I work for a very pro remote work company, but that’s still how we did things. You want to move to the Midwest and work remotely, or apply for a transfer to a different regional office? Happy to let you do it, but know that the market rate for your skills there is X, which means an adjustment in salary for a voluntary move. People usually weren’t jazzed about it but understood.
When you work in an area with fewer jobs in your field, it's far less likely that you'll have a competing offer that'll jeopardize the company's ability to keep you. That means your opportunity cost is much less, which means that the floor on what they can pay you is less.
(A similar dynamic on the investor side is why startups end up starting in the Bay Area to begin with. In most other regions of the company, there are very few investors willing to invest in high-risk tech startups. That means that a prospective startup needs to take the only financing option they can get, which means that the investor ends up owning the majority of the company. The Bay Area has a liquid and competitive market for funding, which means that there's a real chance of a VC firm losing the deal, which is what allows startups to raise capital on fair terms.)
Happy to let you do it, but know that the market rate for your skills there is X, which means an adjustment in salary for a voluntary move.
my question is: in this hypothetical, did my skills somehow lose monetary value to the company because I left the west coast and bought a house in Indiana? What’s the calculation on that one? Let’s talk numbers.
I’d love to sit down to coffee with a hiring budget manager one day and get into the weeds on CoL against present value and just do all of the math until the cafe closes or one of us has to take the first coffee induced “bio break”.
Or at least, this is how it would go if my company tried to sell me on this. Hell, I might even be amenable to the pay cut if the company was otherwise doing right by our relationship as employer and employee and I felt sufficiently invested in continuing that relationship, but we’re going to get real mechanical and be VERY thorough about it.
But for your run of the mil developer -> senior developer, a large chunk of that $150k Bay Area pay for non-FAANG is COLA, no way around it.
It doesn't have anything to do with your skills. It's just that they believe they can replace you in Indiana with a lower salary.
I'm not saying it makes a lot of sense, just that they're probably thinking about it in that way.
For people where there is only a handful of people with those skills in the world, they command ny/sf pay wherever they live.
What's my 'demand market', as it were? Is it Cali where my parent company lives? Is it Chicago where the subsidiary division I support operates? Or is it Indy?
How does one negotiate salary taking in all that when negotiating a permanent full remote transition?
(This is just for the sake of the hypothetical, I’m very satisfied with my current actual arrangement, but we’ve crossed into a new working world and consider me a career “prepper” or something)
Ultimately, every negotiation comes down to BATNA (best alternative to negotiated agreement.) You have to demand from the company you think can/will pay the most the amount of compensation you are confident (but perhaps not sure) that you can get from the second-expected-highest company. This is similar to a Vickery auction -- the winner is the person who is willing to pay the most but they pay the price the second-highest bidder put forward.
In tech labor, the distribution of compensation for the same work is much wider than almost any market participant realizes.
Appreciate the back and forth on this, it’s an interesting set of conditions we’re wading through as a society and I enjoy the thought experiment.
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* there may be a better way to phrase this question, unable to figure how to put it, at the moment-if you’ll accept the pleasantry as far as the hypothetical will warrant it.
It makes all the sense. If you can get an apple for $1 from seller A and the same quality apple for $5 from seller B, why would you buy from seller B?
But if this becomes widespread, they will be.
But, the crucial thing to remember is that people's calculation of ROI of compensation to COL is way off. And so they're being under compensated in places like the bay area relative to other areas. Bay area is 50% more than the rest of the country but the COL is x4 to x8 (heck even day care is x4 more in SF than houston).
i've posted this before: https://skilldime.com/blog/see-which-cities-pay-the-highest-...
As you can see, you're way better off anywhere outside the bay area even if the salaries are less.
I disagree. Your skills didn’t drop. Your value didn’t drop. They weren’t going to hire anyone in <location> anyways, they’ll hire <local> if you quit. So you’re negotiating between them wasting time & money hiring for someone of equal value locally
You're pay going up by x3 could have many reasons. If you're in the early part of your career, that's very much possible but it's not typical of an average SE in SF vs an average SE in the rest of the nation.
