In other words, companies with this policy pay you as low as the market allows them, without you being poached by a local competitor.
A company decides to pay based on COL. Their engineers in rural areas are much cheaper and they now have a strong incentive to hire more people in Des Moines than in SF. They do so, thus driving up the demand for (and thus, price of) engineers in Des Moines. Likewise, by hiring fewer SF engineers, they're driving down the demand for (and thus, price of) engineers in SF. Give it a while and the national price for a given engineer converges.
I don't know exactly what the timeline here is - probably longer than a couple years, but less than 20. As an SF engineer, this'll probably pull my salary down, but the salary of engineers throughout the country up.
> As an SF engineer, this'll probably pull my salary down, but the salary of engineers throughout the country up.
I'd say the salary of engineers throughout the world would go up.
I think this is a positive change that will make the overall industry more efficient and benefit society as producing high-quality software becomes more affordable. And I say this as an engineer in a high-pay city who benefits from the current inequality in the system.
I believe the change will be gradual enough that people like me can keep earning good pay by continuing to improve our skills and learn from experience.
For instance, all the ads leads who understand the core C++ code leave - how do they fix bugs?
Cost of living does have explanatory power.
Cost of living affects the supply side of labor pricing.
Wages affect the demand side of cost of living.
Neither is determined solely by the other, but each influences the other.
Sometimes a market price disparity for a group is driven by nothing but social expectations.
Consider that the causal arrow might more strongly point the other direction on wages vs cost of living.
Something that isn’t a tautology. “Why do you pay $4 for a cappuccino?” “Because that is the market price for a cappuccino.” “What does ‘market price’ mean?” “It means the amount of money people pay in the given market.”
You can see that nothing at all has been explained.
So when someone says that people are paying a certain price in a certain market “because it is market price”, that is getting things backwards, and not explaining anything at all. It’s like the surly teenager whose parents ask “Where are you going?” and he says, “Out.”
There are some rough approximations we know to look at (e.g. the "market price" of the inputs, existence of competing products, and so on). But as you clearly noted, there are an immense number of complex factors affecting this.
There are other newly remote companies as well, but many of them were guilty of illegal anti poaching agreements in the past. Poaching is basically another word for "hiring away," that shows a strange employee ownership mentality.