What makes you think this is true and not just a post-hoc rationalization? Let me put it this way: offer that salary worldwide and you will still have difficulty finding top-tier talent, as many remote-first companies are finding out the hard way. Having been a hiring manager in such a position before, I will tell you that you are still competing against every other remote tech company to find and hire from the same global talent pool.
Secondly, you're not accounting for communication ease and timezone differences. A huge amount of the world is cut out if you optimize for remote candidates within +-1-3 TZs.
Finally, the assertion that the average valley firm doesn't need a $200k+ in 2020 USD terms engineer is also not necessarily true. Demand for senior talent is significantly higher than for mid range and junior talent, because mid-large size firms want it (to bolster their senior roster and make it easier for teams to subdivide), and small firms absolutely need it (they simply do not have a senior engineer and need at least one).
You verbatim asked "why pay $200k for a software engineer same talent can live outside of the bay area and can do with 1/3rd of the salary" and you got a response. If you think there's truth in what I'm saying but find that response "unpleasant and combative", I have two suggestions for you:
1. Communicate more clearly. If you are meaning to express an argument rhetorically or as a "devil's advocate" but it's easy to misinterpret your statement as if you simply support it, consider rewriting your comment for clarity.
2. Rethink your premises. If you actually do believe what it is you're saying, consider that you're the argument of "same talent for 1/3rd of the price" is the original offshoring argument, which has well known conceptual issues.
If you're more thoughtful about checking your assumptions when you could be wrong, it will be much less likely that you end up in a situation where you find yourself saying "Gee, I found so and so's response unpleasant and combative, even though there is truth in what you're saying." If you put your hand on the stove, do you criticize the stove, or do you realize that maybe it was a mistake to put your hand there and then move it away?
My feedback is to learn how to write in third-person grammar [1]. It is one of the most important skills in effective communication and it puts the issue at the forefront.
[1] https://www.grammarly.com/blog/first-second-and-third-person...
"The question I have is what portion of the $200k salary is 1) due to the raw talent of the individual 2) because they live in the bay area. From a company's POV, if they have to pay a 2x premium for the local talent, what are they getting for that price, if anything?"
First of all, I switched around the order so you're leading with your priors. This sequence makes it clear that the statement "what portion of the $200k salary is 1) due to the raw talent of the individual 2) because they live in the bay area" is not your conclusion, but your starting point. I phrase the second sentence that way rather than "same for 1/3rd of the price" because it focuses on why people are _already_ paying the extra money when they could buy the cheaper "substitute" product rather than leaving unquestioned the presumption that the two are substitutable.
Sorry if this advice is unwarranted, but given that you've clarified what your intentions were from your post, I think the underlying curiosity is still pretty valuable, and I believe it's worth exploring. I would just personally take a different stylistic approach as described to explore it.
It’s only difficult to hire developers anywhere because you don’t want to pay what it would cost to get a yes.
1) How many people transfer to rather than from the Europe or India office? I'd wager that it's mostly in one direction, which is towards the higher wages.
2) Are RSU grants are adjusted downwards after the transfer? I believe the answer is no. Which means that the total package is not decreasing significantly until cliff.
3) What's the pre-existing financial situation for folks that move towards a lower CoL area? If you've already made a significant enough amount of earnings in the US that you could survive off of them in your destination, the base salary is going to matter a lot less.
4) Is there lateral incentivization in terms of trajectory? If you get to start a new office in a different country (or head a new team or something along those lines), the clout you develop long term may be enough to balance out the temporary salary loss, as when you return back to your origin country, you could have leveled up substantially and retain your level. You're effectively engaging in arbitrage here.
Suffice to say, I don't have a great answer, but I will note that this is a pretty specific exception, enough to make me repeat that platitude that "it's the exception that proves the rule."
There are other places in the US that are warm in the winter, of course, but less of them are also nice in the summer. Then among those, very few of them match the Bay Area in friendliness to things like LGBT causes.
I have a feeling that many people will continue gravitating to the Bay Area.
This is a sincere question, by the way. (It's also a practical one - I just accepted a fully remote position, and I'd move to the Bay Area in a heartbeat if it weren't so expensive.)
Bay area has one of the most closed minded people when it comes to politics. Jack Dorsey (Twitter CEO) talked about it in his interviews with Joe Rogan and such - how do we make sure that voices across the spectrum are represented on Twitter and just not what silicon valley thinks is acceptable? There is definitely bias.
I don't want to open a can of worms, but I personally don't like living in the bay area.
If it's anything like Seattle, there are great and beautiful communities a few hours away - you get the same weather and even better nature but it's too far to commute. And they're a lot cheaper.
