If you’re a programmer considering a move to the Bay Area, you probably know at least two basic facts: 1) tech salaries are higher here than elsewhere, and 2) living here is really expensive. Both facts have been true for a long time, but they have become especially true in the past four years. Since 2012 home prices have risen by about 60% and rents by about 70% in both the San Francisco and San Jose metro areas. The absence of any apparent upper limit to these increases has given rise to a new journalistic subgenre, the Bay Area Housing Horror Story. Maybe you’ve heard about the cheapest house in San Francisco, a $350,000 “decomposing wooden shack” whose interior is “unlivable in its current condition”? Or the tent next to Google X that was renting for $895 a month? Or the guy on Reddit who calculated that it would be cheaper to commute daily to the Bay Area from Las Vegas by plane than to rent an apartment in San Francisco?
It’s easy to hear data and stories like these and conclude that programmers moving to the Bay Area are suckers. After all, salaries have not risen by 70% in the past four years. But what this analysis misses is the extent to which this place and time is exceptional. The Bay Area in the early 21st century has produced an astounding number of successful tech companies. Uber was valued at $60 million in 2011 and at around $68 billion in late 2015 [1]; Stripe at around $500 million in 2012 and $9 billion during its most recent funding round; and Twitch at just under $99 million in September 2013, before Amazon acquired it for $970 million less than a year later. There have been many additional large-scale successes during the current boom, along with hundreds of smaller-scale successes that would be considered enormous in other local economies. Of course, Bay Area companies also fail spectacularly (Theranos, Good Technology). But an outsized percentage of tech's biggest successes happen here, and this creates opportunities that simply don't exist in other locations.
So does it still make sense for programmers to move to the Bay Area? The answer of course is that it depends. SF is very expensive! And there are many other great places to be a programmer. At Triplebyte, we help engineers around the country (and world) get jobs at top Bay Area companies, so we talk to a lot of people facing exactly this calculation. In this blog post, I'm going to go over the publicly available data as well as our internal data, and try to better answer that question. I am going to focus specifically on people looking to work at tech companies, not people trying to found startups (much has already been written about the latter).
The Baseline: Salary vs. Rent
To begin answering our question, let’s look at the best available data on salaries and rents in the Bay Area (San Francisco and Silicon Valley) and see how they compare both to national figures and to data for another metro area that attracts elite tech talent. Seattle is the obvious choice for our “other metro area” for a number of reasons. It’s home to leading tech companies, and it’s a West Coast city with high living standards, making it an appealing destination for many people who like the Bay Area. Finally, housing costs there are cheaper than in the Bay Area, so it’s got a key competitive advantage when it comes to attracting talent.One major caveat is in order at the outset. It’s hard to get accurate salary information in any field, and it’s even harder to isolate accurate figures exclusive to the tech industry (as opposed to figures for programmers in any industry) in a specific locality. The chart below shows average salaries for software developers from the U.S. Bureau of Labor Statistics, which collects wage data from employers by location and occupation, and from Indeed, a job-search website that collects data from jobs listings as well as placements and self-reports. Neither data set is perfect (the BLS data are categorized in ways that make them only approximately suitable for our purposes, and the Indeed data are proprietary and of unknown reliability), but they are in agreement on the level of basic trends. They also broadly confirm trends in a third data set, self-reported salaries for individual companies and job titles on the site Glassdoor, which are specific enough that their reliability can be assessed (though industry-wide data at Glassdoor seem more suspect).
This data suggests that San Jose (i.e., Silicon Valley) salaries are significantly higher than Seattle salaries. The situation in San Francisco, however, is more complicated. The BLS data shows salaries significantly lower than in San Jose. This is not in line with what we see at Triplebyte. Triplebyte candidates taking jobs in San Francisco earn slightly more than candidates taking jobs on the peninsula (and our average comes out at $139,000, right in line with the San Jose numbers). One explanation of the discrepancy may be that San Francisco has a higher percentage of banks and other non-tech companies that employ programmers but don't compete for top talent.
In any case, our interpretation of the BLS data is broadly corroborated by the Indeed data, which show that San Jose developer salaries are on average $6,000 higher than San Francisco salaries and that San Francisco developer salaries are on average $27,000 higher than Seattle developer salaries. Salary figures for specific companies self-reported at Glassdoor suggest a similar pattern. For example, according to Glassdoor, software engineers working at companies like Google, Facebook, Twitter, Airbnb, and Uber start out at around $115,000 a year, and earn north of $150,000 as senior engineers, regardless of whether they are located in the Valley or San Francisco. The numbers at each career stage are roughly $15,000-20,000 lower at Amazon and Microsoft in Seattle.
Putting all of these data sources together, then, we can estimate that engineers at top tech companies in the Bay Area stand to make between $15,000 and $33,000 more per year than engineers at top tech companies in Seattle.[2]
What happens when we factor in cost of living? The chart below, derived from Zillow’s August 2016 Local Market Reports on the three metro areas, shows that median rent is about $1400-$1500 a month (or roughly $17,000-$18,000 a year) higher in the Bay Area than in the Seattle metro area [3].
