I've generally been a fan of Greenspun's blog, but this conclusion seems nonsensical to me.
If we follow your reasoning, London employees are half as productive as the SV ones.
If facebook were just charging a market rate determined by supply and demand, then your salary would drop when you become remote, regardless of where you actually live, as your location has nearly no bearing on your productivity or competition for the same job.
The fact that Facebook wants workers to report their location, as they cannot easily see the difference, shows their motivation cannot be driven by supply and demand.
If it costs N$ to purchase one developer in Kansas, and $2N to purchase on developer in SF, if there are enough developers in Kansas to satisfy the demand, then yes the price drops to $N. But if in fact the demand is higher than the supply Kansas can provide, then Facebook will buy out Kansas, and get its remaining supply from SF.
The average price of developers goes down, yes, but you get a form of price discrimination since those in SF value the city at more than the increase in relative salary from leaving.
The Kansas developers could increase their cost to compensate, sure, but you run into a few issues, while the market is supply-limited otherwise this wouldn't be an issue, if Kansas devs cost the same as SF devs, FB might just revert to its old practice and leave the Kansas devs back jobless.
You can sort of think of this as high CoL cities having a monopoly effect on pricing. "Normally" the market would fix this, but people are attracted to cities for lifestyle perks that can't be made up with equivalent $$. In other words, the city has an absolute advantage in city-lifestyle, so others can't compete on price to people who want city-lifestyle. In other words, for the person who enjoys living in SF, you'd have to offer them more to work in Kansas than to work in SF. As long as enough of those people exist, the market won't equalize. The normal econ-101 kind of understanding of supply and demand doesn't work, because you have, in essence, one consumer who wishes to purchase from two different markets with different market prices. City-livers and non-city-livers.
I know this because this happened in several smaller cities in my country way before the virus, for other reasons. Anecdotally, they also tend to tell me they are happy, compared to metropolis-dwelling friends who often confide in me that city life isn't all roses...
TLDR: One only really needs a community of about 150-250 non-interchangeable like-minded people to be happy and have dating/marriage prospects. In a city of 10K people you can also change your Dunbar community several times if you want to.
While true, this also forces you to change the things yo do to fit the community. If you have, say, two relatively unique pasttimes, you'll be able to find communities for both in most major cities, but will be one of only a handful (or the only!) person who does the thing in a town of 10000.
No, they won't, that's my point. If both developers are remote, and so Facebook is nearly indifferent to hiring Kansas vs SF, then it would happily keep pay Kansas developers until they raise their wages all the way to that of SF. That's true even if there's a fixed number of Kansas developers and that number will never increase (which I don't believe).
Or, in economics terms, both SF and Kansas workers are substitutable goods, so neither group has a monopoly and you'd expect their prices (or marginal price, to be accurate) to equalize, regardless of the elasticity of supply curves of the two goods.
We know the developers are substitutable, as the article states that Facebook isn't able to easily tell them apart, short of threatening them with strict penalties for lieing.
Then you're missing my point: if the Kansas dev costs as much as the SF one, why not just recentralize in SF? It's pretty clear that facebook believes that remote workers are somewhat less efficient. Maybe that cost is worth it at a 10% discount on labor, but maybe it isn't on 3% less.
>Or, in economics terms, both SF and Kansas workers are substitutable goods
Yes, in isolation, one SF worker and one Kansas worker are substitutable. But 1000 SF workers and 1000 distributed workers aren't. Or in other words, once you have 500 SF workers, the marginal value of an SF worker is > than a Kansas worker, even if the worker in question is the same human being in two different locations.
https://www.huffpost.com/entry/walmart-food-stamps_n_4181862
https://www.statista.com/statistics/223080/government-spendi...
Coupons are one obvious long-standing mechanism. Loyalty cards are another. Another is the stocking of similar products at different price points in different locations, either different stores or different places within a store. Many stores these days seem not only to have a store brand vs. brand name products, but may have two or more levels of store or economy brands. You can add products from local producers at a higher price; maybe they even come from the same source as the regular ones, but you label them to differentiate your customers. Yet another thing I've seen (granted, it could be an error, but who knows) is pricing a larger size product or one that is labeled as an "economy" size at a higher per-unit cost than a smaller one. Or even pricing it at the same per-unit cost, which helps extract more money from people.
The basic principle you use to discriminate when you can't do it directly is to exploit a correlation - an obvious way to charge people with money more is to use the fact that they probably value their time more and are more impatient. But if someone who is poor is impatient, and is stuck paying more, all the better for the business. People are far from ideal economically rational actors and every aspect where it's normal to use heuristics can be targeted to improve profits.
Increased supply of workers means that prices/salaries will drop, likely.