It’s a bad idea for a company to pay you significantly more than you could earn at a different job. Because then you’ll never quit even if you’re miserable. You’ll stick around and be a toxic presence.
The outcome is that Bay Area folks will get paid less than their current pay, and those in India get paid more than their current pay. Because there's no way my company can afford to pay all their developers Bay Area rates.
That would be using exactly the same rationale as your comment: Equal pay for equal productivity.
Let's not pretend that all companies are cash-strapped startups. The FAANGs of the world and the Fortune $x companies and the multinationals can absolutely afford to pay their global workforce uniform wages, but they choose not to because it's not maximally profitable to do so.
I'll contest that. FAANGs are extreme outliers. I can assure you my company, while it certainly can pay everyone an extra, say, 10%, definitely cannot pay all its SW engineers Bay Area salaries. And then Non-SW engineering companies - even the top ones - rarely have that much money. Their operating expenses and capital costs are a lot more than a SW company's is.
That does not really make sense. Work does not have some inherent value, its value is based on market situation, and different markets have different price equilibriums.
Honestly, if you go 100% remote, you are now competing with a much, much larger pool of developers. You are not going to command Silicon Valley prices.
software engineers have it pretty good, anyway. this manager's example is perfect: sure, people grumble, but they typically eventually accept a reduced salary. why is that? even at a reduced salary, most laborers will be OK with a non-physically-straining, intellectually decent job that lets them live where they want to live and largely earn enough to not worry too much.
Prices are set by supply-and-demand. More to the point, companies will pay you the least amount of money they can, while still retaining you. Just like you pay the toilet paper company the least amount of money you can get away with, even if you get vastly more value out of it.
You're welcome to reject the above on principle. But then you'll have to settle for the next best alternative. And if the company's done its homework right, your next best alternative wouldn't be any better.
Why do janitors, and wait staff get paid so little? Two of the most important jobs in the world are to clean things and feed people.
I guess anyone can clean a toilet or cook a burger, but to what level?
What about teaching?
Our world is definitely out of balance. I don't know to what degree, or as to why.
If UBI existed and no one "had" to work, then people would probably have to pay a janitor or a cook $200 per hour.
It seems like nobody wins in this situation. If my goal is to maximize savings, I'd move to the Bay Area to get the maximum salary from you and find the cheapest housing in the area. I'd be miserable because I'm living in a place I don't like in a shitty apartment. On the other hand, if you offered to pay the same amount while I live in the midwest, I'd be happier with my living situation and be pocketing more cash. This would make me more productive and make me stay at the company longer, with no additional cost to you.
It's standard practice for your company maybe. This hasn't been my experience at all. I have had three jobs where this was not the case. I've had colleagues who have experienced similar as well. People should be paid for their time. I can't even believe a company would want to engage in salary reduction negotiations with employees they value.
It's not paying less that's silly, it's paying an artificial amount less. The only way in which location should come into it is restricting candidates to those located in (or willing to work to) a particular time zone(s).
Does relocating from San Francisco to San Jose also come with a pay cut? What about to Stockton? Modesto? Further out?
Being on the periphery of a high cost area is probably the best deal. For most companies, for example, I imagine that Boston/Cambridge will be considered the same as Boston suburbs--even though within an hour drive you can get to vastly cheaper housing than in the city proper.
So to be honest, moving to a cheaper area with the exact same COL might not be better because of other factors involved.
How many places in the United States have the immigrant communities of the Bay Area, for example? And how do you recreate such communities in cheap places without making them expensive?
Only if you don't live frugally, or if you aren't a senior engineer.
If you do, a lot of the high costs of a high-CoL area can be avoided.
If you are a senior engineer, that XY% raise over a junior is free money... Applied to a larger starting salary.
