A Follow-Up to “Location-Based Pay”
blackshaw.substack.com
blackshaw.substack.com
In the real world company A tries to squeeze wages in one place and company B obviously tries to hire at local wages in the other place. There is no built-in fairness, it's just a negotiation strategy. The new equilibrium could be that everyone earns less.
I'd rather have that employees around the world can take home a western salary if possible, putting that money into the local economy and raise salary expectations among their peers.
Wage equilibrium around the world is inevitable with the rapid increase in integrated markets and improvement in telephony technology.
What this means for workers is far less important that what it means for capitalists.
We talk about race to the bottom for workers, completely ignoring race to the bottom for landlords / corporations and governments.
landlords around the world have to now compete on a much more even footing.
Rise of the corporate sector in China / Russia / Africa puts deflationary pressure on developed countries.
Governments that do not offer much, would watch the young and skilled flee to live under better government structure.
I literally just left my job today, because they refused to give me a raise due to my location (and pay level). I got a much better offer in a slightly more expensive location (I can move).
It makes no sense to tie pay to location when you aren't competing solely in that location. Your employees can move to places with better pay and benefits too (or companies that don't strictly tie compensation to location).
At the moment I make a decent amount of money for where I live, but at the same time, cost of living has gone up while my wage has stagnated. I'm very tempted to bite the bullet and look for a job in e.g. the Amsterdam region again, hopefully I can negotiate WFH conditions and the pay will be significant enough to warrant spending the extra time in the commute (once the 'rona is over, of course).
The idea that employers should, as a principle, seek to pay the least possible for the best work, is predicated on the idea of a free market, which is a theoretical construct. It requires a lot of things, like perfect information on all sides, and externalities being properly priced in, that don't actually exist in the real world.
It's not entitlement to want a fair share of the value you create.
https://elsajohansson.wordpress.com/2017/09/13/what-does-a-w...
People have spouses, children, families, responsibilities. Not everyone can just pick up and move. Also, not everyone wants to move - some are very happy in a given location for various tangible reasons.
It is so trivial now for companies to source talent from anywhere on the globe that the days of employees negotiating salary based on location are pretty much over. You are competing at a global level now.
What I am trying to say is real income is what is left after your expenses.
Our system is profit-centric, and most of the profits go similar to snowballs, always to the bigger ones. In our world those big ones have additional supper power, they can change rules so that they can become even bigger...
This can't possibly be true, or the UK wouldn't be full of Eastern Europeans who migrated to Britain for its economic opportunities.
By the way, when we say "afford", I mean be comfortable, that if you lose your job you will not lose your home because you cannot pay 2 payments, and therefore lose your deposit and everything you have payed in until that point. Buying home in UK is life under constant stress of "what if" and pandemic, Brexit and current economy have not done a good job of removing that fear...
I suppose it was a little disingenuous of me to say that "I" can afford to buy when I'm taking my wife's income to consideration too, but then I imagine most people who have reached the point in life where they're thinking about buying a home are thinking of doing it with a significant other.
> be comfortable, if you lose your job you will not lose your home because you cannot pay 2 payments
In what country is it not the case that you'll get evicted for failing to pay your mortgage on time? Also, won't you also get evicted for failing to pay rent?
Again, maybe thing is about being brave and just jump in without thinking about possible issues that may never happen...
Regarding eviction, I meant more, that you will be able to have some savings to bridge gap between two jobs or if it gets to unforeseen illness or event. Like what happens if you both lose jobs, or you need take care about your spouse ... (I hope that never happens). But, my only point was that system is adjusted so you are always on the edge (regardless where you are), so you always turning that economic wheel ...
I have few mates they have miscalculated amount they can borrow, forgot to include other expenses, service charges etc. now they really struggling as mortgage is eating most of their salary, they have very little room for any maneuver.
If lots of people want to live in a particular area because they think it will help them live better, that area will have more people jockeying/bidding to live there. Since everyone wants food with their meals, food will get bid up. If vacations to a beach are enjoyable people will vie for them (and suppliers emerge to cater to that).
The treadmill effect is caused because other people are running their own lives on their own treadmills, resulting in a system outcome.
That is part of what gives rise to the FIRE movement among people with some freedom to choose to live on less than their max (not everyone can, and certainly not to the same degree). If you adjust the hedonic consumption treadmill to run more slowly than you are running, you can literally get ahead. I’m not choosing it, instead choosing the expensive mortgage and longer worker career, but I can see why it appeals to some.
Our political and economic systems in the state of the things they are right now have not created on their own. All our systems are the human product - created through many iterations with a very similar theme and always done by similar actors - an elite that can influence those policies and the elite that have the right to invent and pass new policies, which is, to say the least, very corruption-prone process.
For instance, policies created after 1973 created a mismatch between productivity and salaries; basically, the working force become constant losers and elite winners. https://www.epi.org/publication/charting-wage-stagnation/ https://files.epi.org/2013/ib388-figurea.jpg
At this point, who is to blame for those policies? And more importantly, when it becomes evident knowledge, who is to be blamed for keeping the state of things as it is?
Treadmill and the rules it runs on - are built by humans, and if we did built it, we could change it too.
"London Money" has been good for a long time, but it's not just about location. It's a vortex effect that makes "London" a shorthand for "talented, productive and driven". If you're talented, productive and driven, you move to London where you can make more money (and work on more cutting-edge stuff). If you want those people, you set up in London and pay London Money to hire them.
