Work from Home: Tech Companies Cut Pay of Workers Moving Out of Big Cities | Hacker News Reader

Work from Home: Tech Companies Cut Pay of Workers Moving Out of Big Cities

bloomberg.com

33 pointsmrfusion17 comments

The idea that pay has anything to do with the value an employee adds to a company is almost always a fiction, except in coop-style arrangements. You get paid as little as it would cost to replace you with a sufficient replacement. Remote work increases the labor pool and lowers that replacement cost for the company.

A company may have decided to go remote, but if they were to immediately cut all salaries to the lower remote-rate, they would lose too many expensive local workers faster than they could hire new cheaper remote workers and productivity would severely disrupted.

Because of this, they're using individuals moving away from HQs as a convenient rate limiter to do it gradually.

I see this as pretty much the exact opposite. Previously the employer valued the employee at, say, $100. They also valued having that employee physically on-site at $100 for all that “open collaboration” crap we’ve heard for years. That means the employee makes $200 because they’re spending $100 more to accommodate the employer’s onsite desire and they wouldn’t work for a net of $0.

Now the employer has realized (because they were finally forced to actually invest in it) that having that employee onsite wasn’t providing them the extra $100 in value they thought it was.

It has nothing to do with the employee’s intrinsic value changing - if anything it is reinforcing that it hasn’t. It has to do with employers having finally realized that for decades they were putting an absurd amount of value behind having employees onsite ($100 extra for the employee, $200 extra for offices, $200 extra for food and other perks, etc.) without actually receiving the tangible benefits they thought they were.

The shorter way to say this: cost of living is a factor. They now realize spending all that extra money to have people onsite isn’t worth it - either employees are at least as productive (valuable) remotely or are at worst only minorly less productive (valuable) remotely, so it’s not worth the premium they were paying to have them nearby.

Aren't you just agreeing with the GP? They now realize spending all that extra money isn't worth it, but they can't just change everyone's salary in one go.

Mmm, yes. I accidentally replied to the wrong person in the middle of the night. My bad. Ignore me everyone!

In Bay Area, you are partly compensated to not work at a competitor in Bay Area.

I hope salaries will not decrease by much because there will be a next Facebook that will decide to pay Bay Area rate regardless of location, and Facebook/Google will be forced to follow the new standard.

One example in the past is green card application.

Back then, at Google, you would need to be at Google 1 year before they will apply green card for you.

Then, came along Facebook who would apply green card for you immediately. Within a year, Google followed suit.

Another example is Facebook removing one year cliff. Then, Google followed suit very quickly.

I work at one of the big tech companies in a more senior role. If my pay was ever cut, I would simply just quit. The mental stress and anxiety that has come with my job is only acceptable because of my total comp. I know there are companies who pay half or less of my total comp. Having worked at two of those companies before, it made sense given my work life balance and other things.

So it's a really good lesson in supply and demand, and how some parts of the economy relate to others, and how some things are externalized.

Two people with the exact same market value to a company will get paid differently because their 'supply' curve is simply different.

The 'non market' issue here is the personal choices that people make about where they live (family, history, aesthetics) and other dynamics that drive wages in any particular region.

Also, it may very well be in the calculation that someone in Colorado is actually worth less than someone at the HQ every day in the SV.

It's a little bit of a complicated and interesting dynamic.

Localised pay implies that the same employee is worth more to the company when they are in a high COL city than a low COL area (regardless of whether salary is determined by value-add or market rate). How can that be the case when all employees are remote?

Only if you incorrectly believe that pay is based on value. It's actually based on how hard it is for them to get someone else to do your job and how hard it is for you to get another job.

It is easier for them to replace a remote employee than a local employee, so that works against you.

It is harder for you to find an alternate job if you live in a low COL area than if you live in a high COL area, so that also works against you.

Obviously, this wouldn't be the case if every company went fully remote, but that isn't going to happen, so you should still expect a lot of remote jobs to adjust pay based on locality. If they don't, they are just leaving money on the table.

I am not assuming pay has anything to do with value.

The employee is already remote in the high COL area in this case. Why is it easier to replace you with a cheap low COL area employee once you've moved to a low COL area yourself? They could have just replaced you with a low COL employee before you moved.

I think the other comment in this thread about rate limiting this change touches on the real reason.

There are costs to replacing and ramping up an employee. The company reduces pay for those who move because it assumes they'll accept that reduction based on the difficulty of finding a better paying job while working out of that new location. It wouldn't even surprise me if the big tech companies actually colluded on these market discounts to keep wages low, given the wage fixing lawsuit a few years ago. If Google, and FB both cut your pay 30% for moving to Tulsa then employers can keep a lot more of their money and their people.

At this point they may as well split out food/shelter/clothing (variable) and keep the rest fixed.

Hmm.

Workers move to new States.

Workers pay is cut compared to workers one or two source States (CA,WA).

Migrated well-educated workers, now tax-paying citizens of those other 48 States, ask Senators and State governments of those other 48 States whether that is fair.

Senators and States governments decide no, and take direct action against the prime culprits of such a scheme in those two States. Very unpleasant action. They have nothing to lose and everything to gain.

Instead of being able to positively leverage the geographically dispersed workers for National political leverage, the companies now become the target of government actions they should have feared all along they would be.

All because of a boneheaded stunt like this.

> Senators and States governments decide no, and take direct action against the prime culprits of such a scheme in those two States.

Could this really happen? I thought the US model was more about letting the market as free as possible from gov interference.

In any case the same companies will then realize they can also hire people from Europe.

What’s stopping corporations from fully going remote on global level? Except for tax reasons?!

Who cares about salary, if you already locked in a Bay Area RSU grant you’re set.

The distinction between a value-added vs. market-based salary approach is pretty obvious here. It's funny that they're doing market adjustments but then discussing 'fairness', markets are optimal but not fair.

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