It's a perverse race to the bottom for the benefit of corporations at the expense of the worker and social income equality.
Labor is a market. It's supply and demand. All of that stuff you're talking about--the cost of eating out vs. cooking, rent in Silicon Valley vs. Wisconsin--doesn't need to be calculated. The market price for labor in a city is how much you need to offer to get enough qualified people to work for you in that city. People’s preferences, for eating out, for living here or there, are factored in to how much they’re willing to work for.
Now suppose you could move somewhere else and didn't have to pay insane prices just to live in a shithole like San Francisco, but you'd have to take a pay cut - why wouldn't you do it? You'd earn less on paper but you'd have a better life.
Exactly. "pay" is just a way to afford things that you value. If I can get those things, I'm happy; if not, I'm sad. "pay" is irrelevant unless compared to cost.