Oddly enough, high-CoL areas have the same, or higher % raises, when you are promoted, than low-CoL areas. In the mid-west, the wage difference between a senior and a junior may be $30,000. In the bay area, it can be $150,000. Your CoL doesn't go up just because you have a better job title.
So you can own/lease a broom closet or pied-a-terre in Expensiveton, maybe rent it out intermittently or to a "roommate", and actually work and sleep in Cheapsville.
If home address has an impact on take-home pay, it will be gamed just as hard as all the other metrics.
To simplify, it seems like either you want developers that are physically present in London, in which case you have to find some and pay them London rates, or you don't particularly care if they are physically present, in which case I don't understand why you would pay someone working remotely from London differently from someone working remotely from Llanfairpwllgwyngyllgogerychwyrndrobwllllantysiliogogogoch.
Presumably in both cases your company is getting the same value out of the employee. So why not hire only people working out of the Welsh countryside and refuse raises to anyone who wants to move to a higher COL area?
In other words, it seems like if I decide to work remote and lie about where I physically spend most of my time, it would make no difference to the company but might make one to my compensation, which, ignoring any moral judgement, just seems strange for the company.
Companies do this to a certain degree. My anecdotal observation is that a lot of tech companies that aren't in the Bay Area or only have a small presence there don't in fact try particularly hard to be competitive with the big Bay Area employers--unless there's someone they really really want. People may still join for various reasons.
You should pay for how GOOD an engineer is. Not for where (s)he lives.
Define "GOOD".
For a business a "GOOD" engineer is one who is able to deliver business value at minimal cost. If by "GOOD" you mean talented then you have to realize that the US doesn't have a monopoly on talented coders.
The greenback goes far in many places within your timezone. If borders are opened up via remote work companies will be forced to re-evalute the axes by which they quantify "GOOD" (talent, cost).
This seems logical, but determining X is still in your authority, so let's not pretend this is fair. It's usually not a granular break down of skills either, or worse, it's calculated by job title plus a single primary skill, e.g. "Senior C#/.NET Developer".
[1] https://en.wikipedia.org/wiki/Equal_employment_opportunity
[2] https://elsajohansson.wordpress.com/2017/09/13/what-does-a-w...
I'm sure that if one of your directs asked for a raise because they moved in to a more expensive apartment you would politely refuse.
[0](https://www.businessinsider.com/google-employee-lives-in-tru...)
You don't pay a non-London salary because the employee lives outside, or a Euro-denominated one because they commute from Paris.
I think this comes down, we're not paid based on revenue we generate. But to keep us out of the talent pool. Or how much an adjacent firm may be willing to pay us. I don't believe it's based on what I can offer.
The next argument is on market salary demand. I live locally in a market that makes no use of my technical skill set. If I need to keep cash flowing I find any three month contract to keep the lights on. But then I go back to being remote, and compete on a remote pool.
Now we're on a remote pool set. America, or another cheaper to live country. If it's an external firm, do we have a middle company that can handle that tax implications. So we can hire a developer in Southern Asia or Europe. That role can now be filled for a drastic monetary reduction. But at the cost of management over head. Time zone difference, communication lag, better remote processes / documentation, etc. I've helped a few teams acclimate to these off shore changes.
As an aside I always found it odd companies that outsource a majority of their development to an off shore firm. That will never be on site. But if a full time, on site, employee asked for a wfh to watch a sick kid, they had to burn a PTO day.
Compared to an off shore developer there is one thing a country local developer may offer. Better communication with stake holders. Working in the same time zone. Communication especially remote is a big deal. I've seen a number of teams not be able to adapt to the time zone difference or communication differences.
I went to work for a FAANG company several years ago. I took a 35% pay cut off my last local job, while my rent increased by about 60%. I did it for the experience. I've never seen the high FAANG salaries people talk about, but that's just me. I'm also horrible at leet code / hacker rank so there's that, and I studied for over a year on hacker rank to get that job.
