Tech companies aren't charitable foundations designed to help developers. They're businesses. They aim to maximise profit. If they can lower wage costs of course they'll do it.
I suspect this is just the beginning of the move away from the Bay Area. Give it twenty years and small offices and remote workers distributed across the country will be very normal. Wages (and Bay Area house prices) will reflect that.
The future of the Bay Area will be outsourcing lower waged jobs that also includes software engineers, QA staff, administrative, etc. to other areas of the state or country where cost of living is less expensive. It's already happening, just ask around.
Again, because the value turned around by SWE peeps etc. for tech companies has an actual cap. You can't pay a QA/SW engineer $500k/year just so they can afford live in the Bay Area. They'd have to be one hell of a QA/SW engineer if that was the case. I just don't think it's worth it for tech companies at some point.
After all that happens, the jobs left here will be primarily managerial; c-level execs, product managers, business analysts etc.
Those too, if the housing situation doesn't improve, will be outsourced to lower cost of living areas as well.
Again, it's inevitable given the numbers.
Much of the wealth being generated in this area is being sunk back into real estate. The high wages in tech in the Bay Area are high because they're subsidizing a corrupt housing market.
Eventually the only people left in the Bay Area will be executives and really high-paid lawyers.
As long as big tech makes big bucks in the Bay Area, the money's gonna want their labor within arm's reach. Remote work has its place but for most companies you can't have your cake and eat it - remote is either all or nothing. That leaves local employment. Paying a quarter million to a developer seems like a lot, until you compare the efficiency gains of keeping everyone in one place.
I think the real issue with Silicon Valley's future isn't financial, it's cultural. I believe it is rapidly becoming a second Wall Street: the place where young professionals tough it out for a few years until their bank accounts and resumes are good enough for a more fulfilling job in a cheaper and more preferable location without the cost and the crazy.
The Bay Area is a great place to make money, but is it truly a great place to live? Strip away the nice weather and trendy restaurants, and it's hard not to notice how much of the communitarian counterculture that peaked in the 60s has been, like so much of the world today, eaten by software.
I think big tech companies are so large that they've realized that if they keep pumping $200k-$500k/yr employees into the bay area (that weren't there before):
1. Housing prices will continue to increase since the supply is not changing yet demand (and ability to pay at current prices) is increasing
2.1 Gentrification happens and existing bay area natives get more adversarial to tech companies
2.2 Existing employees experience a decrease in QOL if comp packages remain the same
3. Tech companies keep having to increase TC packages to keep their employees' abilities to purchase homes
Also by expanding into other large markets tech companies can hire people who have lots of ties to an area and don't want to move. This has an added benefit of perhaps not having to offer as much TC since these markets might be less competitive.
I have a feeling that tech companies in the most expensive parts of the Bay Area are going to have trouble getting some people to come back to the office rather than move somewhere a bit cheaper and continue to work remotely.
Most major tech companies want to hire onsite, when there are plenty of places in this country where you can buy a lot of real estate for much cheaper than the Bay Area.
I pay less on my mortgage for a large house with over an acre of land than friends of mine pay for rent for studio apartments in San Francisco or Seattle.
Investing $1B into housing in the Bay Area seems nice at the surface, but maybe if we stopped demanding everyone be willing to relocate to one of a handful of cities to work in our industry, we'll solve the root cause of the problem.
At some point though, if Bay area housing prices continue to rise because of all the people who must must must live there, the Googles and Apples of the world aren't going to keep raising salary levels accordingly. And startups/smaller companies (to say nothing of many non-tech jobs) certainly won't/can't. Something's got to give and even if housing supply increases somewhat (as it's slowly doing) there's inevitably going to be some equilibrium where enough potential employees and employers go enough is enough and move elsewhere.
After all, there are plenty of successful, non-startup companies that are quite distributed.
I think I agree with you on the surface, but at the same time I wonder what impact Bay Area salaries would have in low cost-of-living areas. What about gentrification? Isn't one of the biggest complaints about tech workers (and especially people moving from CA) that their high income is making life less affordable for those native to a particular area?
