases, employers can force labor markets to react one way or another.</p>

<p>Let me give you a historical example. In 1914, Ford Motor Company offered wages of $5 a day, a record high wage at the time - about double what Ford's workers were making the year before, and far more than what Ford's competitors were paying. The results were also predictable - all of the auto workers in the country wanted to work for Ford, and so Ford was able to pick the very best people to hire. It also greatly reduced turnover and spurred effort - nobody wanted to lose a lucrative $5 a day job because he knew that he wasn't going to get anything comparable anywhere else. It also spurred many of the most hardest-working and sharpest guys who would have gone to other industries to instead want to become Ford auto workers. Hence, Ford greatly upgraded the quality of its workforce, and contributed greatly to Ford's great success at the time.</p>

<p>What that shows is that labor is not a simple commodity. You can't just trade one worker for another, simply because workers differ in productivity. Some people work harder than others. Some people are smarter than others. By paying higher wages, you incent the better workers to want to work for you. You also spur existing employees to work harder for fear of losing their well-paid jobs. The point is, the value of labor is itself a function of how much you pay for the labor. </p>

<p>Investment banks pay very well, and that's why they are able to pick from the best possible candidates. Google, as an engineering company, is a special case. While they don't pay especially well, what they do offer is 'prestige', and that has value. Hence, many of the best engineers in the world want to get a job for the Google because they are getting "paid" in prestige. </p>

<p>I am quite convinced that other engineering firms could do the same - either increase salaries or increase prestige. They just choose not to. Apparently, they just don't really seem to think that engineering is not that important. At least, not as important as paying high fees for banking or consulting services.</p>

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<p>

The department I work in at Boeing, the managers take care of the design reviews, scheduling, and the coordination of junior engineers. The technically oriented lead engineers usually just do the difficult algorithms and present their results to the managers. Perhpas this is different from company to company.</p>

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<p>

Fair enough. Perhaps it is different for each company.</p>

<p>Here's something interesting that just surfaced today, Motorola plans to cut 3500 employees:</p>

<p><a href="http://macnewsworld.com/story/55265.html%5B/url%5D"&gt;http://macnewsworld.com/story/55265.html&lt;/a>

[quote]
Few details were given, but the cuts are believed to be aimed at middle management across the company's business lines, which includes home networking equipment sold to cable companies and hardware and solutions marketed to telecom companies, as well as the core handset business.

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<p>Perhaps the top management don't get affect as much, but not so much for middle management.</p>

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<p>The thing with investment banking and management consulting is that it is hugely competitve to land a position. They really only consider top grads from from Ivy schools. People I know that went to work for IB/MC were engineers with MBA's from Johnson (Cornell), Sloane (MIT), Rotman(Toronto - yes a Canadian school!) and Wharton (UPenn). It bears mentioning that these guys all had minimum A- (3.7) GPA in undergrad - and were personable as well as being very smart. You can see that you need a good undergrad GPA and to graduate from a top MBA - no easy feat.</p>

<p>On the other hand, 60 Minutes did a profile on Indian Institute of Technology as India's MIT. It would not surprise me that IB/MC would hire these grads - probably a good business decision since many are really smart.</p>

<p>I have a friend who had average marks and is working towards an online MBA. She is delusional if she thinks that this online MBA will give her access to the top IB/MC firms.</p>

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<p>
[quote]
The thing with investment banking and management consulting is that it is hugely competitve to land a position.

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<p>This is certainly true, but is true regardless of what you majored in. Lots of engineering students want to get IB and MC offers, but, frankly, so do a lot of humanities stdents. </p>

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They really only consider top grads from from Ivy schools.

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<p>Ivy or Ivy-ish schools. Lots of grads (engineers or not) from Stanford and MIT go to banking and consulting, yet these schools are not members of the Ivy League. </p>

<p>I think it should also be important to distinguish what is meant by a 'top student', for the purposes of consulting and banking. A 'top student' does not always have to mean top grades. For example, one of the most common sources of hiring for consulting and banking firms are former athletes at these schools. For example, if you want to find one single undergrad organiation at Harvard that churns out one of the highest percentage of future consultants and bankers, it's hard to beat the Harvard football team. As a Harvard football player, you have access to all other former Harvard football players, many of whom are now in consulting and banking and can therefore provide you with a strong inside track to getting hired. Clifton Dawson, Harvard's record-breaking running back, has said that if he doesn't make it to the NFL, he will probably go into banking. He already completed an investment banking summer internship obtained (unsurprisingly) through his football contacts. </p>

<p>The same could be said not just about football, but also about any of the varsity sports at these schools. Banks and consulting firms seem to like successful athletes because of their initiative and goal-oriented nature. </p>

<p>
[quote]
It bears mentioning that these guys all had minimum A- (3.7) GPA in undergrad - and were personable as well as being very smart. You can see that you need a good undergrad GPA and to graduate from a top MBA - no easy feat.

