What’s wrong with engineering salaries in Japan?
Engineering salaries in Japan have had a reputation of being really low compared to other parts of the world, especially Europe or the US. But with 3 to 5 positions open for a single candidate, the big question remains: why?
For this deep dive into salary levels for engineers in Japan we sat down with Drew Terry, founder of OpenSalary. Drew is on a mission to give engineers more leverage during salary negotiation by answering a simple question: how much do engineers make in Japan?
Want to improve something? Measure it.
Welcome Drew! So, can you tell us what OpenSalary does?
I’ve been in Japan for quite a few years now, working as an engineer for large tech companies, and of course I’ve been hearing about the “legend” that engineering salaries in Japan are pretty low compared to other parts of the world. So I thought, why not measure it? From there, I figured the best way to do that was to directly ask people how much they make.
I built a first version of OpenSalary in a few weeks, and started sharing it to the engineers I knew. Very quickly, I gathered enough data points to start doing some analysis and identify patterns.
So what was the most surprising finding when you started looking at that data?
Two things struck me:
- I am tracking the gender of the people filling our survey, and I was shocked to see that only 4% of them are women. I do have women engineers in my network, so I don’t think that low number comes from a bias as to who filled the survey.
- Second, I was surprised to see that average salaries seem to reach a plateau when people hit the “10 years of experience” mark. When I dug deeper, I actually noticed that there was a higher variance for those categories. In short, passed 10 years of experience, salaries are way higher or lower than the mean. My guess is that since Japan has a “management heavy” business culture, when you reach that range you either become engineering manager or… you don’t.
International companies are shaking things up
Moving on to the elephant in the room… are engineering salaries in Japan that low?
So, it’s not that simple (laughs). I think it’s more accurate to split salary ranges int three categories:
First, you have “big tech” companies, the likes of Stripe, Google, Amazon. For those, salary ranges are almost on par with the international market.
Second, and that’s probably the most interesting category: medium to large size, Japan-born startups. These companies start having an international presence and understand that to attract top talents, they need to raise the bar. To me, they’re the most interesting to look at, because they’re setting a “Japanese example”.
Lastly, we find more “traditional” Japanese companies, and for those, well yeah… salaries are pretty low.
So there is hope after all?
Well, my take is that engineering salaries in Japan not increasing much has mostly to do with the fluidity of the market, or more specifically, the lack of it. Employees do not switch company that often, so employers don’t have any real incentive raising their employees’ salaries.
That lack of fluidity is exactly what I am trying to address with OpenSalary. I am hoping that by showing exhaustive and transparent data, some people will stop and think “Wait a minute… I could make twice as much money if I was working at the same position for that other company!”
“Lack of fluidity in the job market is what I am trying to address with OpenSalary”
Another aspect is that I feel companies don’t expect much from their employees. So the natural thing to do is to pay them lower. I also suspect that it’s much harder to fire someone here, compared to the US for instance. Over there, it feels more like a “high risk high reward” approach when it comes to salaries. You’re paid a lot, you deliver a lot. You don’t deliver enough, well…you’re out.
Do you think it’s easier for high-paying companies to hire talents then?
Well, I think that all companies struggle to hire actually. High-paying ones can’t find the top talents they need to sustain their growth, and even though salaries they offer are much higher than the average in Japan, they’re still not high enough to justify a relocation, for example.
As for low-paying companies, they probably manage to hire some people through shukatsu (job search after university), but I don’t really think they offer enough to motivate someone to take a risk and switch company.
“I think those hiring woes are holding back Japanese tech companies when it comes to having an impact on the international scene”
Also, looking beyond just the “how much are people making?” issue, I do think that these hiring woes are holding back Japanese tech companies when it comes to making an impact on the international scene. Some Japanese startup founders understood that, and not surprisingly, their companies are growing, they’re raising money, and from an employee’s viewpoint, they are the most sought-after companies to work for. Specifically, I am thinking about Mercari, SmartNews, PayPay and the likes.
Turning a pet project into a company
Talking about OpenSalary itself, have you noticed any reactions (good or bad) from individuals or companies?
Overall, most reactions and comments I received were very positive. Surprisingly, I also did not receive any negative feedbacks from companies that are perceived as “bad-paying” ones.
The most sensitive aspect is obviously data security, and I did receive a lot of questions about it. With LGDP in everyone’s mind, I understand the concern, but in short, we have no way to identify anyone since we don’t even collect an email.
Lastly, a lot of people seemed surprised with some specific data points, especially high salaries, and were arguing that “it’s just not possible that companies pay that much money” (laughs). In a sense, I think it shows that people have almost been brainwashed to think that engineers should not make that much money…
So a pretty positive experiment so far! What’s your plan with OpenSalary moving forward?
I am actually getting help from one of Le Wagon graduates — mostly for front-end development and data collection (aka business development). The latter is our main focus in the near future: the more data we’ll manage to collect, the more legitimacy our service will gain, with a better chance of having a real impact. Getting more data will also allow us to make finer analysis about salary differences for genders or positions, for example.
Basically, short term we are looking at how to gain more traction and have a stable stream of new data. After that, we’ll be focusing our efforts on figuring out a sustainable business model.
Thanks a lot for your time! All the best for OpenSalary, and hoping it can have an impact for our fellow engineers in Japan 🤞
