I don't understand this rational at all. If a developer in SF is worth x dollars to you, why are they suddenly worth less if they move to a lower CoL area? If you're paying salaries that are livable in a high CoL area, you aren't discouraging people living there, you're freeing people to move wherever they want.
I'm a Silicon Valley based dev who really wishes he could move far, far away from here without taking a huge pay cut, so I'm obviously biased. That said, in my view as an employee, the value I create for the company isn't based on my physical location, so why should my salary be?