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Comment by kethinov | Hacker News Reader

Buried in the article they also talk about cutting the pay of people who move away from big cities based on their "geopay" scale, a new trend that I have a hard time seeing as anything other than corporate greed we should vigorously oppose. I understand not every company can afford to do Basecamp's "pay everyone SF wages" thing, but any company can afford to set uniform pay grades at some level and one would think that the equal pay for equal work principle should apply here. One should neither receive a big city subsidy nor have their pay cut for choosing to live somewhere else.

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The problem is that if (even just keeping the discussion to the US) a company pays, say, Chicago wages everywhere, that means they effectively probably can't hire anyone in the Bay Area for example. Of course, a lot of companies already basically don't try to salary match the hire who has an offer from Facebook or Google in SV and wants to work there.

Sounds like a good incentive to just pay SF wages to everyone which any company currently in SF clearly can do.

Those that aren't in SF already can't afford SF talent so it makes little difference.

It's not like there's some glut of companies out there paying Chicago wages to most employees except for their 1 or 2 in SF who get a HCOL bonus. And to the extent that there are companies doing that, perhaps it wouldn't be so bad for society if they stopped.

The ultimate outcome, no matter what companies do, is that tech workers just won't live in big cities any longer.

If remote work is an option, then paying high rents just doesn't make sense.

Moreover, as this trend continues, the ultimate outcome is not US workers moving to low-cost locations, it is foreign workers supplanting US workers in extremely low cost locations.

I don't buy this.

> If remote work is an option, then paying high rents just doesn't make sense.

I live in NYC because I like NYC, not because the pay is higher. I took a net pay cut after rent, taxes, etc after moving here from Maryland, in spite of getting a substantial pay rise. I suspect that's not uncommon.

> the ultimate outcome is not US workers moving to low-cost locations, it is foreign workers supplanting US workers in extremely low cost locations.

This was already on the table. Generally speaking, you get what you pay for.

> This was already on the table. Generally speaking, you get what you pay for.

Right, but now companies are a LOT more comfortable with it than before, and have the tools, the management training, and the executive buy in to accelerate this.

yeah, to each their own. You would have to pay me an order of magnitude more than I make now to get me to work in NYC.

Maybe this is overly simplistic, but won't this all work itself out over time? More companies refuse to pay inflated SV salaries (note: most companies in the world already do not employ people there anyway), so some of the concentrated SV talent leaves for other places like Chicago where they can still get a sufficient wage relative to the cost of living. This continues for a while and eventually the COL in SV will start to equalize with other places in the country like Chicago, won't it?

Perhaps the real message here is that SV companies are realizing this is a perfect way to get out of paying $300-500K salaries for jobs that are more like $150K anywhere else in the US. It's kind of like the outsourcing craze from 15 years ago, except instead of getting 3-5 developers for the price of 1 by going to Europe or Asia, SV companies can get 3-5 developers for the price of 1 that are still US-based and only a couple of timezones away.

As someone who doesn't live in California but still near a big city in an area that is still "expensive" (but nowhere near SV prices) relative to smaller towns and rural areas, I can't figure out if this remote shift is a good thing or bad thing for me yet. I fear that my suburban house will be worth less going forward because proximity to a major city may be way less valuable now if so many fewer people ever physically go into work anymore.

It's a big assumption that SV wages are inflated given the value that sector has generated for the economy. Facebook made around $600k in profits per employee.

I will agree that they are inflated relative to other professions, but that just means for them the earnings gap is even greater. (https://www.commondreams.org/views/2020/01/21/if-worker-pay-...)

https://insights.dice.com/2019/07/10/how-much-tech-companies...

Software developers simply do not get offered pay anything close to SV wages pretty much anywhere else in the US (maybe NYC? not sure on that one) - as far as I can tell. It's not really in dispute that SV software wages are significantly higher than elsewhere in the country, is it?

