Rick,

Thanks for clarifying this . . . when I first read the reference to $35k / year engineers I wondered that same thing! In the market we live in (right next to Intel, HP, Tektronix, Wafertek, SEH America, Microsoft, Amazon, yada, yada, yada) getting a decent engineer fresh out of school
for under $40k / year is almost unheard of. Someone with 10 years of good experience . . . plan on doubling that figure. Someone with a lot
of talent and good experience . . . higher yet.

Ken Brown
Applied Motion Systems, Inc.
http://www.kinemation.com

 

I used $35k as a number for the _very_ bottom end.
Read further into my message about "$6.73 for every $10k above that $35k salary."

Also, $35k is about $52k Canadian dollars. I
know many guys working for less than $50k. In fact, the PEO (Prof. Eng's Ontario) salary
survey indicates new graduates and those up to 2 years out in Ontario have medians between $47k and $54k, $Canadian.

The upper decile for 35 years experience on that same survey indicates about $115k, which is about US$76k, which is less than the 2 times you indicate. That's pretty much the top end of the survey.

If you're paying out 2 to 3 times $35k, what's your billing rate??? Maybe that's why Canadian engineering companies do so much business in the US.

Maybe I should apply for a green card.

Anthony Kerstens P.Eng.

 

Now I'm sorry I missed the first parts of this discussion....I bet it's morphed a little since it got started. So, at the risk of rambling off in
entirely the wrong direction....

We produce a standard catalog product. When we do custom engineering, our billing rate depends on the return we expect to get. Generally we have to
look at what an engineer could earn for us in margin generated by the sales of products (s)he could have been working on if (s)he weren't doing custom engineering. If the custom job is tied to a large order of a standard product we charge less. We have no set rate, but whatever we charge we earn a profit -- that's what business is all about. And, right or wrong, we've walked away from plenty of it that didn't look like it was going to be profitable.

If you were to look at your company's P&L, I would be very surprised indeed if you found a PAT that was higher than 14%, and I bet it's a lot lower than that. The billing rate that your company charges is what it needs to charge to earn a profit after all expenses. The company that doesn't do that isn't going to be around long. The flip side of the coin is that the company also has to be able to control its expenses so that its billing rate is within
market norms. While the absolute number may seem high, I'd be real surprised if your CEO's salary was a significant part of those expenses. To simply say,"Wow! $200 an hour is really high! they must be greedy" is simply ignoring the facts of life, and I think, irresponsible.

Any company which doesn't pay at least the going rate in their market for engineering talent is going to be in a heap of trouble. It might take a
couple of years, but sooner or later it will catch up with them, and any executive with half a brain knows this. If you work for a company that you truly believe doesn't, then you might want to start updating your resume because you're probably going to be needing it. And, if you think your company is exploiting you, believe me, you have to power to fix it!

Ken is right -- according to my surveys, the bottom 25th %ile of freshouts is at around $41K US, and the top 90th %ile of experienced engineering talent is at $126K US - a little more than the 3 times I originally indicated. My source is the 2000 AEA High-Tech Industry Benchmark Compensation Survey.

Ok, lemme have it!

Rick Daniel
Intelligent Instrumentation

 

Rick Daniel,

You seem to be on track here (see below). Companies cannot afford to sell their products (for long) at the cost of raw materials. In engineering, the cost of raw materials is the engineer's annual salary divided by 40 hrs/wk *
52 wks/yr. However, the cost per hour of actually performing work is much much higher due to the cost of vacations, taxes, meetings, benefits, office space, utilities, part of the time spent by other support and supervisory
personnel, ...

I am currently writing a book on making the transition from direct employment to consulting. With the assumptions presented therein, an engineer making US$71,000 per year (US$34.13/hr), needs an hourly rate of approximately US$175 to make the same salary with a 10 percent profit. When the other items are taken into account, the direct employee's US$34.13 per hour (raw
material cost) increases to over US$90 per hour of actual work. Considering that a consultant may perform specific jobs 2-3 times faster (and correctly) and only charge for time spent actually working, the consultant at US$200 may
be a bargain (especially when the cost of mistakes is considered).

People who would benefit from hiring a consultant often do not recognize some of the realities of operating a business. The amount of time spent at work not performing work is surprising. It has taken me 45 minutes of unpaid time to read your e-mail and write this response. A direct employee would get paid for this "professional development". How many times has the end of the
day rolled around when you said to yourself, "I didn't get anything done today...."?