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<p>I wouldn't go so far as to say that you 'need' a good undergraduate GPA. I know people who got into elite MBA programs with, frankly, rather middling GPA's. The key is that they had excellent work experience. </p>

<p>For example, I know one guy who was terrible in college, so terrible that he was basically forced out. So he drifted around for awhile, eventually joined the military where he found his groove, eventually qualifying for selection to the Special Forces, and completed numerous dangerous missions, including in Afghanistan and Iraq. He also was able to complete his college degree, but his overall GPA is still pretty bad, chiefly because of the terrible grades he had before. Yet he got into Harvard Business School, because of the strength of his military experience. When it comes to leadership, crisis effectiveness, and the ability to get things done under pressure, I think we can all agree that he's a top-notch guy. I think he'll do rather well in an aggressive, goal-oriented environment such as banking. </p>

<p>The point of all this is that we have to be careful about what we mean by 'top' guys. MBA programs, and frankly, consulting and banking firms, are looking for far more than just academics. You can have quite mediocre grades and yet still be an excellent consultant or banker, due to the strength of your personal characteristics.</p>

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<p>From a finance perspective, engineering salaries are part of the total cost of the goods/services that they produce. Higher profit margin goods/services allow for higher salaries, conversely lower profit margin goods/services have salary/expense pressure. Using the IB/MC example, these services are high profit margin. That is IB/MC generate large fees in excess of the cost of these services. An exampe is an entry level MC from a Big 4 is billed out a $140 - $160 per hour. That entry level MC is being paid $45-60 per hour. </p>

<p>The bottomline is that, the USA still enjoys a competitive advantage in certain industries/fields. Here are few I can think of. IB/MC/Airplanes/Big Pharma/Biotech/Law. I would even include sports such as the NBA/MLB/NFL. I would not include soccer since the European club teams are willing to pay for talent.</p>

<p>In industries such as autos, lower cost/higher quality producers are hurting GM and Ford.</p>

<p>In summary, if you want to make money you need to go where the money is.</p>

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<p>
[quote]
From a finance perspective, engineering salaries are part of the total cost of the goods/services that they produce. Higher profit margin goods/services allow for higher salaries, conversely lower profit margin goods/services have salary/expense pressure. Using the IB/MC example, these services are high profit margin. That is IB/MC generate large fees in excess of the cost of these services. An exampe is an entry level MC from a Big 4 is billed out a $140 - $160 per hour. That entry level MC is being paid $45-60 per hour.

[/quote]
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<p>I'm afraid that it's not quite that simple. After all, investment banking and management consulting both have the same 'problem' in that they are service businesses, and services inherently require lots of people to deliver those services. Hence, they do not enjoy the strongest 'labor economies of scale'. For example, if you're a consulting firm and you want to double your revenue, you basically need to double your consulting staff. </p>

<p>Contrast that with an industry like, say, software. The profit margins for successful software products are EXTREMELY high. Look at it from a variable cost perspective. It only takes some extra packaging, some extra documentation manuals, and a CD for Microsoft to publish another copy of Windows or MSOffice. So it costs Microsoft probably less than $1 to create another copy of software that it will charge anywhere from $200-400 (depending on which version you get). </p>

<p>And that's just Microsoft. Enterprise business software is far far more expensive. Let's say you buy a full suite of business software from Oracle - the 10g database, the Oracle App server, the Siebel CRM and Peoplesoft human resources sutie (Siebel and Peoplesoft are owned by Oracle now), and so forth. Your final bill can easily be in the 8 or 9 figures, depending on how many seat licenses you purchased, which enterprise features you chose, and so forth. But the only 'physical' thing that Oracle will give you (and hence, the only thing that Oracle has to pay for) is a box full of CD's and a stack of manuals. Also they probably have to staff up their help-desk with extra people to take care of the support calls that you are probably going to conduct in order to report problems and get help. </p>

<p>But the point is, you can see that the 'margins' on software, especially enterprise software, are super-high.</p>