So assuming you’re looking throughout the Bay Area for a good deal and you’re comfortable renting rather than buying a home, as most of us are during the early stages of our careers, higher Bay Area salaries at least cover the costs of higher rents. If you are content to live with roommates or otherwise economize on housing, you could potentially save that extra $15,000-$33,000 annually and take better advantage of your higher Bay Area salary. Along these same lines, an ability to live frugally as your career advances would theoretically pay off more handsomely here than in Seattle.
Buying a House
As our careers and lives progress, however, many of us will want to buy rather than rent homes, whether out of a desire to build equity or out of necessity, because we need room for our families. It is here that the advantages of a place like Seattle become noticeable. The median home value (again, from Zillow) across the San Francisco metro area is $807,800, and the median home value in the San Jose metro area is $948,600. The Seattle metro area’s median home value is well short of half both Bay Area metros’, at $394,600.
Beyond the Salary/Housing Baseline
If you see yourself wanting to buy a house relatively early in life, the salary and housing data above indicated it might make sense to start your career in Seattle rather than San Francisco. However, this does not consider equity and career progression. And on these fronts, the Bay Area tech ecosystem seems to bring benefits.A 2015 report by Hired found that when engineers from the Bay Area relocate to other areas, they out-earn engineers on the local market. Experience in the Bay Area seems to advance careers. Engineers moving from San Francisco to Seattle make an average of $9,000 more than others who get offers in Seattle. This Bay Area premium is even higher in other cities: $16,000 in Boston, $17,000 in Chicago, and $19,000 in San Diego.
Another data set crowd-sourced by the startup Step in early 2016 suggests that for at least a subset of talented developers, working in the Bay Area brings more equity than working in other locations. The Step study compares total compensation at the two dominant Seattle tech companies, Amazon and Microsoft, with compensation at Silicon Valley leaders Google and Facebook. The study finds that compensation is comparable for junior engineers in both locations, with those in the Valley getting paid slightly higher, roughly as you would predict based on the BLS, Indeed, and Glassdoor data. But with increasing experience, total compensation at Google and Facebook comfortably outpaces that at Amazon and Microsoft, largely as a result of much more generous cash and stock bonuses. For comparable job titles in Step’s Level 3 engineer category, for example, total annual compensation is $180,000 at Amazon, $199,000 at Microsoft, $249,700 at Facebook, and $306,500 at Google. That is, senior engineers in the Bay Area appear to earn a $50K to $126K yearly premium in total comp.
This difference in equity does not apply directly to jobs at smaller startups, where equity is likely to come in the form of illiquid options. But here an argument can be made for the Bay Area as well. Startup equity is high variance. In most cases it's worth little (most early-stage startups fail) but in a percentage of cases the startups succeed spectacularly, and their equity is highly valuable. If you want to make money from startup equity, it's all about joining a company that succeeds. The Bay Area both has an outsized percentage of startup success, and also just has more startups on the ground (making it easier to be picky and search for a startup that is doing well) [4].
Summing Up
The Bay Area in 2016 is to technology as 1930s Detroit was to automobiles or 14th-century Venice was to the European spice trade, except that these and all other historical analogies are unable to capture the magnitude and speed of local tech growth. It only took Uber about five and a half years to exceed the valuations of all but four of the world's top automakers. In 2016, its eighth year of existence, Airbnb was about 25% more valuable than the world's most valuable hotel company (Hilton, founded in 1919). No precedent exists for growth like this, occurring among so many companies and concentrated in such a small geographical area.This growth creates opportunity. Startup jobs, big company jobs, drone programming in Clojure —the Bay Area has them all. There are simply more tech companies and tech investors here than in any other single location. However, the tech growth has also raised prices and raised tensions. San Francisco is among the most expensive cities in the US (and many people here are not happy about that). If you get a good job, your salary increase will probably cover the costs. But paying exorbitantly for an apartment may feel burdensome no matter how big your income is.
So should you move the Bay Area? Not all startups succeed, and not everyone lands a senior engineer position at a name-brand company. And you may have lifestyle ambitions that simply won't fit with what's available here. If a comfortable house with a big lawn is a non-negotiable part of your vision for yourself, you probably shouldn’t move to the Bay Area. You also may just prefer to live somewhere else!
If, however, you're looking to maximize your probability of joining the next Google (or Google itself), moving to the Bay Area probably makes sense. The salaries here do cover the higher cost of living, and if you are able to capitalize on the additional opportunities that are uniquely available here, you could end up doing much more than covering costs. This is the heart of the industry, and it's an exciting time to live and work in the Bay Area.
If you are interested in moving to the Bay Area and joining a successful company or a tiny startup, Triplebyte can help you find a job. Give our process a try here.