Now, we all know there's many reasons for that, including competition and housing costs. My point is that salaries are so much lower almost anywhere else that FAANG could offer half of what they do in SV and get the best of the best in an area because it would still be a huge premium over local rates. The question becomes: if Facebook could hypothetically switch all its employees to other parts of the US and pay them top dollar relative to the area, would they still be earning $600K profit per employee while spending considerably less on salaries? Prior to C19, FB needed to pay those rates to be able to attract the best to the high COL area in SV because they felt a strong need to have their employees co-located. If FB has proven to themselves that they can have their employees WFH permanently without any significant productivity loss, then naturally they will no longer care about having to attract people to the Bay (and by extension they wouldn't need to offer those kinds of salaries anymore).

But maybe I'm all wrong on this. Who knows.

My understanding is that Google, say, does not offer half its Mountain View salary in Cambridge though I'm sure there's a difference.

A couple of things are being conflated.

SV housing costs are astronomical so some companies pay inflated salaries to at least somewhat compensate.

Certain large tech companies are willing to outbid essentially everyone else to get the people that (they think) are the best.

Proximity to a major city still has advantages like access to cultural events, good healthcare, etc. even if you don't need to go into the city for work. And, indeed, historically tech companies were in the suburbs rather than the city itself. Boston basically didn't have any major tech employers within the city limits for a period even though there were many in the suburbs. So even people who may not want to actually live in a major city might still want to be within an hour or two of one.

I'd argue it sort of has played out. A handful of companies are willing to pay almost anything for the people they want, especially if they're located in SV. Pretty much everyone else has shrugged their shoulders and moved on. And it works because 1.) Hiring is a very inexact process and 2.) Not everyone want to work for one of the big tech companies for various reasons.

> Maybe this is overly simplistic... eventually the COL in SV will start to equalize with other places in the country like Chicago, won't it?

Chicago with an actual winter will likely never have the demand that California with it's year-round outdoor weather will have.

If costs were completely identical, would you rather live in Illinois or the Bay? How many other people you know would say the Bay?

Believe it or not, I have no interest in living in the bay area - even if the costs were the same. I personally would like somewhere that didn't get quite so cold in the winter but still has 4 seasons.

I can honestly tell you that out of all the people I know, I can't think of a single one who would move to the bay area even if the costs were the same. Weather isn't everything.

The Bay area is nice and I certainly understand the attraction when I visit. And I probably wouldn't want to live in Chicago; winters are especially brutal in the upper Midwest, there aren't "real" mountains, and I have no connection to the area. But I have no problems with winter generally and I doubt I would move to the Bay Area even if you took money off the table. Silicon Valley is meh and SF is nice to visit but has a lot of problems. Santa Cruz mountains maybe--if one ignores the wildfire problem.

> Perhaps the real message here is that SV companies are realizing this is a perfect way to get out of paying $300-500K salaries for jobs that are more like $150K anywhere else in the US. It's kind of like the outsourcing craze from 15 years ago, except instead of getting 3-5 developers for the price of 1 by going to Europe or Asia, SV companies can get 3-5 developers for the price of 1 that are still US-based and only a couple of timezones away.

Is it really possible to get the same talent and skills?

A policy like this is basically saying 'we only pay you as much as necessary to compete with your other employment options', which are currently still mostly those near where you are living.

If more companies allow remote work and they don't all do the same thing, this kind of 'geopay' policy will have to be abandoned.

But I agree it's completely backwards, you should be paid according to the value you create for the company, and nothing else.

> you should be paid according to the value you create for the company, and nothing else

But, you need to subtract your pay from the value you create. If you create $1MM value but cost $500K, and someone in the Midwest can create that same $1MM value for only $150K, it's pretty obvious what most companies will choose.

