“Oh your company is in Backcountry Town, Flyover State? Well we will pay 20% less for your widgets then.”
The first is that being in-person is valuable to many companies, enough so they're willing to pay a significant premium for it. If you're remote, then you get less.
The second is that it's all about negotiation. Companies by and large have the upper hand here, and would pay much lower wages if they could. FAANGs do not pay 2-300k salaries for fun, but because of the local competition.
Software developers are finally getting a taste of what the average citizen has to deal with compensation-wise, no wonder people are reacting badly.
Employee wages are roughly bounded below by the cost to keep them alive, and roughly bounded above by the profit they produce. As for leveling the playing field between labor employers, there are known strategies for pooling labor's leverage. The gap is in convincing labor that those strategies are a net positive from them. For people who think that when they are hired that they are going into negotiations on equal footing, this is easier said than done.
They don't think they can, they know they can. So of course they will.
And from the employee side it's not a bad deal either so many people are happy to take it. Sure I wouldn't love a 20% pay cut, but if I can get a 50% reduction in cost of living by taking a 20% pay cut, that's a large raise effectively.
Inflexible entities either find someone willing to pay up or they have to find something else to do.