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Comment by dragonwriter | Hacker News Reader

> Having salaries based on location is fair

It's no more fair than paying based on lifestyle choices; if any employee in SF is providing labor worth $200k, then an employee in Bucharest providing the same labor is also worth $200k. The fact that the SF employee has higher expenses doesn't make their labor more valuable. Sure, they are paying more to live in a more desirable location, but that no more deserves higher pay from a remote employer than an employee paying more to live in a bigger house, or to consume more expensive designer drugs outside of work hours.

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In reality it has nothing to do with fairness, it's a result of real market conditions. An employee in the middle of the country will accept a lower salary than someone in the bay area due to cost-of-living expenses. Same can be said for someone in another country.

Is it 'fair' from a pure salary-to-value ratio? No. But economics isn't about 1-1 'fairness', it's about the allocation of scarce resources at a mutually-agreed upon price, or wage in this case. This is partly why comparing salaries is stupid, especially across locations.

> In reality it has nothing to do with fairness

Well, yes, when I argued against the idea it was fair without also arguing against the clear fact that it occurs, I was rather clearly saying that the fact that it occurs has nothing to do with fairness.

> it's a result of real market conditions

Yes, specifically, the absence of robust competition for remote labor of the precise kinds Gitlab is buying is the “real market condition” that allows them to do this kind of segmentation.

Ironically, the more attention (and copycats) all-remote firms like Gitlab get, the less viable this cost-saving tactic will be, provided that they don't involve in illegal (in many jurisdictions) joint cooperation to limit wages of the type that, unfortunately, tech firms have engaged in in local markets in the past.

Starting a remote company is a cost-saving tactic, and the ability to often not have to pay SF salaries can be a motivating factor, especially in the early stages of the company.

Sure, if you make a cost-optimization rather than fairness argument for Gitlab’s policy—that it's simply a way of paying every employee the minimum they can get away with—I won’t argue against that.

Well, it's both cost saving and fairness, I think. It just seems like common sense to me. If one employee by default has to subtract something like $4000 from their monthly income to cover living expenses, and another has to subtract something like $700, then the employee who subtracts less is taking home way more money if they're getting the same salary. The other employee is being punished for where they live.

But prices aren't based on fairness, they are based on demand and supply. If there is a supply of workers willing to work at a lower price in areas outside of San Francisco, then it makes sense for a company to purchase their cheaper labor if it supplies the same value as the more expensive labor.

> But prices aren't based on fairness, they are based on demand and supply

If they were based on supply and demand, locality of seller would have no effect on the price buyers were willing to pay for goods that aren't location-sensitive, e.g., remote work, because it's not a location-bound market and goods would trade at the global market clearing price absent (inefficient) artificial market segmentation that is only possible (for buyers) when there is an effective monopsony for the particular good/service being purchased (since competition would exploit the underpriced segments buy buying up what they are selling at a price above what the attempted segmenter was offering.)

That may very well happen over time. Non-Bay workers may bid down the price of coding labor, and remote workers from disparate markets will bid against each other, and eventually some "global market clearing price" may be established. Economic theory doesn't operate instantaneously, though. It manifests over time as individual actors bid and negotiate. Remote work is relatively new and its substitutability is being figured out. In the meantime companies may exploit the inefficiencies (and so might workers).

Salary is a market value. Your arguments read like “if a BigMac costs half a Dollar in a developing country then the BigMac is inherently worth half a dollar and should cost the same in the US”

> Salary is a market value.

Were that true, global markets where the location of the seller is immaterial to the utility of the good or service sold and didn't create extra costs to get it to the buyer wouldn't have different rates based on the seller's location, by the Law of One Price.

> Your arguments read like “if a BigMac costs half a Dollar in a developing country then the BigMac is inherently worth half a dollar and should cost the same in the US”

A more precise equivalent would be “there is no rational reason for the same buyer to be willing to pay more to purchase a Big Mac delivered from a neighboring higher CoL city as an identical one delivered with the same latency from a different neigboring community with a lower CoL.” Local prices for Big Macs between countries naturally vary precisely because Big Mac distribution isn't globalized the way remote labor is, and a Big Macs from a McDonald’s in Turkmenistan is not an equivalent substitute for one from a McDonald's next to Market Street for a buyer in Downtown SF.

Local wage policies for remote work are an effort by employers to present a rationalization to employees not to increase their wage demands to what the globalized market they are actually competing in will support. They will only be able to be maintained so long as remote work isn't widely offered and there isn't a meaningful competitive (on both sides) market; once there are enough competing buyers for any given kind of labor, competition for labor will see the best workers from low-CoL area consistently going to employers that aren't lowballing them.

To be honest, Gitlab is paying way above the market rate in Bucharest, while the cost of living in Bucharest is significantly lower than that of SF. Oddly enough their pay rate is close to that of London for a Tech Lead, and that's a lot of money in a city like Bucharest. Even if pay is half of SF, Bucharest's cost of living if a few times less, so it really is great.

The fact that employee in SF gets $200k doesn't mean that the labor is worth $200k in Bucharest. It is worth whatever somebody is ready to do the job for and what the company is ready to offer, in this case - SF it is $200k while in Bucharest it is $100k. If the employee is happy with $100k in Bucharest then the salary is fair.

The fact that the purchaser pays $200k for it means that the labor is worth $200k to that purchaser. Assuming that what they get doesn't vary based on the seller's location, the only reason to offer less for identical labor from Bucharest is because they think they aren't competing with other buyers who are likewise location-insensitive, so that the Law of One Price doesn't apply, and they can optimize their cost with market segmentation.

That's obviously what is going on. Trying to sell it with a dishonest narrative about some inherent fairness of scaling compensation to local cost of living is B.S. Local cost of living is just assumed to be a reasonable approximate proxy for what competing bidders, most of whom are presumed to be local and thus location-sensitive rather than remote and thus location-insensitive, are likely to offer. There's no ethical rationale in operation, just cost optimization.

They should price their service the same. Charge less in ares in the US with a lower cost of living as the wages/revenue will be less for developers/businesses in those areas.

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