Why do software engineers make so much? 5 key reasons

Software engineers make a lot of money relative to other professions. The salary expectations of developers across America have increased significantly in the last decade. For those located in tech hubs, which have higher costs of living, the salaries paid to software engineers are even higher. 

Software engineers make so much money because there is enormous demand for their skillset and not enough supply, the incredible value they bring to businesses and the general difficulty of the role. Good developers are hard to come by and the rise of technology has meant companies need more of them than ever. Technology changes a lot and the role can be quite demanding which adds to the amount developers are paid.

Let’s take a look at why software engineers make so much money and compare their incomes to the U.S. national average over a couple of decades.

Why are software engineer salaries so high?

Software engineer salaries are so high because of supply and demand. There are not enough developers to meet demand in the industry so good developers are paid an absolute premium. Technology is also constantly changing and it requires immense effort to keep your skills up to date. 

In 2000, the average software developer made $49,505 which was slightly higher than the national average of $42,148. However, the tech boom of the past two decades has meant these numbers look vastly different.

According to Indeed, the job finding platform, the software engineers now make $114,576 per year with a $4000 cash bonus per year. That is a 131% increase. 

In contrast, the average salary for ordinary Americans has increased to just $56,310 which is a 34% increase. There is an enormous disparity in the wage changes for software engineers and the general public. It has meant software engineers can retire slightly earlier than most Americans.

The above facts and figures don’t provide us with a reason, so let’s take a look at why developers make so much.

Supply and demand

The number one reason for software engineers making so much is that supply does not meet demand. Companies are crying out for competent developers to help streamline and automate their processes. However, despite many young people now going to college to study computer science the demand far outstrips supply.

It means that the ball is firmly in the developer’s court when it comes to salary negotiations, especially in big cities. If companies aren’t willing to front up a good enough pay package, it’s easy to get a job somewhere else. 

The demand is only set to increase as more and more companies try to distinguish themselves online. From an operations perspective, everyone is trying to automate repetitive processes so the people who can make this happen are always going to be in high demand. 

Business needs 

For a lot of businesses, their tech department is fast becoming the single most important team in the company. If services are down or things aren’t working correctly it can cost companies a small fortune. It’s reported that the Facebook outage which lasted around 6 hours cost the company $60 million, which is based on their 2020 revenue of $85.97 billion. Software engineers are making a lot of money because they prevent issues like this from happening and essentially allow things to operate properly. 

When a service goes down people also flood to social media to spread the news. You will often hear about these things on Twitter before you mainstream news. These outages are incredibly damaging to a brand so companies avoid them at all costs. So paying programmers a lot of money is just one way to incentive against these types of things happening.  

Changing technology

With most trades or careers, you learn a set of skills that you use daily for the entirety of your career. However, software engineering is slightly different. Learning how to code is just the first step on a lengthy journey, you never truly stop learning. 

Technology changes so often that the development landscape is always shifting. It means developers constantly need to improve and upskills to stay relevant. You also have to be highly adaptable. These traits and the willingness to continue learning come at a premium and are part of the reason programmers make so much money. 

Of course, professional development and learning are required as you progress in any role. But with development, it is taken to a whole new level and is one of the reasons why people think there is an age limit to software engineering.

Value

You don’t need a big team of developers to provide an insane amount of value to a business. When Facebook bought Instagram for $1 billion they had just 13 employees at the company. The output to value ratio for software engineers is incredible. It is incredibly difficult to get those types of numbers in any other industry. 

Technology scales so rapidly that a few good developers can create incredibly profitable platforms and apps. It makes them indispensable. When you look at it from the value side of the equation it is even possible to argue that developers don’t make that much money compared to the value they bring the company.  

Difficulty 

Learning to code may not be that hard but becoming a skilled software developer is far more than the code you write. Good engineers:

  • Diagnose and treat complex problems
  • Optimize existing systems, processes, and code 
  • Work well in a team 
  • Estimate the delivery of big issues 
  • Constantly learn and retrain
  • Work well with other areas of the business

The above are just a few examples of what successful software engineers do daily. Some of the above can make software engineering stressful at times and require long hours. 

It takes a certain mentality to want to fix problems all day and that is the life of a developer. It’s a fantastic career but the complexity can be difficult. 

Part of the reason programmers are paid so much is that it takes years of experience to become a good developer and the journey can be extremely difficult. 

How much do software engineers earn?

Software engineers earn $114,576 on average per year with most getting a $4,000 bonus every year. The above is a national average and you can expect the salaries to vary depending on where you are located in the country and what type of software engineering role you do. 

The country you live in also has a big impact. According to payscale, Software engineers in the UK only earn £38,001($52,004)  a year but receive between £600 ($821) and £10,000 ($13,684)  in bonuses. In Europe, countries like Germany and the Netherlands, earn €52,038 ($60,162) and €46,708 ($54,025).

Your experience also plays a massive factor in what you get paid. A senior software engineer which is achievable after five years or more can earn more than $131,000. The longer you are in the role and progress, the more you will be paid.

Another big factor in how much a software engineer earns is the specific type of role they do. Below are national stats regarding the different pay tech roles received.

  • Computer network architect – $119,230
  • Software developer & QA Tester – $114,576
  • Information security analyst – $107, 580
  • Data scientist – $103,930
  • Database admins – $101,090
  • Computer systems analyst – $99,020
  • Web developer – $85,490
  • Computer user support specialist $57,000

So keep in mind that how much software engineers earn will differ greatly depending on the specific role, location, and experience. 

Conclusion

Software engineers make a lot of money because they have an in-demand skill set, offer exceptional value to output for a business, and the job itself is tough. The rise in technology has meant software engineers are needed more than ever and there simply isn’t enough to fill all the gaps. 

This trend is likely to increase into the foreseeable future as technology continues to adapt and progress. A new generation of engineers will need to be trained to work with systems that haven’t been invented yet.