Anyhow, not saying I support it, but at the salaries Google can afford it makes sense...
But, there's still the time cost of commuting. If you pay a premium to live in SF, then you're not going to want to commute 90-120 minutes so South Bay. Then another 90 minutes back at night. In that situation, you'd be paying a premium to live in cramped quarters, in a city with thousands of things to do, but have zero time to do any of it during the week.
I meet people on Caltrain coming from Gilroy commuting to work all the way in SF. Commuting 3-4hrs a day. WTF? I guess there's nothing to do in Gilroy, or they hate their families. Joking aside, the honest answer is the only affordable, nuclear-family homes are in the far-south. (Back to joking. Can we even call Gilroy the Bay-area?)
As it seems to me. When you make the decision to come to the Bay-area.
* You have to decide, do I want to drastically overpay for where I live to be close to SF?
* Do I want to commute 1-3 hours a day?
* Or, do I want to have roommates when I am 30+ years old?
Yeah. That's what I meant. Google could build offices in the Gilroy or the East Bay to improve those employees lives. Companies like Uber are opening offices in Oakland, which is a pretty central location from BART and freeways.
Of course, if you make good tech money (say, anything over 200K) then its a moot issue-you can overpay for ridiculously priced 1-2 bedroom apartments, and still have money left over to save/indulge with.
I've never seen good data to back this up. Are you aware of any sources? (I know you weren't making the claim yourself.) Talent is already difficult to register, and I find it absurd to think that all the best engineers in the world would cluster in west bay. The only people clustering are those who want to work for google (or startup XYZ), not the people google necessarily wants to hire.