FAANG companies somehow convinced themselves that paying $500K for talent in SV made sense even if they could get similar talent basically anywhere else in the US for less. This massive WFH experiment that we've all been in seems to have demonstrated to some of them that physical location doesn't really matter as much as they thought. The next logical step is that paying inflated rates to hire someone in a particular physical location doesn't make sense, if you're just going to have them work remote anyway.

WFH may just be the pin that burst the SV tech wage bubble.

Unfortunately the ability to quantitatively capture how much value you created is next to impossible for most knowledge workers. Sure you can approximate but that’s about it

> FAANG companies somehow convinced themselves that paying $500K for talent in SV made sense even if they could get similar talent basically anywhere else in the US for less

Could they? The market for 500K engineers is very different than 60K or 100K.

With remote work, you'll see a handful of organizations getting the top talent across all locales, and the local companies who won't be able to compete be stuck with the rest. It's a winner-takes-all situation that will now happen on a global scale.

My point is there is no such thing as a "$500K engineer" anywhere but SV (and maybe Seattle), and thus no such market exists elsewhere. Honestly even writing "$500K engineer" sounds so absurd to me because it's so far away from "normal"... I doubt anyone who lives within 500 miles of me doing software development as an individual contributor makes even half that. Maybe I'm badly misinformed though.

Believe it or not, there's plenty of smart, even brilliant people who do not live (and choose not to live) in California. I myself may not be FAANG-caliber, but I've known known a number of people who used to work where I do and now work for Amazon, Facebook, and Google. They moved to the west coast, but obviously prior to taking those jobs they were just as good and living in the Midwest working for a Midwest salary.

It's honestly rather shocking to me that people seemingly genuinely believe that there can't possibly exist smart engineers who live somewhere other than SV.

I don't think people are doubting their existence, but rather if they could staff a whole floor with engineers of that caliber anywhere but in these cities.

Partly because, as you said it yourself, a lot of great engineers simply move there.

Overhead cost of providing a physical workspace is easily 50%+ of base compensation costs. Companies save a fortune by having employees work from home.

"Geopay" scales are exploitation. Employee X should be compensated in relation to the value they bring through their efforts, not at the minimum possible level that the employer can get away with.

The only way to counter that is through collective bargaining, which many people on this site seem to view as beneath them. “Geopay” really isn’t any different from how Google/Apple/etc colluded in the past to suppress developer wages.

At low paying jobs sure but when you're talking about $100k+ tech employees it does not cost 50% of base compensation for the physical workspace.

> Overhead cost of providing a physical workspace is easily 50%+ of base compensation costs.

That estimate is high by about an order of magnitude. To get a sense of the cost ceiling per person, look at the least cost-effective way to rent a monthly desk which is to do it as an individual in a co-working space.

Here's one price list for coworking space in Campbell (Silicon Valley) https://drive.google.com/file/d/1iljwYScQ4d5F4rUcQN-9XH0D8E2...

An open office desk is $325/month, up to a dedicated cubicle for $725/month.

So for a junior engineer at $150K salary, that's between 2.6% to 5.8% of their base comp in office space cost.

Now, of course, a company renting tens of thousands of square feet at a time gets better rates due to scale, so the percentage is less than those examples.

I think there are reasons to make either choice (one global salary vs a localized market salary).

The former optimizes for fairness/equality of continuing employees and takes the "what is the value of the work?" as the foremost question.

The latter puts the focus on "what is the market price [the next-best-alternative] for this employee?" and tries to ensure that you don't have unhappy employees staying longer than either side would prefer because they are "stuck" with a salary that they can't match in any other opportunity available to them and so do just enough to not get fired.

The latter seems unlikely to me. If we stigmatized or outlawed geopay, the net effect would be rising wages across the board because companies would not want to be locked out of hiring good people in HCOL areas. That or the cities would empty out and the relative income needed to live well would flatten. Either way, a win for society.

Everyone thinks they should be getting SF salaries in this new era of remote work. Nobody thinks they should be getting a Flint salary. Equal pay for equal work doesn't have to mean the bar is raised.

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