Pay everyone $200k or $100k (essentially stop hiring in high cost location)?
Until the markets/remote salaries align, you kind of have to pay based salaries the people are able/need to receive in their respected market.
Pay adjusted to location is an unearned bonus for people living in expensive areas. People arguing for non-location-adjusted comp want wages to race to the bottom, allowing the people living in the poorest areas to earn that money, which makes sense from a social justice point of view but is going to really suck for the people who have gotten used to earning $200K entry level in San Francisco.
at first, yes, but wouldn't CoL eventually come down if everyone were earning a nationally based income?
In my opinion that is different that companies doing large-scale adjustments within a country, where social services, taxes (for the most part) and general cost of goods is the same.
I'm not sure we will ever be able to treat different countries as a single market, but I do think that a single country (or hell, even state) should be able to be treated as a market.
Think $120k in Washington or Florida with no state income tax and lower COL. you’d pay maybe 25% tax. In San Francisco, $200k comp to adjust for higher COL will push you into higher federal tax bracket plus 10-12% state income tax. Now you’re paying more than 40% in taxes.
25% vs 40% is a significant difference.
Local taxes also greatly affect the cost of goods and services. 9.5% sales tax in SFBA vs 0% sales tax in Oregon.
25% vs 49.5% — two extremes, but that the reality in the US.
Not to mention gasoline taxes in CA — highest in the nation, they directly affect the cost of gas that we pay as consumers.
Ridiculous is what I call the situation where wealth creation done by tech companies and tech workers ends up in the pockets of Bay Area landlords instead of in the pockets of the people who take the risks and do the work.
Ridiculous is what I call the situation where other geographies invest heavily in getting their young people top-notch education (like in Europe), and instead of earning a return on that investment for themselves see their young people relocate to the Bay Area and contribute to the tax base there.
Ridiculous is what I call the situation where you're a top-notch tech professional and in order to earn money commensurate with your value you have to go through the hardships of the immigrant situation and be part of a culture / economic system that you may not like, subject yourself to political leadership that you may not approve of etc.
Shall I continue?
The good news is that the market will eventually sort this out: Some remote companies will be doing geographical adjustments to pay. Some will not.
The best workers in low-COL areas will end up with the companies not making adjustments. So making adjustments will leave you stuck with the worse workers. So you will end up getting what you pay for: If you pay little you will get low-quality work even in low-COL areas.
People in high-COL areas will figure out that there's an opportunity to have more disposable income by relocating away from high-COL areas and taking remote jobs with companies not making adjustments. The only people who can't do that is the people whose work is so low-quality that they actually can't compete internationally so that their high-COL postcode actually is their only viable argument when it comes to negotiating high compensation. So paying higher compensation to people in high-COL areas will become detached from the narrative that those also happen to be the best people. It will come to mean nothing more and nothing less than making donations to those poor needy Silicon Valley landlords, and I doubt that this is a cause that many tech companies will be getting behind, as opposed to using their money to do actual tech.
That said, this might change if remote work becomes a lot more common, and we might see a big flattening of salaries. Bad for SF real estate prices (and for high earners in those companies in general), since people in those HCOL markets will suddenly be competing a lot more directly with workers from elsewhere, modulo language skills, ease of scheduling, cultural fit, etc.
Basically companies base their compensation bands on the 50-90th percentile what the market is. People are also anchored their previous compensation, it's hard to get people to accept drastically lower compensation even if you think they are overpaid in their current job.
So it all comes down to finding a compensation that both parties are willing to engage in at (the market). The market is still not fully liquid, uniform or not all talent is the same so the pay differs in different markets.
You could obviously game this too by saying to pay what people are they are "worth" but you just happen value SF experience more than other experience, essentially.