I think the standard argument is not that they're paying according to need, they're paying according to market norms.

Thing is, in high cost of living areas the living cost is extremely pegged to job opportunities, it's almost tautological. Where there are more job opportunities, you have to pay people more to stop them working for competitors. A confounding factor is a hypothesised (not sure if backed by data) trend of talent concentration - that is, areas with lots of job opportunities attract most of the most talented people, driving salaries up further.

All that's to say, if Gitlab want to hire someone living in such an area, the market dictates they must pay more in order to attract that person over a local competitor (for jobs). It's not due to the person needing the money more for a higher cost of living, at all.