<p>You can even see it with Internet companies. Frankly, it doesn't take much for Google to conduct a search for one more user. A little extra bandwidth, a little extra energy costs in their datacenter for the processing, but that's basically it. The same is true of Myspace - it costs the company very little money to handle one more user profile. It doesn't cost Ebay much of anything to handle one more auction. </p>

<p>What software companies, including Internet companies, exhibit from an economic standpoint are miniscule variable costs, but very high fixed costs. The very first copy of Windows Vista "cost" $6 billion for Microsoft to produce, because that included all of the R&D costs to build Vista. But the second copy, and every copy after that, costs almost nothing. Once you've built the software, it costs almost nothing to make copies. It cost a lot of money for Google to build its scalable search engine and other features and tie it into an advertising engine. But once that's all built, it costs practically nothing to add more and more users. That's why companies like Microsoft can enjoy high margins. For example, Microsoft has 39% operating margins and 28% overall profit margins. In comparison, Goldman Sachs's margins are 39% and 25% respectively. </p>

<p><a href="http://finance.yahoo.com/q/ks?s=MSFT%5B/url%5D"&gt;http://finance.yahoo.com/q/ks?s=MSFT&lt;/a>
<a href="http://finance.yahoo.com/q/ks?s=GS%5B/url%5D"&gt;http://finance.yahoo.com/q/ks?s=GS&lt;/a&gt;&lt;/p>

<p>So if salaries were determined solely by profit margins, then why doesn't Microsoft pay its engineers as well as Goldman Sachs pays its bankers? Why don't Microsoft engineers, start out at 120-150k (salary + bonus) right out of undergrad? Why don't you have superstar Microsoft engineers making 7 or 8 figures a year? After all, Microsoft's margins are even better than are Goldman Sachs's, so it would seem to me that they have the headroom to pay even better than Goldman does. </p>

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In summary, if you want to make money you need to go where the money is.

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<p>See above. There is a TREMENDOUS amount of money being made in software. But not a big chunk of it is accruing to the actual software engineers. Or take the Internet. YouTube was founded in 2005, and was sold a year later for $1.65 billion. That's a tremendous amount of wealth-generation for just one year's worth of work. But most of that money went to the founders and to the investors. Those engineers who built the YouTube website and back-engine - they didn't get that much of it. {Don't get me wrong, I'm sure they made out decently, but they didn't become super-rich the way the founders did}. Hence, the money is definitely there. It's just that not much of it accrues to the individual engineer. Contrast that with investment banking, where a significant amount of the value created really does accrue to the individual analyst or associate. </p>

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[quote]
In industries such as autos, lower cost/higher quality producers are hurting GM and Ford.

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<p>I would actually argue that much of it is a matter of marketing and strategic positioning. For example, Microsoft's software really isn't THAT good. Microsoft has never really produced the highest quality or the cheapest software around. Microsoft wins by stellar marketing and stellar business strategy. For example, Microsoft encouraged the clone PC market and cut sweetheart deals with them to preload Windows and Office. Microsoft played Intel and AMD off against each other, and played the peripherals makers against each other to keep all of them off-balance and weak. Microsoft bundled features that served to destroy entire competing industries (i.e. Microsoft killed Netscape by bundling IE into Windows, and has effectively killed off Real Networks as a competitive threat by bundling Windows Media Player). </p>

<p>Let's take a look at the auto industry. You say that low-cost/high-quality producers are hurting GM and Ford. Well, frankly, I think much of this is due to bad marketing. The high-quality Japanese makers, i.e. Toyota and Honda, are actually more expensive than GM and Ford. The Koreans are basically now the same cost, and often times a bit more expensive. So, if anything, it is actually GM and Ford that are now the low-cost option. I know that among my circle of friends, we all know that the American car is the cheap option, and foreign cars are actually the expensive option.</p>

<p>But take a look at the German cars, especially the luxury cars (Mercedes, BMW, Audi). Frankly, German cars are not that high quality. The latest Mercedes, in particular, are riddled with manufacturing defects according to JD Powers. And Mercedes is expensive. You can almost certainly get a Ford or a Chevy that is more reliable and cheaper than a Mercedes. But that has to do with marketing. Americans THINK that a Mercedes is high quality, even when it is not. Mercedes has that image of great German engineering as well as exclusivity that gets customersto want it, even when the quality really isn't that strong. In other words, the Germans have marketed their products well. The Americans have not. When people think of an American car, they think of something cheap and shoddy, even when the quality is, while not as good as the Japanese, is still actually pretty good.</p>