Will Levels.fyi report that software engineer's salaries are lower in 2026 than they were in 2022?
Forecasting market: Will Levels.fyi report that software engineer's salaries are lower in 2026 than they were in 2022?
Alpha Opportunity
Alpha Thesis
We believe the lower software engineer salaries in 2026 market at 15% is undervalued. The combination of AI-driven productivity gains (reducing headcount demand), elevated tech layoffs (2023-2025 trends continuing), increased global competition (remote work enabling overseas hiring), and the Iran war's economic drag all point to downward salary pressure in 2026. The 15% price underweights these structural headwinds.
📐Key Metrics
Key Findings
- 15% vs. 40%: Our AI May Be High — While structural headwinds exist, software engineer salaries have been remarkably sticky even during layoffs. True probability: ~25-30%.
- AI as Productivity Tool — Companies need fewer engineers when each engineer is 2-3x more productive with AI tools. This reduces demand at the margin.
- Layoff Oversupply — 250K+ laid-off engineers flooding the market creates competition that prevents salary inflation.
- Levels.fyi Data — Levels.fyi specifically measures total compensation at top tech companies. If these companies freeze hiring, salaries flatten.
- Counter: Inflation — General inflation means nominal salaries tend to rise even when real wages fall. The resolution depends on nominal vs. real.
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