Why some AI roles are commanding such high salaries

In the race to dominate the artificial intelligence (AI) market, companies see opportunities to reap major profits—and some are willing to offer big salaries to the candidates who can help them get there.

“Astronomical” salaries. The price employers put on hiring the best AI talent became apparent to Kaitlyn Knopp, founder and CEO of compensation software firm Pequity, when her team recently helped advise the founders of Inflection AI, who were tapped to join Microsoft, on what competitive pay looks like among major industry players.

To get a sense of the market rates for AI roles, Pequity reviewed its own compensation data, as well as market research of publicly available sources, including compensation trends from OpenAI. The company that launched generative AI chatbot ChatGPT in 2022 is currently valued at $80 billion, and is credited with starting an AI “arms race” among businesses. When reviewing the compensation data, Knopp saw that OpenAI was paying AI and machine learning talent anywhere from 125% to nearly 400% the going rate of what software engineers traditionally earn at big tech companies like Google or Microsoft.

“When we looked at the going rate for what OpenAI I was paying for, like, three years of experience for data science, it was anywhere from $245,000 base to $377,000…And then the equity was around $1.5 million, equivalent over four years. So, astronomical rates,” she said.

The reason for this salary inflation, according to Knopp and other compensation experts and recruiters in the field, comes down in part to a supply-and-demand issue, as well as the potential for top AI talent to help companies reap major financial rewards.

Why AI skills command such high pay. The share of jobs listed on recruiting site Dice requiring AI skills was 16% as of March, up from nearly zero at the beginning of 2023, according to CEO Art Zeile.

“Much like any skill that has high demand, but low supply…it means the salaries, the compensation, goes up, there’s no question about it,” he said. A recent report from analyst firm Foote Partners found candidates with skills related to AI, such as prompt engineering and deep learning, command at least an 18% average pay premium.

In some ways, AI has become a catch-all term for business investments in technology that can perform work that has traditionally been performed by humans. When employers advertise AI jobs, these roles could require a variety of different skills, from robotics to natural language processing, research from HR consulting firm Randstad has found. Some of these skills are more rare and valuable than others, but in general they are commanding a pay premium.

David Turetsky, CHRO and VP of consulting at Salary.com, likened the current AI talent race to the dot-com boom in the late 1990s, when companies looking to build an internet presence spurred a hiring frenzy.

“There’s going to be emergent areas of focus for all organizations across the board,” with institutions ranging from nonprofits to HR teams looking to leverage AI, “and the development of those skills are going to demand a premium at the beginning,” he said. “When the supply comes…the skills become more ubiquitous, then we’ll see the rates come down.”

A big payoff. The potential payoff from AI investments is significant: McKinsey & Company, for example, estimates generative AI could deliver $200 billion to $340 billion in additional revenue for the banking industry annually, while retail and consumer packaged goods could see as much as an additional $660 billion annually.

The promise of such financial rewards is another factor driving salary inflation for AI roles, Knopp speculated. “Companies have realized that if they can get their hands on even one, or two, or three experienced people, they will pay anything to get them in the door, because the payout of that knowledge is so exponential,” she said.

If you’re a senior staff machine-learning engineer or principal scientist at a big tech company like Amazon or Meta, “and you’re able to optimize an algorithm by 1.2%, you could influence $2 billion of revenue,” said Kyle Langworthy, who is partner and head of the AI, machine learning, and data practice at executive search firm Riviera Partners. In this context, “your $8 or $9 [million], or $4 or $5 million compensation package makes a lot of sense.”

Still, Langworthy cautioned that the OpenAIs of the world are fairly rare, and headline-grabbing salaries represent “1% of 1% of 1% of the market.”

If this serves as a reassurance to HR teams fretting about hiring AI teams without the budget to offer multi-million-dollar pay packages, so too should the fact that cash isn’t the only factor candidates are considering as they weigh a job offer. The potential to have a major impact at an organization also seems to be important to potential hires, as well as standard perks such as flexibility, Langworthy said.