Seattle is also as expensive as New York and the Bay Area.
I wish more people would reject zip code COL so that companies starting to WFH don't just take Gitlabs idea of it.
Their calculations and reasoning are completely irrational. Rent is more a lot more in NYC, but utilities are the same; medical costs are the same; groceries are roughly the same (I found them cheaper in Manhattan than in nearby suburbs); you don't own a car (or two, as a couple); you don't have the expense of maintaining a large home and yard; etc. It costs a lot to live in NYC, but you can't compare the rent on a 1BR NYC apartment with a 1BR suburban apartment and say it's three times as expensive. It's a completely different lifestyle, and the choice for people like me is between a shoebox in the city with the perks of city life, or a comfortable 3BR home with a yard in the suburbs and a car and maybe a swimming pool or a boat or something. It's not a cheaper life, it's just a different life.
In the end, I think zipcode (and COL) is a weak proxy for talent. It's very easy to measure zipcode, compared to talent.
But, think about it from the other angle: if you have a history of this talent (earning high salaries in high-COL zip codes or otherwise), why on earth would you accept anything less than that, when moving to a lower COL area?
To me, it seems like a decision that would hurt the employer more than help them, since the people with proven talent would work for companies that don't discriminate on zip codes. And that costs more than the investment in assessing incoming talent levels.
None of the salaries I've seen there seem remotely "senior/architect" level if you want Bay/WA talent.
That's the way I see the company, at least.
My location during any of this transaction bears absolutely zero significance. If I'm worth $300k to generate $5mill for you don't worry about whether I'm living in NYC or on a ranch in Wyoming.
If you're willing to take $60k for a remote job you can make $160k at because that's the actual global market value you're doing all of us in the field a disservice by working for the low COL wage. It's bad enough salaries have barely risen for other fields since the 70s. Our field can work anywhere but we need to make sure we don't let our salaries slide by letting the Gitlab style take hold.
Often on hn I see people thinking they need to take a pay cut to work remotely. You don't! Same thing.
Don't forget that there's a really high competition among applicants so someone will take those 60k offers. And when it's 8-10x their average salary in their home country, then you can't really blame them.
I'm not really serious, I can probably get a better offer from a US company, but it still irks me.
Adjusting by CoL is only good for the employer, if a worker is worth X working remote in SF they're worth the same amount in the middle of nowhere.
But the competition tends to be fiercer in a higher COL area, so you are still not guaranteed even a median pay job in that area if you cannot get it. Many do not. The "higher COL area = higher pay" equation seems magical except it hides that it also includes higher competition.
Of course the competitiveness matters. It informs the level of optionality and leverage they have to negotiate. I would say that it's the only thing that matters. What about the CoL adjustment is weird besides it being reflective of the somewhat ugly and distasteful truth that to the company, you are a human resource and fungible cog? That's what they're paying for.
This employee will have to think about what happens if they do not come to a favorable agreement with their employer. Their BATNA completely depends on 1) the demand of other firms in the area (or remotely) and 2) their relative ability to compete. If they can perform well enough to move to a competing employer in the same locale that pays better, they will.
Care to name some?
I'm not cranking out code that is somehow less effective while living in the NW England, and so to pay me less than someone else is downright insulting.
I also, to be clear, don't have any hard feelings about people who live in even cheaper[0] places than me, it's their choice. I used to work with a guy in the Phillipines who was on the same as me. Good for him!
[0] It's not that cheap in the NW England. It's clearly not SF, NY or London, but it's not cheap.
- Work hard
Reputation is a thing. You don't have to kill yourself, but the industry isn't that big, so getting a reputation for being a slacker isn't going to help.
- Be a nice guy/gal
This can be a reputation thing too. No-one that is worth hanging out with expects you to drink, or stay out late if you don't want to, but the more you get to know people and the more pleasant to be around as a person you are the more likely you are to succeed. Meeting people if you can (conferences, meetups etc.) and convincing them that you are a nice person (bonus points if you are) can kinda remove the first stage of interview.
An ex co-worker invited me and a friend round for dinner a couple of years back while we were travelling. It wasn't some polo-shirts-tucked-into-slacks and golf networking type thing, he just did it out of the kindness of his heart. I remember that, it's good for people to remember you like that too.
- Convince people you are smart
Being smart is one thing, but you have to market yourself too. Don't be obnoxious about it, but don't hide it away. This can be anything from emailing/slacking the company "Hey, check out this cool thing I did that you might be interested in" to just chipping intelligently (but respectfully, see the nice thing) in conversations/meetings. Going to conferences and talking intelligently to people about stuff helps, or the harder route, contributing towards open source. "I have three rails commits" a lot more impressive than "I have no rails commits" (if you're into Rails, check out the Rails github issue tracker, you can literally create PRs and get them merged).