It's not that you earn less in small-town Hampshire just because it's small-town Hampshire. The pool of talent there excludes the people who went to London to chase the big time. You pay small-town Hampshire money, you get small-town Hampshire people. And believe me, after nearly 20 years in UK software, those folks aren't great. Some are competent, but stuck in a technical rut. Others are just poor at what they do. This effect has been writ large in inter-country business - an Indian colleague told me a while ago that her opinion on why outsourcing was such a mess was that the best people leave for the US. The second tier leave for Europe or Canada. Who does that leave to work for outsourcing firms?
If the geographical vortex effect falls due to a change in working practices, companies are still going to need to pay to get good people.
Banks like JPMC and Starling know this - their offices outside London pay near-as-dammit London salaries because they want talented, productive and driven employees and if you want to attract them, you need to pay.
I have been in Manchester for a few days, and except for my friends and few exceptionally good food & club places town is simply unsatisfying (I do not know what word to use to describe maybe day time boring). For me I would rather take a StarLink and move to Scottish mountains ...
Don't get me wrong, I do not hate rest of UK, there are different towns, and they are quite different, some are nice and pretty, other look like post-communistic havoc...
Yes, there's a lot to do there. The tradeoff is poor air quality, limited access to the natural world, bad smells, overcrowding, huge living expense.
You grow out of clubs. These days I like a pub I can sit down in. And most Londoners that I know stopped doing all the immense number of things at some point. Plus I can get to central London pretty quickly on the train if I want to. Usually I don't though.
It's probably partially my age but I know a lot of people who are on the verge of leaving, partially due to remote working opportunities from Covid but mostly due to being priced out. Even those I know staying "in" London are having to buy in Essex, Hertfordshire etc. due to the cost. London's housing crisis is only getting worse every year, in enough time the upside may be that it helps other cities develop instead.
This makes me want to move to Liverpool. £200k won't get you a shoebox one-bedroom flat in London.
I don't understand how people can think this.
Software engineering salaries is way above the median. Housing is difficult to afford for everyone right now, but definitely doable on even below median engineering salaries if you have a partner who works too
If you can get a FAANG position in London that will pay £100k+
In Ukraine with average salary of $400 is equally difficult to afford home as in UK with salary of $3000, only difference is that from more expensive it is possible to find a way to reduce expenses (giving up comfort) and then move savings to a cheep/er place.
In EE, as a sw engineer, you will do much better than your UK counterparts if you compare your revenue to the population average. That comes with some perks (e.g. it's easier to afford services, like say, getting a babysitter) and with some downsides (the general society around you is "broken" to a greater extent; I feel that too many people take for granted what they have. E.g. having well heated homes is not a guarantee that magically happens; if the city infrastructure breaks down, you may have problems even if you're otherwise rich).
Getting a house is not everything; if fact, if you're from UK, it's probably quite easy to go to EE and get yourself a house there.... but you don't want that, do you? Because, actually living in London might have some advantages that you're overlooking, and maybe those are reflected into the housing prices, too.
This is savings wise in UK. > https://themoneycharity.org.uk/money-stats-almost-10m-with-n...
Another thing is that those who migrate are looking for more opportunities, and also in comparison they decide to live in worse condition as they can save more working jobs local people do not want to do. In that way when they go back they can live significantly longer with those savings.
Person struggling to find job 500 EUR a month in Ukraine, (https://ukraineliving.com/the-truth-about-the-average-salary...) can in UK live in share bunk bad room eating noodles for a year and save £10000 working construction industry. In London normal expenses rented 1 bed flat,food etc. will eat those saving in 3-4 month. Back in Ukraine same person can live out of those savings for 2 years.
However if that home is in a rural area where there aren't any jobs anymore that means you'll have to move to the city and rent an apartment. Because a normal rent is higher than a normal salary this can be problematic. So if you're in this situation then moving West somewhere is a much better option.
My impression is that both your statement and OP's statement can be true at the same time.
What that means is that wherever you may live, you are competing against the lowest offer another worker of similar value anywhere in the world will accept.
If you look at the charts, you’ll see how low those offers may go.
In a world where people are not able to move all over, this may not be tested. But in today and tomorrow’s global, mobile workforce this is going to cause friction.
What does this even mean? The market will bear paying some of us top wages anywhere. If you offer me less because I'm in a different location, I'll just take the offer from the other SF-based company that offers me more.
Their arguments are not even consistent:
1. They claim that it is just about bringing an awareness to the issue.
2. It’s not about stiffing any worker (so-called first-world or otherwise).
3. You shouldn’t be a hypocrite.
4. But in order to be consistent (not to violate (3)) you need to also argue that you yourself shouldn’t be able to, say, work remotely for a Bay Area company and get the same pay as the locals. Therefore (1) can’t be true since you actually have to forfeit the negotiation on the altar of your own relative privilege (see (2)).
Then they close this new article by saying that:
1. We shouldn’t argue against location-based pay.
2. Then they approvingly quote someone who claims that “we should reject the notion of Location-Based Pay”. But that contradicts (1) since this means that you should actively combat the idea of location-based pay.
I live in Spain, and I'm in the same timezone as Germany, now let's imagine I'm percentile 99 when it comes to talent and an American company wants to hire me.
Because I live in the middle in Spain they offer me 75k euros a year, if I were in Germany I would get 110k instead. Now my current company pays me 70k and I'm happy where I am, I'm definitely not changing jobs. However if I was offered the 110k I would seriously consider moving because it's a lot more.
So instead of paying me the 110k they end up paying 110k to a worse candidate in Germany. Not only they pay the same to a worse candidate, if I were making 110k I would be kidnapped at the company because nobody else would pay that much here.
Learn to negotiate better based on performance impact to position. The demand for high performance software engineers are vastly greater than the supply.
Nope. See ya. Whatever follows next is not going to be worthwhile.