I think that was the point the author was making. It's not the employers decision on your location adjusted wealth sccumulation opportunity, or how he puts it how many goats you get.
He's basically advocating for global market value. The side effect here is that individuals are free to maximize their wealth by choosing to live where they can best maximize their wealth. This allows the individual to chose what is valuable to them - dollars/goats or the intangibles of a location, e.g. sunshine, culture, freedom, family, etc.
This makes some sense for the individual where you have global scarcity. This enhances the competition for the individual's skill where geography in many cases presents a real barrier. For example in non-distributed workplaces you are essentially up against a sort of implicit collusion to minimize rates, the local market demand for your skill.
> "why should geographic location dictate my salary relative to my peers?"
It doesn't. Your unwillingness to relocate does.
Everyone has their own reasons for where they're willing to look for work and why. But those reasons, your reasons, have a price tag attached. To you, your reasons + your salary is equivalent to a SV salary. (Else you'd relocate.)
Similarly, companies who are unwilling to allow remote workers and/or choose not to build remote teams aren't paying more because of their location. They're paying more because they value having their employees at their location and that value is greater (to them) than the difference in SV salaries vs the midwest.
It seems that one of the arguments the author is making is that that an employee’s cost of living isn’t what’s in play but the competitiveness of the employee’s compensation at that location. That your buying power is more in SF than in London, because a good amount of people just as talented in London would take a lower pay cut compared to SF, for example.
That seems to make sense, but I wonder why the opposite isn’t just as likely to happen, more employees ask for more, if companies paid more for remote workers
> You enable a certain amount of profit for your employer, regardless of what you do with your pay. Regardless of how much rent or mortgage you pay, and regardless of where you pay it.
Then why would companies bother hiring people in expensive locations if they can hire another developer in a foreign country for half the price?
In practice, companies that adopt location-independent salaries don't automatically pin their compensation to the most expensive locales. They pick a midpoint compensation that is good enough to attract remote workers who can't do any better locally, but they turn away a lot of developers in expensive places like Seattle or SFBA who know they can do better locally.
I mean, sure, that sucks for people in the local labour market, but if you cannot find work that covers your cost of living, then you either have to change your work or lower your cost of living. This is the same in any type of work, in any location. For example, you might make enough money running a small town bakery, then big office opens up, local cost of living rises (like it has in San Francisco, for example) and suddenly you can’t sustain yourself anymore. You either have to do something else or move somewhere else.
My point isn’t that things don’t have an effect, just that companies want to embrace remote, that location shouldn’t be coupled to compensation, outside of implicitly due to locations effect on what an employee would accept. The employee can then make a decision on their own worth and values and choose whether they would rather do their location-non-specific work from a high cost place (that presumably has other benefits[1]) or if they would rather move to a low cost place. This shouldn’t matter to the company and shouldn’t have any impact on how they value the employee.
[1] If there is no benefit to living in a high cost location, for a given individual, then its not exactly smart ir prudent for them to stay there and keeping the prices high (due to higher demand) isn’t benefiting anyone. (Proximity to friends and family is, of course, part of the equation). I can’t expect my career of choice to pay me more just because of my personal choices or preferences, though. Why should one employee subsidize another employees lifestyle?
I assume the point is that salaries aren't about fairness. So the objective measurable reason is that if you want to hire employees in high CoL areas, you'll need to pay more to be competitive.
To be clear, I have no issues with divorcing salary from location for a remote company. But it probably means you're paying generous salaries for people living in cheap locations and you'll have trouble hiring anyone who must must must live in SF for... reasons.
> Why would a SF company pay the employee in Kenya more than they need to?
Let's say an SF company limits max pay for Kenya remote employs to 10% of the maximum that Texas remote employees would get paid for the same duties, which is in turn 80% of the max that Bay Area remote employees would get.
The the actual applicants, of equal ability, are a Kenya applicant who will accept a minimum of 10% of Bay Area pay, a Texas applicant who will accept 85% of Bay Area pay, and an Oakland applicant who will accept 100% of Bay Area pay.
The first two don't get hired because a mutually acceptable salary can't be agreed, the last one is and the company pays 10× what it needed to.
It makes some sense to scale offers based on factors that you think will shape what people will accept, except where this is prohibited by law (e.g., protected class), and location may fit within that [0]. But it doesn't make sense to adjust the limit of what you accept that way.
Of course, if you try to have a consistent transparent salary methodology, you either have to give up location-based offers or accept the inefficiency of location-based pay limits. But the whole point of salary transparency is to avoid the perception that people are being paid differently for the same work based on non-germane factors as a way of exploiting people from disadvantaged backgrounds, so why you'd keep location-based limits with transparency is beyond me.
[0] Or may not: location clearly correlates with various protected attributes, which may get you bit by disparate impact if location isn't measurably linked to value.
Pointless snark aside, this is correct. But it is still constrained by geography and it's not all that surprising that employers would like to constrain it a bit more than it is. So this move makes total sense, and pretending that there is no correlation between your location and what you can command in salary is farcical.
It doesn't make sense but it is true. If you're really good, someone will make you an offer for an SV salary, and now everyone needs to compete with that. Besides, it's only fair. Your value shouldn't be tied to where you live per se. It's true that people in some areas make less because they have fewer options in their area, but for a high caliber person, they have plenty of options whether they move their physical location or not.
I'm pretty sure we're going to see a trend as remote work becomes more popular where there will be a much smaller delta because of location of the employee.