- Take an interest in people, and listen
Even if it's hard, like it is for me.
- Focus your attention in the right places.
Like on upcoming or hard to hire for technologies that smart people are starting to use but that aren't ubiquitous yet. No-one with a "bums on seats" mindset is going to consider a remote PHP or JS dev if they tripped over 5 walking from their car to the office that morning. For me this was Rails. It's still hard to hire Rails devs and that means that companies are having to consider remote people, and the wages are good.
Go is another wave. Popular, used by some smart people, hard to hire for. There are others I'm sure.
- Apply anyway
Just like it's totally possible to get a job that asks for a degree when you don't have one (my first job ever for instance), you can apply for jobs that don't allow remote then ask to work remote. Let them tell you no if they want (don't get too invested of course), but I've worked at companies that have tried to fill spots for over a year, good developers for a lot of technologies are hard to find, and at a certain point companies that aren't friendly to remote working, with the right candidate right there, but who wants to work remotely might just re-consider.
- Apply to companies that are remote
Gitlab famously pays location based wages, but might actually be a decent stepping stone to somewhere else. Shopify does remote, I don't know if they do location based wages. Basecamp pays SF rates. You can apply to all these places, and maybe be rejected, but then apply again in the future. I know that there's at least one person who didn't get into Basecamp on the first application.
- Meet people, if possible
It helps that when people see your CV they think "Oh hey, I remember ngngngng, they talked intelligently about threads vs processes at that conf". If you're shy, that's tough and you'll need to work round it. I was shy and worked round it, so it was possible for at least me.
- Become a contractor/consultant
You need skills that you can market to a company (I do Rails performance/scaling and upgrade consultancy, I made someone's controller in the critical path 1500 times faster and orders of magnitude smaller the other day, that's good marketing).
You also need to market yourself. Reputation helps, but then so does a website that tells people how much you've helped other people in the past.
- Once you are there
Make sure to tell people about your successes. If you're working at a company that is not fully remote this is even more important. "Hey peeps, I thought you might be interested in this thing I did" again.
- Have an idea where you want to be in 6 months, 1 year, 2 years, 5 years.
Mostly this is about not letting yourself get stuck in a rut rather than having a fixed plan. Don't let yourself get used to the grind.
- I don't know, maybe do move to the Bay area
Are you young and single with no kids? It might not be a bad move. It could be a stepping stone. I have visited SF a few times and loved it, but then each to their own :)
Once again, this is I think what I did and I think what worked for me. It's all cumulative though, and I'm 40 now, and starting the local Ruby user group maybe 13 years ago was a long time ago, and a distant first step on the path to where I am now.
That is very short sighted. Your dollar value is highly dependent on where you live, that's just reality.
1. That is very short sighted.
Short sighted? You mean, the area-independent wages I've been earning for the last 10 years or so are going to stop? I can't see that happening, if that's what you mean.
2. Your dollar value is highly dependent on where you live, that's just reality.
Only if I am doing something that requires me to be in a certain place, because that's where the value is created. There is a local market for drywall fitting in SF, and there is one in Bunghole, Montana. You can't make the CA rates in MT because you can't provide the value in CA while still being in MT.
As a programmer though, I can provide value wherever it is needed from pretty much anywhere I want to be. I'm not providing value in my house, here in England, I'm providing the value at the place I work for.
It's for this reason that I'd fully expect to be able to charge Polish rates to a Polish company, and SF rates to an SF company.
If I applied for a job/contract in Poland for instance, I'm not going to stamp my foot and throw a tantrum because they won't pay me SF rates. I'd expect them to offer me Polish rates. I also wouldn't expect them to pay me NW England rates (which are likely much higher).
Anyone have thoughts about this?
It's interesting that folks envisioning a globally uniform payscale tend to posit SF salaries in Hanoi rather than Hanoi salaries in SF.
Or maybe practical beats ethical.
The minimum wage for a McDonalds cashier in NYC is $15/hour.
McDonalds also operates in India, and hires cashiers that do essentially the same work. If the employe was able to pay $15/hour for the same type of work in NYC, then shouldn't they pay the Indian cashier INR 1,125 / hour? Or what about the other way around, why shouldn't the NYC cashier get paid at the Indian cost-of-living?
And forget wages, how about the cost of goods and services? A 4BR house in Columbus, OH can cost about $300,000 — but the same house might cost about $3M in Palo Alto. Is this unfair / discriminatory? The house itself might be identical.
