Answer by John L. Miller:
I've asked myself this a lot over the years. The answer *has* to be "yes" on average, or they wouldn't be paid this much. It's still hard to believe, and feels wrong compared to, say, what someone who does manual labor earns for a living.
How could they possibly be worth it? The answer is intuitive. An economist or business student could explain it better, but here's what I think.
Software engineers produce a product with a high development cost, and a very low incremental (per-unit sold) cost. Yet the company's revenue scales (roughly) linearly with the number of copies sold / used. This makes the ability to produce that first copy of the software INCREDIBLY valuable to the company.
For example, suppose the first copy of Windows 95 took 333 people 3 years to produce, at a (then) per-person, per year cost of $100k/person/yr. That would be $100M in development costs. Now, suppose each copy of Windows has an incremental cost of $1 to produce and distribute, and is sold for $101 revenue by the company. If the company sells 10M copies, that's $1B in net earnings. If it sells 20M copies, that's $2B in net earnings. All with very little extra work. You just have to have the software to sell, and have it of a quality that WILL sell.
Suddenly $100k doesn't look so expensive. And for the best software engineers, the ones who induce a multiplier effect on quality and productivity (yes these exist) in their products… How much would you pay for those?
The numbers are fictional, but the idea is sound. It's still ridiculous, but then, so is the sums of money at stake for the company. Software companies are NOT charities. They're competing for a pool of developers, and for the most part, paying what they have to to get the developers who best make them money. If they could pay 1/2 as much and still get the developers, you'd better believe they would, because it's more profit.
This applies to service companies such as Google's search & ads business too, though in their case, they are selling the space for ads served in the answers to each search request entered into their search engine.
Are software engineers really worth their salaries, including those working for Google or Facebook?