>But this implies that people in big cities can expect to see their pay go down to match the greater competitiveness of remote workers, not the other way around.
It really depends how fully remote a company goes. To the degree there's still some company advantage to anchor locations that some employees come into on a semi-regular basis, a company might still want to pay some premium for employees to live in that area. However, to the degree that a company were fully remote (and ignoring that some functions will still be physically close to customers), then high CoL vs. low CoL becomes purely an employee decision, it's hard to see the company paying those premiums. So, leaving aside real world messiness, the expectation would be that salaries head towards one (country-wide) value for a given set of skills.
> Is there that much of a network effect with talent being in one region that companies would rather pay a 4x compensation premium that relocate to new or lower cost locations?
Yes, it's pretty strong.
Employers want to be where the employees are, and employees want to be somewhere where there are other jobs.
> I get it if location based pay is used for jobs that require in person. But how can the employer have it both ways? Why would the employer want to subsidize more expensive lifestyles for a remote position?
Employers don't pay high because CoL is high; they pay what the market allows them to pay.
It's no more fair than paying based on lifestyle choices; if any employee in SF is providing labor worth $200k, then an employee in Bucharest providing the same labor is also worth $200k. The fact that the SF employee has higher expenses doesn't make their labor more valuable. Sure, they are paying more to live in a more desirable location, but that no more deserves higher pay from a remote employer than an employee paying more to live in a bigger house, or to consume more expensive designer drugs outside of work hours.
I don't think the author is pretending it isn't about money - that seems to be the central thesis of the entire article. The point they are making is that if the author wants to live in India, if the work is entirely remote anyways, they shouldn't have to provide additional value.
If his work was worth $100K when he lived in SF, why isn't the equivalent work worth $100K in Wichita?
To me it seems like a recognition of the fact that for remote work, location doesn't really matter, so the market rate is national or global. If Starbucks wants to hire, they can base their pay rate on the local labor market, but software companies should expect to pay a national rate for those types of jobs going forward if remote work is going to be more of a standard.
> (A) location-based pay is justified because of location-based cost of living
Cost of living doesn't justify location based pay. It happens to correlate, but if a company could offer you an less pay in a high COL area without you declining the offer, then they might. They could even move their entire operation to an area with 1/4 the labor rates, like the Philippines, but there are big reasons they don't.
> then is car-based pay justified
Car based pay doesn't exist AFAIK, so what's the point? Companies pay what they have to pay to hire/retain the employees they want. There are a myriad of factors affecting any labor market, including all sorts of day to day personal costs like housing and transportation, but those are distilled through the personal choice of the employee. The main input to what employers pay is what other employees pay - it's a feedback loop at an unstable local equilibrium.
That said, if a major company or three decided to move to globally uniform compensation (the same pay in Czechia as Chicago), well that would be an interesting experiment to watch, though I wouldn't want to work there.
The only thing I’m arguing is that if my location doesn’t matter to the job, then the location I’m in shouldn’t matter to the salary equation: only what you’re willing to pay for my skills and what I’m willing to accept. Tax or other legal issues aside, once I’m employed remotely, it shouldn’t matter to you if I then decide to leave my expensive NYC apartment to live for a fraction of the cost in some rural town (assuming I have adequate internet etc). The employer shouldn’t then say well your cost of living is now lower, so we will pay lower. I’m still the same person providing the same value.
If the company wants to save money, then why were they willing to pay more just because I lived in a higher cost of living area, rather than looking for people in the lower cost of living areas to begin with?
The article actually seems pretty balanced in that respect. It acknowledges that there are centers of gravity for some industries but, in some cases, you can work from almost anywhere.
What I think people here sometimes don't recognize is that there are costs and tradeoffs to location choices. Those tradeoffs aren't constant for people over time. And there isn't a single right answer however much one needs to justify their own decision.
> Location-adjusted pay for remote US workers is indeed a social norm
That's backwards, though. It's a social norm because it's the most workable solution. Firms that overpay salaries (defining overpay as paying far above the market rate in any given region) will not be able to afford as many employees / highest quality employees / as much marketing / as much downturn stability or runway / as much other investment as their competitors, so they will lose on average.
And this makes sense. The same forces that drive salaries up (competition from other employers willing to employ the same person) also drive it down. You can't only have upside.
> while your competitor says I can live anywhere and remote in
I think most companies still consider your location when determining your pay. Facebook does for instance, even going as far as tracking your IP to make sure you're being honest. If you choose to move to a lower cost city, they'll adjust your wage. Not sure about the other way around.
That'll probably eventually change, but it could be a useful indicator. The median employee that chooses to live in X may be more productive that the median employee that chooses to live in Y. But that's yet to be seen
> This is a common but fundamental misunderstanding of what determines your salary. Your salary is determined by the market...
Location based adjustments are replacing this misunderstanding with a different misunderstanding which is roughly "The market rate for the position is determined by where *the employee* lives, not by the many others that would be qualified by the job"
He's basically advocating for global market value. The side effect here is that individuals are free to maximize their wealth by choosing to live where they can best maximize their wealth. This allows the individual to chose what is valuable to them - dollars/goats or the intangibles of a location, e.g. sunshine, culture, freedom, family, etc.
This makes some sense for the individual where you have global scarcity. This enhances the competition for the individual's skill where geography in many cases presents a real barrier. For example in non-distributed workplaces you are essentially up against a sort of implicit collusion to minimize rates, the local market demand for your skill.
reply