Rather than blow revenue rewarding bad life choices, offer to move them to an area with lower costs of living. Do that for only 10 employees and you have 300-500K EVERY SINGLE YEAR to re-invest into your company. In practically any other industry, this kind of saving would be obvious.
Living in a high cost area is not a "bad life choice".
No chance I'd work at Buffer, given they'd halve my salary because of my zip code. Other remote jobs don't. No brainier.
Not everyone is willing to just move for a job if not necessary.
> so, just hire in low-cost areas!
The company execs might be based in a high-cost area (because of family ties, property ownership, etc.), and also might not be ready to eat the cost of running a remote organisation.
I don't think it's bad, it would be bad if they didn't have a better salary because of their location.
Does that mean they will hire people from the bay? No it doesn't mean that either. The formula could actually force them to hire people from cheaper places.
I've never lived in SV, nor do I want to -- there are areas of the US that pay SV prices with lower cost of living and progressive citizenship/policies, which I'd rather not name since then whoever's reading this would move there -- but the assumption that a "senior" dev in a low cost area is more valuable than a "beginner" dev in a high-cost area like the valley rests on a bunch of things that often are untrue/shaky at best.
- How do you even determine senior vs. beginner? Years of experience? Successful projects? Breadth of technology knowledge? depth of technology knowledge? interaction/propensity to share knowledge with team members?
- What has this senior dev in low-cost area been exposed to? What about the junior developer? If I asked them to solve a problem, which can imagine the widest breadth of possibilities? which can imagine the most stable/future-proof possibilities? This can come down to the person almost as much as the years of experience.
- What frameworks/tools/language are you talking about? (this seems like it may not matter, but if you're measuring contributions to a codebase, a developer with 1-2 years of experience in purely golang is going to be better/likely faster at grunt work maintaining an API in golang where the design choices have mostly already been made). Higher level refactorings and architectural work will likely be out of their reach for months/years to come as they mature, but if what you really needed was someone to put out fires with code that isn't terrible, 1-2 years will often suffice. It wouldn't take the senior engineer very long at all to learn the new language but they'll also have to spend some time unlearning old habits -- of course they'll also be bringing good habits that you may not already have as well, but happily dealing with grunt work and over-working yourself because you're "super psyched" is usually not something senior engineers will do -- newcomers/greenhorn often do this, however.
If the dev works on a rarely used admin app, surprise, you pay them lower.
That has nothing to do with whether leadership can accurately assess the value of the projects and applications that are developed in general (a point I agree with you on).
If your devs are in a bigger city, there's a good chance they went to the bigger university in that bigger city. If you have devs from a bigger university you can more easily recruit from that bigger university.
If your office is in a bigger city, you can have more relevant personell in that bigger city such as sales and marketing. If you have sales and marketing in a bigger city, you can reach the customers in that bigger city. A bigger city has more customers than a smaller city.
If you have your devs in a bigger city, you can recruit devs from different industries in that bigger city. Bigger cities have more industries present, meaning you can bring in devs with different skillsets.
Basically, discouraging devs from living in big cities can be a very bad idea because. Opportunity costs are real costs.
The Dallas metro area is larger than the SF metro area (and so are the individual cities), but Dallas's COL is half as much as SF's.
Edit: For that matter, just to ward off the (valid) point that the SF metro area doesn't include most of SV, the Dallas metro area is larger than the SF and SJ metro areas combined. San Francisco-Oakland-Hayward and San Jose-Sunnyvale-Santa Clara have 6,172,302 people combined as of the 2010 Census, while Dallas-Fort Worth-Arlington has 6,426,214 people.
You don't have to be on-site, so the real market is nationwide (if not international). Companies simply pretend it's limited so they can pay less.
And that still doesn't solve the talent issues; highly skilled professionals congregate in areas with amenities (culture, like minded people, access to top notch medical care, access to schools, access to public transportation, etc) so even if you're remote you're still competing for the high CoL people at high CoL prices.
Are SF medicine or schools 3x better? Is public transportation 3x better? Is the culture 3x better?
I think not.
You can get comparable things in cities with a fraction of the living cost which self-evidently shows that people are paying too much for what they are getting.
Finally, if I'd rather live somewhere without any of those perks and pocket the money instead, should I be told that I can't? Should my decision be held against me?
Yes, and more, with the possible exception of schools (it's hit and miss here, same as anywhere).
Unfortunately for people in your position, companies know that your options are limited. Large supply of people that want to live away from jobs and pocket the difference compared to the number of jobs available => lower prices.
Both negative (taking away) and positive (adding) responses are beneficial to devs.
If if a company chooses to raise everyone's salary, Awesome! Now companies that lower salaries must compete.
If a company chooses to lower everyone's salary, Awesome! Devs in high-cost areas will be forced to move which will unify the market at which point devs in traditionally lower-wage areas will now be able to compete in a larger market and negotiate for more pay.
I may be misunderstanding what you're saying, but people definitely move from places like Nashville (where I live now) to places like SF and NYC (where I'm moving next year) to increase their salary.
No one pays devs mid-six-figures in Nashville, but you can make that in SF and NYC (not easily, but possible).