Ask HN: Why is location factored in a remote compensation package?

When negotiating compensation for remote work companies usually offer less to employees located abroad, even though one works the same job in the same position as her US counterparts. As far as I know the same happens between states too.

I understand cost of living (mainly rent) varies between locations, but many commodities are actually cheaper in the US including gas and consumer electronics etc. Negotiating on what should be one's living standard instead of putting the price for a piece of work does not seem to be logical (maybe even a bit unfair). What am I missing? Working remotely for a local salary seems to be the worst of both worlds.