Glad to see this as an East Bay resident. Here's hoping it helps the already-existing trend of more tech companies moving across the bay ;-) Or, maybe the San Francisco companies will just fire their low-paid workers or shift them to being employed by a subsidiary to avoid this tax.
It's funny how San Francisco often seems to be both the home of the US tech industry, and the home of opposition to the US tech industry.
This is great. I've always been an advocate for companies to set themselves up as remote first, even if they have an office, so that people who are remote can still be just as involved.
One thing I predict happening if this becomes widespread is a reversion to the mean on salaries. I think the pay for people outside the Bay Area will go up and inside the Bay Area it will go down, as being in the Bay Area will no longer be nearly as essential.
This will have a nice second order effect on Bay Area real estate prices, bringing them closer in line to reality (but we will still have all the problems of massive undersupply, because it's just a nice place to live, tech employee or not).
Given how hard it is to find labor, due to the lack of housing, they might even have some degree of success. Tech giants need to learn this the hard way: the bay area is not a place for cheap labor: housing costs and taxes are way too astronomical for that.
Also, as the article put it, in the short term, I think Google is putting themselves in a very weak position by making their expansion in San Jose. They could've picked a number of different tech hubs in the rest of the US, but instead chose San Jose. They'll be paying a much higher cost of labor for both engineering talent, plus the countless payoffs they'll need to make to local governments. But, I guess, it must all be worth it, otherwise they wouldn't have done.
There's long been strong financial pressure for the tech industry to disburse: it's incredibly expensive. Ideally you'd start a tech company somewhere where office and engineers are cheap. But the companies stay in SF because employees and VCs are there. VCs and employees are there because companies are here.
And even though Sand Hill VCs could fund companies anywhere in the country, in practice, they didn't (much). If that's changing, I feel like that's the trigger for a big tech diaspora as much or more than remote eng work.
Here's a solution: have tech companies settle in other regions.
There's a reason why companies have large offices in the Bay Area and are willing to pay the exorbitant salaries and rent there.
If they could reasonably relocate to middle America where land and salaries are cheap, they would - they all know how expensive it is to operate in the bay area, yet they choose to do so.
The other factor I'm not hearing in this conversation is that there is a third-party in why the Bay Area has so many high paid tech jobs: the VCs. I know of multiple startups orignally based elsewhere who were pressured to move their company to the Bay Area by the VC. I suspect there are many ways in which the VCs have an invisible hand in creating the Bay Area market.
I don't know how to unwind the VC intanglement when talking about compensation. I do think it should be part of this conversation.
Sorry to see you leave San Francisco. I've had a similar introduction to the city and don't intend to leave. One subtext that I'm reading into your article (incorrectly, perhaps), and seeing lots of elsewhere, is a subtle guilt among tech works for the salaries they make in the Bay Area. I understand that as techies we're inclined towards a sort of egalitarianism, but perhaps there's an inherent conflict somewhere between that and the exits and acqui-hires and searches for small fortunes.
How would a Bay Area tech company then compete with the like of Google of Facebook for top-talent then? It would be nearly impossible for most companies to match the compensation of the Big 4. The influx and concentration of wealth by those companies are essentially crowding out smaller companies and driving up local housing prices. Think about the billions of dollars that flow from around the world, and disperses itself in the small radius that is SV and SF.
What's the solution then? Have smaller companies move to the Midwest? Or radically cap salaries at 100k?
getting tech out of SF would actually do a lot of people good. I've worked at countless software companies and always wondered why the companies had to be located in the most expensive city in the US.
Tech hubs like San Francisco are not "company towns", they already had multiple employers competing for labor, and workers already had the choice to go to these other companies that are becoming remote.
The only difference is the benefits of non-remote tech-hub work that have been driving the high wages in tech - concentration of talent, face-to-face communication/team-building, advanced urban infrastructure - are now gone. So tech workers will have the same amount of company choice, but can no longer benefit from tech hubs; tell me why companies are going to continue paying the same high wages again?
I suspect this is just the beginning of the move away from the Bay Area. Give it twenty years and small offices and remote workers distributed across the country will be very normal. Wages (and Bay Area house prices) will reflect that.
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