As to my experience with cost of living adjustment frankly they've been border line insulting. Locally, on site, if I find a role that uses most of my skills I'm looking 150/180(full time / w2 contract). I had a fully remote contract role, that used all my skills and challenged me. That paid me 245. I always look at my rate as what is the given task and job duties, because I generally work medium to long term contracts. Senior Software, vs Dev Ops, vs SRE, vs Product manager all have different salary bands. I don't have a blanket salary, it's always what's the role you're asking me to do.
When I first got a COL adjustment rate, I laughed. Then I became frustrated, and then I ignored COL adjusted salaries. Coming off a local contract role at 165, I was in talks for a more senior position, full time remote. A company out of a high cost of living area no less, started at 95. I'm not against being paid a bit less, but that drastic of a pay cut is insulting to senior staff. If you're going to pay me less, I want to know why.
Regardless of locale, I'm incurring more costs. I pay for better internet, stocking of coffee/pantry, electricity, and the big expense space. I still live in a city. Getting a second bed room can help a lot ensure a better work from home environment.
Globalization is going to become very interesting. I moved from New York for about a 10% salary reduction, while halving my rent. The determining factor is politics, and how people can adapt to working remotely.
Companies: "I don't have to pay you $big_city rates because you live in $small_town and nobody there will offer you $big_city rates."
Candidates: "I don't have to accept $small_town rates because I work remotely and can work for a company in $big_city."
Because if it wants to hire workers that live in SF, it has to pay SF wages. It doesn't have to pay SF wages to workers living in Tulsa.
Think about it flipped around a bit. Let's say that instead of hiring employees, you're buying candy bars. Someone running a bodega in NYC isn't gonna give you a discount just because you're going to have the candy bar mailed to Oklahoma.
The bottom line is not the $X value and the $Y compensation. It's a lot more complicated than that. Just like the company's bargaining position is a complex mixture of the value that different employees provide and the opportunity cost of leaving a position unfilled, the employee's bargaining position is affected by the salary the company is willing to provide and the opportunity cost of accepting this job offer instead of another.
Not yet. When Tulsa engineers wake up to their value, they hold the cards.
I’ve been on the hiring side for good senior engineers. They’re hard to hire, period.
They take a ton of time to properly screen and by the end of the interview process, the company has wasted so many resources that could have been used for development if they don’t land that person.
The most impactful benefit for me is I get to work on $big_city problems with $big_city talent. $Small_town problems and the $small_town talent are mind-numbing and deeply frustrating to work with
Why not you?
As an analogy, imagine someone from NYC traveling to Mexico City to get tacos from a cart on the street at 9 pesos a pop (about 50¢ US). Those tacos are better than the tacos in New York, so why aren’t they paying $4 each?
We've tried to make a vaccine for the original SARS. It's been 12 years now and there's still no successful, safe vaccine for it. For COVID-19, if a vaccine is released within the optimistic 18 months, how safe will it be compared to vaccines that went through all the trials normally?
An employee’s rate depends on how much they would be going for in the market, and living costs are part of the employee’s expenses—not that of the company’s.
To be clear - I'm a big fan of remote work, I'm just saying that companies have been forced to solve only a subset of the problem they face before the market really can scale to be that large for everyone.
"Work from home" is the first step. If a company embraces work from home, it embraces completely asynchronous communication. As soon as that becomes an acceptable way of solving problems, Vlad making $50k/year in Ukraine who will do 65 hours a week will become a contender to replace Jackson in SF, who is making $250k/year and refuses to work more than 40 hours a week because of work/life balance.
How many people think tech companies are just completely well-intentioned in everything they do? Curb your enthusiasm, a healthy chug of skepticism is needed.
I'm not saying it will never pass. But history has shown it's much harder than you're making it out to be. We already had a great outsourcing attempt 20 years ago which had questionable results. And now pay is higher than ever.