However, in remote work, this is no longer true to the degree of other jobs (disregarding regional taxes, paperwork, etc). The job can exist anywhere and the value derived from it (all else being equal, like worker quality, etc) does not change.
Wouldn't this be true of remote software engineer jobs too? Market forces would drive wages downward. If you live in Minnesota and demand SF-salary, your neighbor (who is similarly qualified) might accept a lower salary, and their neighbor might accept an even lower salary, etc until you find the local market equilibrium.
Are you suggesting that that's unjust?
The net result of that is that software engineers in Minnesota get paid lower than software engineers in SF.
My question is: how is this unjust? By your own argument, the difference in salaries for physical cashiers across the globe can be attributed to market forces. I'm making the same argument re: remote software engineer salaries.
Also, this argument can be used the other way around. Why should an employee know what the employer's finances are? Perhaps the employer has the raw ability to pay an employee more (even if it's not economically expedient), but why should the employee know this? Why should the employee know where the employer is physically situated?
In every market, the employee and employer both have information on where the other is situated and how much they are able to pay / receive. That's not really information asymmetry.
Also, at this point, remote software engineer salaries are some of the most well published in the industry, though there is definitely room for improvement in salary transparency. All that being said, I don't think you can convincingly argue that ALL remote software engineers ought to be paid exactly the same, regardless of their local cost of living. They can certainly try to negotiate their wages up, but there will also be downward pressure on wages if the labor market is loose enough.
It's not just rent/mortgage price differences, there are also different laws regarding taxation, healthcare and retirement.
On the other hand you can't offer someone in the Bay Area a Eastern Europe level salary. Nobody would come, but you can offer a slightly higher than average salary in E.E. and they would definitely come. It's just that a global company needs to hire in both regions to be competitive.
Also, employers always pay employees less than the value of their work and pocket the rest. This is called profit.
It's like if your rent was information you were required to give to your employer. They could then make lower offers to people with lower rent, because the market conditions are now warped in favor of the employer.
I think your perception about salaries outside of the valley is skewed.
For example, are you equivalent to a L3 with 0 years of experience at google making 200K, or an L6 with 10 years experience making 600k?
We've all worked with highly qualified offshore resources (as well as many bad ones). Do they really deserve that 20k salary when we're making high six figures?
I've started hiring abroad. It's a different form of management, sure, but you absolutely beat the return on investment.
My advice is to try to stick with the same timezone, and the same language (or roughly anyway).
That is a pretty ridiculous assertion. Rent and taxes are higher but they are not $130k/year higher.
You can even save >$70k of the $200k you make in the bay area without being exceptionally frugal, which you obviously can't do if you're making $70k/year.
In my own experience throughout my career I've been both severely overpaid and underpaid relative to my economic impact.
https://en.wikipedia.org/wiki/Shapiro%E2%80%93Stiglitz_theor...
I can certainly see companies wanting to pay less based on CoL simply to make the bottom line better. Given the way capitalism works, I'd say this is a near inevitability. The end result will probably be that the big tech companies are going to start "offshoring" work to the Midwest, and other low to very low cost of living areas. ("We'll pay you $70k per year, but you can live wherever you want in the US!")
I can't see this being good for employees, because there are significant benefits to living in a place like NYC or the Bay Area, and those benefits would be lost if people had to live in the middle of nowhere to make it worthwhile.
... that want to live in NYC or SF. For everyone else, who doesn't want to live in places like that, this is awesome. (And that's a word I never use)
"Desirable" is a multivariate subjective assessment, not an objective trait (or even a mostly-consensus one).
One of the best DBAs I've had the pleasure of working with would, from what I've gathered, prefer to be in a boat on a lake somewhere in rural Alabama than to be in many of the major "tech hub cities". Being a software engineer doesn't mean you have the same opinions as other software engineers (as a quick search of programming language trends might show, at least on a superficial level).
And I think there'll be more desirable cities to live in in the future if remote work becomes the norm across fields where it is possible. People will start to liven up locations that nobody would otherwise look at as long as the jobs aren't there.
And, yes, maybe there are not enough software developers in SF, NYC, Austin, and other tech hubs to drive up prices, but this move will certainly drive down compensation. I have a hard time believing such a move would end up being good for workers.
The fundamental problem (for the cost-cutting employer) is that good engineering orgs really do generate that much value.
This happened with the wage-collusion attempts in the valley. Facebook was willing to give more raises than Google or Apple. In the latest roll of the dice, AirBnB, Uber, Lyft, and friensd were willing to pay more. It's the cycle of business.