Salary Case Study

Salary Case Study

money treeThis week’s theme at Engineer Blogs is all about salaries. Chris gave us some excellent big picture view for those starting out in engineering; FrauTech provided insight to the current conditions and future outlook for engineers in the United States; while for Cherish, the temporary-engineer and cash-poor grad student, she isn’t in it for the money. Bless Cherish for still being able to hold on to her ideals. Still, if you’re in engineering for the money, you’re in the wrong industry. But that doesn’t mean that as a practising engineer, one shouldn’t try to milk as much out of your employer as possible. At the very least, one should be able to get paid more than an academic.

Given the big picture has already been covered, I will focus my attention on a specific case study and what lessons we can draw from this case. Let me start by saying that this case is not fictional. It is a comparison of two real engineers (not me) working in the same sub-field — integrated circuit design — but in different sub-sub-fields. Both started their careers in 1997 and both hold Master’s degrees (with thesis) in electrical engineering.

Seeing how bar charts have been in vogue in recent posts, I didn’t want to feel left out. So let’s take a look at the two engineers’ salary chart over the years. Note that the numbers are based on their raw base salaries and do not include other monetary benefits like stock grants, stock options, or cash bonuses.

normalized salary

The salary figures represent those of Engineer A on the left bar and Engineer B on the right bar, normalized to the starting salary of Engineer A and calculated at the end of the indicated year on the horizontal axis. Bars of the same colour indicate the same employer so it’s easy to tell when a job change had taken place.

Based on the chart, I’m going to make some basic conclusions:

1. Chris’s logarithmic salary curve is true. Just look at Engineer A. Engineer B’s salary curve is fairly linear and struggling to reach the ceiling. But if he does good work, the ceiling will come eventually.

2. Sub-sub-fields matter. Although both engineers work in integrated circuit design, their concentration on different sub-sub-fields means the supply-demand curve for their services differ greatly, resulting in quite a dramatic difference in salary over the years.

3. Job hopping can significantly boost one’s salary, sometimes. For Engineer A, the first two job hops both resulted in significant increases. By the time the third job change came around, Engineer A actually saw a slight decrease in pay. More on that later. For Engineer B, two job changes did not produce any siginficant change in pay.

4. Starting salary really really matters, sometimes. For Engineer B whose salary curve is smooth and lacking discontinuities, his initial salary matters a lot. For Engineer A, the initial salary does matter, but as soon as he got the bump up in pay with his first job hop, it no longer mattered. He was starting on a new salary curve at the new company.

5. Economic conditions matter, all the time. This is obvious, but I think it bears repeating. Engineer A changed jobs at the height of the tech bubble in 2000, resulting in his first upward discontinuity in pay. Engineer B waited too long and switched jobs near the bottom of the tech implosion, resulting in only a small change in pay. He was happy just to get that job. Engineer A’s second large bump in pay resulted from the tech sector starting to recover again, especially in the sub-sub-field of Engineer A’s specialty. This meant the time was ripe for another job switch that yielded great dividends. Yet two years later, the booming sub-sub-sector that served Engineer A so well started to consolidate, resulting in his layoff. Having already hit his pay ceiling and in need of a new job, he was more than willing to take a minor paycut in order to be employed. Engineer B’s second job switch was due to a change of professional interest; with the continuing softness of the high tech sector, he didn’t even get a pay raise in switching jobs.

6. Finally, engineers can make good money. As the chart shows, Engineer A had already increased his pay by 150% six years into his career. I think that’s more than not bad.

It’s hard to predict precisely what sub-sub-field of engineering will garner the most demand vs. supply and it’s even harder to dictate the type of economy one lives in. But in our lifetimes, we will all go through periods of prosperity and periods of gloom (like now). What is under our control is what we do during times of prosperity. What I take away from the chart above is that when the good times are rolling, it’s time to get yourself a step function in pay. Because if you don’t, what you’ll be forfeiting is that pay difference, integrated over the number of years until you get that chance again. And that, may prove to be a very costly decision.

4 comments

Dang, that’s some great data. The thing that strikes me most is that the mere presence of a crap economy shows people shouldn’t leave their current jobs, lowering churn and slowing down the economy more! Crazy

Is it possible to keep in contact with A&B to update this chart? Also, if you factor in other monetary benefits, how do you think it would change?

Maybe I can follow up with Engineer A since I know him better. As for benefits, Engineer A has had some substantial year end bonuses (~6-7% of base), but it’s erratic for him. Engineer A also works for a company that provides a generous pension plan; his level in the company also qualifies him for stock grants. Engineer B’s cash bonuses are less substantial (~2-3%) but I believe he get them yearly. No stock benefits for B though since his company is privately held.

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