Maybe they will be successful this time. But I'm not going to lose sleep over it. I haven't based my life around earning an SF bay area salary. My retirement is already paid for. My house is 80% paid for. College funds for children are mostly paid for.
I think this is, as usual, specific to the Bay Area and maybe NYC, and also limited to the top 10% of developers at tech companies.
I don't think tech salaries are all that great even in other big cities like DC or Denver, especially as home prices have also passed their 2007 highs, while salaries were stagnant and bonuses or equity are nothing like in FAANG companies. This is especially true when non-managers salary cap at about 40, which is when many professionals in other industries are just getting started making good money.
A lot of small cities might have no real tech companies and only a few large Fortune 500 companies that employ half the software engineers in the whole city. All it takes is one or two of them to decide to offshore half the IT department to Bangalore while signing a big deal with Cognizant or Infosys for the other half in house (i.e. H1Bs brought in from India). If you're stuck in that city, you're looking at wage stagnation for a long while.
It's still okay if you're a good developer - top 25% - at age 27 making $90K in a low COL city, while most of your peers are barely out of grad school. But it's not when you're 40 making $120K and all your peers - nurses, government workers, sales, lawyers, entrepreneurs - have caught up, often with far more stability and better working conditions. I think software engineering has gotten to be a dead-end career for a lot of us not working at tech companies in big cities, and globalization and H1Bs have continued eating away at the industry for the majority of us working as contractors and at big corps.
The technological barriers in the last 20 years prevented effective outsourcing of tech jobs. Since the technology did not work, the cultural acceptance of it did not matter.
I did one of the first live streaming events over the internet in 1995. It involved a convert venue, a dedicated T1 line to the data center hosting the web server, a Cisco 2501, a computer camera that i rigged to a frame grabber, and a "beefy" web server running on Sparc10. After we got the telco to install the line it took about 2 days to do the rest. The "broadcast" lasted between 11pm and 3am. I think it had about 9 concurrent viewers at its peak and 12 total. The promoter of the venue paid ~$4k to do it. That's the accessible "telepresence" at the time.
I was at a company that had offices on the West Coast, NYC, DC and UK in 2000 or so. We had a video conference system and IP phones. It was possible to do a "meeting" with the other offices and it worked pretty well -- sound was fine video a bit jerky. It helped that we had our own network. Someone tried to take a headend home and use the his at home cable connection. It sucked. The video barely did 5-10 frames a second.
Today I can walk into most of random coffee shops and do a professional quality video call. The technology is here. The only blocker for leveling playing field is cultural. The circumstances are forcing companies to remote the cultural barrier. Would they put it back when the lock downs are over? I seriously doubt, especially if they save $200k/year per high paid employee.
As companies go remote, they will depress salaries as a side effect of no longer having a locality-sensitive hiring constraint. But again the cause is the hiring constraint—not the location the employee is in.
All they should be able to ask is what fraction of their work hours you're available for. It could be that everyone must be online 9-5 PST, or there're a few hours of overlap, or there's no expectation of common work hours as long as you "get your work done."
Even now, there are some good rent deals. I moved to a new apartment a couple weeks ago (mainly because I needed a better WFH space to work effectively) and got 6 weeks free on my lease, which isn't normally seen in the bay area.
When the pandemic passes though I do hope to be able to return to working from an office, if just because it's less lonely and there is usually better sunlight in business spaces than what I get at home. Maybe 2-3 days a week in the office and 2-3 days from home would be a nice balance, when it is safe to do so. Employers may also see the value in at least providing some additional financial incentive for living closer to the office and being willing to come to the office (if safe), although enabling full remote work for those who choose it is something I also fully agree with.
Even with regional adjustments, the math usually works out in your favor to not be in the bay area.
Their biggest problem is that they are on Eastern time, despite being way too far west for it, observe DST, and start public schools way too early.
Also, they have developed traffic circle cancer all over their north side.