Income Gap Between Tech CEOs, Software Engineers: Huge

How much of an income gap exists between tech-company CEOs and the software engineers who actually drive the business?

Business.org recently crunched the numbers on CEO salaries, and then compared those executives’ per-hour earnings to the hourly wages for the most popular jobs at their respective companies. For example, it matched up Amazon CEO Jeff Bezos’s $1.6 million per year against an Amazon warehouse associate’s annual earnings of $27,206; the latter would need to work 62 hours in order to earn the equivalent of one hour of Bezos’s pay.

And Bezos is something of an outlier, as he “only” takes that $1.6 million; the vast bulk of his wealth comes from Amazon stock (and because that’s risen so stratospherically in recent years, he’s now the world’s richest man). A Netflix customer service rep ($29,141 per year) would need to work 2,338 hours in order to equal one hour of Netflix CEO Reed Hastings’s income (Hastings makes $36 million per year).

But we’re not necessarily interested in each of these tech firms’ most “popular” jobs; we want to see how CEO salaries match up against software engineer income. For the latter, we consulted Glassdoor, which crowd-sources its salary info. 

Good news! The income gap between “average” software engineer salaries and CEO pay is much narrower than for the “popular jobs” at these respective companies.

But there’s bad news! Income-wise, CEOs still earn an insane multiple over what software engineers make, even if the engineers earn over $100,000 per year. Check out the chart below. (We calculated the per-hour for software engineers off a 40-hour workweek for 52 weeks per year, per business.org’s original methodology.)

Software engineers earn a good deal of compensation (especially when you consider the stock options and bonuses they rack up on top of these salaries), and yet their salaries still look paltry in comparison to CEOs.

But we knew that, of course—and the income disparity isn’t limited to tech. In May, a study by the Associated Press found that CEOs at S&P 500 companies made a median salary of $12 million last year—not only base pay, but also stock grants and “other compensation.”

“Pay for typical workers at these companies isn’t rising nearly as quickly,” the Associated Press added at the time. “The median increase was 3 [percent] last year, less than half the growth for the top bosses. Median means half were larger, and half were smaller.”

Meanwhile, according to the 2019 Dice Salary Survey, the average tech pro earned $93,244 in 2018—a mere 0.6 percent increase from 2017. That’s a good average income in many places around the country, but it’s a drop in the bucket compared to CEO take-home. 

9 Responses to “Income Gap Between Tech CEOs, Software Engineers: Huge”

  1. Robert N

    The CEO compensations mentioned are not accurate and are off by an order of magnitude. What’s states in the article is merely their base salary and it excludes their stocks and bonuses.

  2. The perspective of this article begins with the presupposition that executive pay should be equivalent to worker pay. Why? What grounds the idea that equal pay is morally superior? What reasons would support inequal pay? The fact of differences in pay with a prejudiced framing is not an argument.

    I am a software engineer. From a personal perspective: If I ran my own business, I would want a huge piece of the pie. I take on the risk so that I can reap the reward. From a business perspective, the ambiguity and impact of executive decisions is vastly greater. Do we not in general practice increased compensation commensurate to increased responsibility?

  3. Samantha

    Completely agree. Left used to pretend that it’s the “injustice” that they care about. But these software engineers are making huge salaries. Everyone is getting rich, and they’re still complaining and until they redistribute everyone to the exact same salary it will never be “fair.” And even then, they will complain that some people are smarter at saving/investing/buying than others. Why not take it to logical completion, it will only be “equal” when govt forces everyone to have the same pay, the same apt, same food, same shirt. Freedom just gets in our way of things being “equal.”

    • Define rich. Define huge salaries. That is all relative. Software developers generally have higher salaries than everyone else, but when everyone else is struggling, how much does that mean? Living comfortably usually means housing at 25% of income, and people in the valley have housing costs of >40%. Which is why so many people have roommates. We’re talking about the most educated people in the world, who usually work crazy hours, making the largest profits the world has ever seen barely being “comfortable.” How is that “getting rich?” What hope does anyone else have if that’s the life of the best and the brightest in the most profitable industries? Engineers used to be solidly middle class with a single income, a house, raising multiple children and sending them to college. That is no longer the situation. The relative wealth of engineers has decreased over time.

  4. I feel like you are oversimplifying this. What constitutes responsibility? Who calculates the value associated with decisions? If you are running your own company (sole-proprietor), then all of your decisions have 100% impact on the company and you earn all of the profits. If you are running a $100B company with thousands of employees that is generating billions in revenue, then it is almost impossible to determine if your decisions are helping or hurting. You make a decision and your company makes billions in profit.. is that because of your decisions? If you made a different decision maybe you could have made 2 or 3 times more? What isn’t in question is that all of your thousands of employees’ contributions led to billions in profit. The people that are assigning value to executive decisions are the executives. You could also argue board members, and therefore shareholders, but in practice they are essentially only approving the decisions of the executives for compensation, rather than assigning value themselves.

    The big factors that are being ignored is the sharing of information between companies within an industry (indirectly, through lots of different avenues) which effectively amounts to wage fixing and the Visa programs for technical professionals. When a company says they have competitive compensation, what they are saying is that they have looked at all of their competitors salaries and pay the same amount (isn’t this technically illegal?) Tech executives often claim that the Visa programs are necessary because they can’t find enough employees to support growth. The key point they do not acknowledge is that they can’t find enough people at the price at which they want to pay them. Any tech company could find as many employees as they want if they paid higher salaries than their competitors. Then the argument comes that that would drive up wages as companies compete. Yes, exactly. And then the ratio between compensation for executives and employees would be much lower as profits would have to be invested in talent acquisition. But as it stands, they can hire foreigners to offset the talent pool. Sort of an inversion of sending jobs overseas. And what recourse does exceptional talent have? If management considers them exceptional and offers higher compensation to retain them, then sure, they make more – based on the decisions of management. But they have essentially no bargaining power themselves, because every company effectively wage fixes – management knows that they don’t have the option to go anywhere else because their competitors are paying the exact same salaries. So what incentive does management have to increase salaries? This is why no one has any loyalty to companies anymore and everyone leaves every two years or so to achieve a 5% bump in pay. That works out to about an annual 2.5% increase in tech salaries, which, by the way is close to the average increase in wages for tech employees. Meanwhile executive compensation is growing much faster – when it is the people doing all of the work that are generating all of the profit, but have no mechanism by which to see any of that increased profit short of the whims of management.

    This fundamentally comes down to how do you define fairness and assign value? If all of the software developers in the US unionized and held management hostage so that 99% of all revenue was distributed to the employees, then is that fair? Why or why not? It could easily be argued that that makes as much (or more) sense than the current practices that have led to the income gap.

    • And as an additional comment regarding software developers unionizing: how is the staff of the companies coming together to dictate how revenue is allocated more or less fair than the managers coming together (using data across companies) to effectively agree on the bare minimum they can pay? The people with all the power making the rules… that sounds right. A real competitive system would have wage competition that would drive profits and executive compensation to essentially zero. Why does that not happen now? Are software developers not in demand? Are they not increasing the profits of companies? When someone is hired, is the decision that they can only be paid a certain amount because the company only has that much to pay them and that person only provides that much value? The answer is obviously no, because there are massive profits. The reason is because management can get away with it because the employees have no other options and no power to do anything about it. Oh, except go start their own companies – which end up being more successful and displacing existing companies or are demolished by non-capitalist forces (e.g. Microsoft suing competition in to oblivion is totally capitalist, right? It doesn’t require any intervention by regulatory agencies, judicial interference, etc. Or another example of Amazon operating businesses at a loss to eliminate competition – the executives with the power making all of the rules.)