Regards,

David W Spitzer
845.623.1830
www.icu.com/spitzer

 

Check out http://www.peo.on.ca/EngPractice/Salary_Survey/2000sumrpt.pdf

If the AEA survey is correct, then maybe current claims about a brain drain to the US are true. Of course, now I realize we're talking about
different industries (service vs. product) and different geographic regions.

As for this thread, I got started off answering CWW's (rhetorical) question "Why is it that employers are so dead set against paying for the skills that are building the new economy?" The $35k also comes from CWW's wonderings. The answer, as might be expected, is greed. I might also like to say complacency on the part of employees, but most engineers I know have looked
around and they generally come up in the same ball park.

To say the least, I'm amazed by the AEA survey, and disappointed by the PEO survey. Does anyone know of any other salary surveys that would
include Canada and/or Ontario.

Anthony Kerstens P.Eng.

> -----Original Message-----
> From: The Automation mailing list, managed by Control.com Inc.
> [mailto:[email protected]-CONTROL.COM]On Behalf Of Rick Daniel
>
....
> Ken is right -- according to my surveys, the bottom 25th %ile of
> freshouts is at around $41K US, and the top 90th %ile of experienced
> engineering talent is at $126K US - a little more than the 3 times I
> originally indicated. My source is the 2000 AEA High-Tech Industry
> Benchmark Compensation Survey.
>
> Ok, lemme have it!

 

I'd like to know where I can get a job for $105k. Aren't a whole lot of them out there.

 

Anthony,

I imagine cost of living is a factor too -- the AEA survey only covers the US.

> "Why is it that employers are so dead set against paying for the skills
that
> are building the new economy?" The $35k also comes from CWW's wonderings.
> The answer, as might be expected, is greed. I might also like to say
> complacency on the part of employees, but most engineers I know have
looked
> around and they generally come up in the same ball park.

I can only say that at my company we make damn sure that anyone we really want to keep is going to be happy if (s)he looks at that survey. My guess is that most companies are like that. It's easy to look at management, pick out something they've done that you don't agree with and say they're all a bunch of stupid, short sighted cheapskates -- heck, I used to do it too in my
younger days -- but if you look at the entire situation, I doubt that it's really true in many companies.

Rick Daniel
Intelligent Instrumentation
http://www.instrument.com

 

David,

When can we expect your book for sale.

Regarding your numbers, might I add, wow.
Is there anyone who can detail why there is
such an incredibly drastic difference between
US$175 that an American engineering company
apparently _could_ get, and CDN$90 that a
Canadian engineering company _does_ get.

I'm having a hard time swallowing those numbers.

Anthony Kerstens P.Eng.

 

Maybe I should move my company to Canada instead? Oh wait...I forgot about taxes...never mind. ;-)

Regards,
Ralph Mackiewicz
SISCO, Inc.

 

Anthony-

Dealing with integration in the US one if the thing I am told in many places is that there is only 2% or 4% unemployement in this or that state.
Considering the quality of the available manpower left to be picked by employers we can wonder if this is the reason for such rates. In our country
the Unemployement rate is around ...say 10%.
Also is was told that there is like 10 000 engineers looking for jobs in the "Ordre des Ingénieurs du Québec"...

Lately we had a system which needed modifications (PLC program...) close to Atlanta. We contacted a nearby cie wich could do it for us ... they charge 90U$ / hour for service OR 120U$ +O.T. for troubleshooting programs... Gosh we only charge 75$ CAN for this ...

Offer and Demand are IMHO the main factor for the rates...

My 2cents

Pierre-

 

Anthony,

The book will be considered by a publisher in the next few weeks.

For reference, the following is repeated from my previous e-mail:

Also, I differentiate between three types of engineers with three different pay scales. At US$75 per hour, you appear to be describing the second group below.

1. engineers who work directly for a company (with a steady income plus benefits...)

2. (contract) engineers who are contracted to work part/full-time on an ongoing basis for the same company (with a relatively steady income plus few or no benefits...)

3. consulting engineers (consultants) who work a small number of hours on specialized problems for multiple clients (with an erratic income plus no
benefits...)

Engineering services are often termed "consulting services" by the client. They are different than consultants (as defined above). Engineering services generally fall in realm of the second category (as defined above) with relatively steady hours. My calculations show that the second group costs over US$90 per hour of actual work (not per hour). The billing rate may be
different.

