Skyrocketing software developer salaries in Japan a portent of a seismic shift
Traditionally in Japan, salaried employees work for a single company their entire life, with their pay rising as their seniority increases. So uniform is compensation that common wisdom even gives a formula for what your monthly salary should be: take your age and multiply it by ten thousand yen. So at 22, a fresh university graduate could expect to earn ¥220,000 per month, with that rising to ¥300,000 per month by the time they hit 30. While there are some exceptions, historically, a salaried employee could expect to make roughly the same as their peers.
When I first came to Japan in 2006, software developers were largely compensated in this manner. Companies viewed programmers as paper pushers, and so rather than specifically recruit people with aptitude for it, they would assign a certain percentage of their fresh graduate hires to be developers, and give them a basic training course (something like Learn COBOL in three months!).
Around 2010, I started to see a shift in how developers were being compensated. While Zynga was raking in cash with Farmville in the US, the domestic equivalents like Gree and DeNA were doing an even better job of monetization. With all that cash, they were willing to pay above market rates for developers, and in 2011 they announced starting salaries as high as ¥15 million per year.
Not only were these social gaming giants flush with cash, but the kind of companies developers worked for started to change. Historically, most software developers in Japan have worked for outsourcing companies, rather than building products in house. At least among developers in the Ruby community where I was most active though, there was a distinct shift around 2013. When I first joined the community most members worked for outsourcing companies, but by then the majority had shifted to working for product companies instead. Looking at the sponsors of Japan’s main Ruby conference, you can see the shift: in 2009, only 5% of them were product companies, but by 2013, almost 60% were.
When you’re building a product in house, it’s much easier to see the difference that having talented and motivated developers make, and so these burgeoning product companies turned their eyes to the masses of undervalued talent. With better pay and working conditions than the traditional outsourcers, they were able to gobble up many of the prominent developers in the community.
These days, while salaries for developers in Japan still aren’t at par with what you could make in the Valley, they’ve increased greatly since when I first arrived. In a survey I conducted in November 2020 of international developers in Japan, I found that 28% of respondents reported making over ¥10 million a year (or over roughly $100k USD a year). To put this in perspective, a 2018 report found that only 5% of salaried workers earned over ¥10 million a year.
There’s a lot to be said for this trend. While traditionally working as an engineer has been seen as a job with poor working conditions and low prestige, as companies have started to compete for talent, that’s changing. A 2017 survey found that among high school boys, becoming an IT engineer was the most popular answer to what job they want to do when they grow up. While the better compensation and conditions are certainly great for developers, recently I’ve started to think it’s also a harbinger of the end of part of what I love about Japan.
In societies there exists a continuum between individualism and collectivism. The US and Japan exist at opposite ends of this continuum. It’s no coincidence that the US, with its focus on the rights and worth of individuals, also sees the highest compensation for them, while in collectivist Japan, where group harmony takes center stage to individual needs, people have been compensated more evenly.
While there are certainly issues with Japan’s collectivist culture, being in a society where people default to thinking about the group over themselves has profound benefits. It’s why Japan has little crime, why encounters with rude strangers are almost non-existent, and dare I say even why Japan has done so well in the face of COVID-19.
Companies shifting to paying the most productive individuals significantly more than others erodes the collectivism that creates much of what is exceptional about Japan. While the forces of capitalism may make this shift inevitable, it gives me pause from cheerleading Japan’s skyrocketing developer salaries while income inequality rises.
There’s been many attempts to build the Silicon Valley of Japan, with a focus on the prosperity a tech hub could provide. But wealth isn’t the only thing the Valley is famous for, its struggles with poverty are also legendary. If Japan can find a way to synthesize the innovation a results-oriented culture brings while keeping its focus on the needs of the group, it would truly be a great outcome. I worry though that in its quest for greater wealth, Japan will be forced to sacrifice the benefits of a collectivist society, losing what has made it so attractive to me.