VMware Cuts Pay for Remote Workers Fleeing Silicon Valley

Labor markets aren't local when everyone can work from home. That's why this kind of move is absurd. Talent outside the Valley might be willing to take lower pay, based on lower cost of living, but just like everything else the price of their labor shouldn't be based on the cost to produce it.

While I agree that there is dissonance between value produced and salary paid, but your argument doesn't seem to hold as well.If higher competition drives salaries upwards then the salaries should increase in a remote worker economy as worker pool is not bound to a geographical locality but rather to the whole planet(or at least a larger region if culture or timezone differences are major concerns). Economics of demand and supply is much more complicated than we could reduce to a liner or so about competition or a few factors. Increased base living costs for the employees combined with the larger availability of capital with the employers probably plays a major role here.

In theory a business that was paying somebody $8 to create $800 of value would have an incentive to pay a lot of people until either the $8 increases or the $800 decreases. If they didn't do it, somebody else would.

Vice versa a business that paid someone $8000 to get $800 worth of value might be able to sustain it (it can divert $7200 from something else) but won't be able to scale it.

People who want to sound reasonable might talk about figures like $790 and $810 but that guarantees you will be in the weeds because you never know exactly where to "charge" things. For instance, a firm invests in equipment for a worker, worker B fills in the gap when worker A slacks off, etc. Even in areas where it is widely believed you can measure productivity (e.g. sales) this is problematic.

I have been looking in the macroeconomics literature but haven't yet found any exploration of the following:

what if an organization has a nodal structure such that at each node somebody can divert X% (say 1 for the hell of it) of what goes through the node? The salary of the top man is then basically proportional to the size of the node, so to get mega-rich, a bank president in New York might buy a bank in New Jersey. The node in New Jersey remains, but a buyer of the bank in New York now gets to skim additional cream.

A corollary of that could be that the "competitive advantage" of "productive" urban areas is in theft. In Ancien Regime France you would set up at Versailles because that is where you had connections for thieving. In post-2008 America, Washington D.C. has boomed because it has "comparative advantage" if you want to bribe politicians to help you steal. Certainly in a country like Equatorial Guinea you are going to settle in the capital because that's where you can steal.

This is the most depressing, dystopian desire.

Taxes are necessary to fund shared infrastructure and services. They're not supposed to overtly punish success or prevent people from earning a high salary.

There's an argument that high earners can (and possibly should) pay a higher share of taxes because they have the most ability to do so, but you seem to be just advocating taxing away people's earnings out of a jealous desire to not see anyone have more than you.

I once negotiated with an employer that tried to use these exact kinds of cost-of-living stats to compute an adjusted "matching" offer to an offer from California. But it's a bad deal because those high california prices are "paying" for very desirable benefits like nice weather and job opportunities. These differences are not considered when "living" is treated like a commodity where the only stat to compare is cost.