The intent of the costing exercise is to compare the cost per hour of actual work (not per hour) for each of the above groups. The first two groups were comparable and slightly over US$90 (think about the ramifications --- outsourcing is a viable option), while the consultant was approximately US$175. The point is that compared with the US$34.13 average hourly wage, US$175 may seem excessive. However, comparing apples to apples, the cost per hour worked is approximately twice that of a direct employee or contract
employee. This can be very cost-effective when the proper consultant performs specialized work quickly and correctly.

For example, in 2-3 hours, I recently diagnosed a problem that had been occurring for years and had (insidiously) cost the client many times my fees.
In this case, the equipment manufacturer did not resolve the problem (either because they could not diagnose the problem, or because they were aware that they did not have an offering that would resolve the issue). This is one of
the pitfalls of the current trend to rely on vendors to perform engineering that should be the user's responsibility.

With regard to the CN$90 you mention, my recollection is that in Canada, the prices in CN$ are similar to (or slightly higher) than those in the US in US$. I understand that the CN$ is worth less the US$. However, the $90 figure appears similar.

Regards,

David W Spitzer
845.623,1830
www.icu.com/spitzer

 

At 02:47 11/06/00 -0700, Pierre Desrochers wrote:

>Anthony-
>
>Dealing with integration in the US one if the thing I am told in many places
>is that there is only 2% or 4% unemployement in this or that state.
>Considering the quality of the available manpower left to be picked by
>employers we can wonder if this is the reason for such rates. In our country
>the Unemployement rate is around ...say 10%.

Actually the latest figure is 6.8% (although the area where you are is a bit above this average). Comparisons of unemployment rates between different countries need to be taken with a grain of salt. This is a number which is subject to a good deal of interpretation, so numbers from different countries are not really comparable as they are based on different
assumptions and definitions.
What is more significant to this point is that wage inflation in the US is not exceptionally high. Overall wages and earnings in the US are 3.6% above last year, while inflation was 3.4%. Certain specialties or regions may of course deviate from this somewhat, but this gives you a general idea. In Canada the comparable figures were 2.3% and 2.5% - lower pay increases,
but also lower inflation. This means that labour shortages do not really explain the difference. (All figures from The Economist).

<clip>
>Lately we ad a system wich needed modifications (PLC program...) close to
>Atlanta. We contacted a nearby cie wich could do it for us ... they charge
>90U$ / hour for service OR 120U$ +O.T. for troubleshooting programs... Gosh
>we only charge 75$ CAN for this ...
<clip>
Beware of comparing costs at nominal exchange rates - this can be very misleading. Currency fluctuations due to capital flows can cause significant and prolonged distortions in exchange rates. A better comparison would be to use parity purchasing power (PPP) which takes this into account. The Economist publishes PPP figures regularly. Unfortunately I don't have
any recent numbers, but I believe I recall reading that the US dollar was above PPP, and the Canadian dollar (and Australian dollar, and the euro) below PPP. Nobody has a really good reason why this should be so.

If you are an exporting to a country whose nominal exchange rate is above PPP, you of course don't worry about PPP values. You simply pocket this difference and congratulate yourself on being such a good businessman. If you are exporting *from* such a country though, you get squeezed. Rockwell has given this as one of the reasons why they are doing poorly this year (a low euro).
It was to avoid problems like this amongst themselves that some of the Europeans first linked their currencies together, and are now adopting the euro. In the old days when currencies values were primarily dictated by
trade flows, currency missalignments could not persist very long. Today, capital flows are much larger than actual trade, and so deviations from PPP seem to persist much longer.

This may all sound like something which is of no consequence to any of us, but it in fact does have some practical value. If you have a large project in which your expenses are in Canadian dollars and your payment will be in American dollars you are exposing yourself to a significant exchange rate risk. You can hedge this via a bank or by other means of course (which
you may already be aware of). If you don't, you could be taking on risks that you didn't intend to. The record of the past has been that eventually currency values do tend toward correcting any deviations between PPP and
nominal exchange rates.


**********************
Michael Griffin
London, Ont. Canada
[email protected]
**********************

 

Actually, when I said CDN$90, I was describing
group 3. We perform engineering services for
individual projects, large and small, for many
customers.

Also, CDN$90 is about US$60. A typical group 2
worker could expect around CDN$40 up here, unless he somehow negotiates a sweetheart deal. That's why I asked for details on why there's such a huge
difference. I can't understand it because the cost
of living in the US is really not that much more
than in Canada.

Anthony Kerstens P.Eng.