With remote, these companies are now able to do what every other large labor driven industry has done and lower their costs by finding labor in cheaper markets.
Trying to negotiate salary based on value provided is one of the biggest misconceptions I see online and with in-person mentoring groups.
Compensation is not about value provided. It’s only about market rate and convincing the person to stay at the company.
I encounter a lot of people, especially juniors, who are disgruntled because they think their employers are getting more value out of their work than is being passed along in their paychecks. I usually ask them if their employer sends them a bill every time they fail to deliver a project or make a mistake that costs the company money. That usually makes the disconnect between value provided and compensation click.
I say this as someone who worked remote and managed remote teams before COVID: The reality is they WFH is a perk and WFH employees require some additional management overhead due to reduced communication efficiency and higher collaboration overhead. As much as I love remote work and my remote teams, it would be dishonest to say that we wouldn’t perform better or faster if we were in-person in the same building. It may not be a popular opinion or what people want to hear, but in my direct experience with mixed WFH/remote teams it’s always true. In-person is just too efficient to replace with Zoom and Slack and e-mail.
The second reality is that once you open the doors to full-time WFH, you’ve opened the doors to full-time remote, which means you’ve opened the doors to a much larger labor market. It becomes easy to replace your $200K Silicon Valley hires with someone a couple states away who is thrilled to do the same job for $180K or even $150K. Then you start expanding your search and find people who live in other countries who deliver the same results for $100K or even $80K.
It’s not surprising that companies don’t want to pay the highest salaries in the country for people who aren’t actually in those areas for work. Losing only 10% of their high salaries honestly seems like a bargain.
I don't think reasonable people would disagree with this statement about compensation. That being said, I don't believe it says much.
"Only about market rate" allows for tautological reasoning in that the market rate is just whatever you end up getting paid.
A stricter definition of market rate as "you get paid what people like you get paid" doesn't seem to say much either: when you get a promotion, did you suddenly start producing more for your employer? Or did they suddenly realize you produced more for them?
As most pricing goes, so does employee pay: you're paid the salary to which you agree. You can increase your salary by 1. threatening to quit your current employer unless pay rises or by 2. convincing some other employer to pay you more.
So I agree with the above in that being in person definitely makes collaboration easier. But on the other hand I feel like I personally am more productive when working from home because I have more energy. I always found the commute in the morning draining and by the time I'd gotten dressed and showered, into a crowded train, to my desk, out of my coat, put my bag down, set up my workstation if I had to take my laptop home to have an out of hours work meeting where I might need to demo something, etc. I'm already feeling a little worn out.
Working from home I definitely have found myself stuck waiting to hear back from people and similar things, but... at the office if at the end of the day I feel close to solving a problem I have to weigh up whether or not to stay late and keep working or just spend more time the next day getting myself back to that headspace. I fairly often will just go home because I know that with commuting and everything how much I want to just be home will be higher by the time I get there, plus I'll have more things I need to do at home that I might have been able to do when I get home because I'm spending less time there everyday. Not to mention the amount of chores I can get done during the workday - I've hung laundry while making tea, or done stuff at lunch, etc. At the office I'd still be taking a lunch break or making that tea, but I'd not be getting other stuff done at the same time. I know that those extra house chores aren't productivity in the workplace, but having them done makes me feel more energetic and clearheaded at work
Why would I or should I sabotage a trend that spreads wealth to poorer parts of the world?
> ..., because no company willingly pays people based on the value they provide.
That's what competition is for.
Compare also https://pseudoerasmus.com/2017/10/02/ijd/
People sell things for the highest price they can get paid, and people buy things for the lowest price they can pay. The buyer and seller agreeing on a number is the only factor in determining which price a transaction clears at.
Executive cost money, too. They are also employees.
But that line of argument could only argue for extravagant CEO pay, not high pay for executive in general. (Especially since CEOs get a lot of their pay in shares, so are incentived to get the shareholders more money; eg by driving lower ranking executives' pay down.)
Indirectly: competition between companies and workers (including executives) determines pay.
This would imply a coupling between corporate expenses and share price that is much tighter than I understand to be the case.
You can't have it both ways.
More frankly, I think that the cost savings in offshoring are a false promise. You can hire very cheap programmers in India and similar, and they are not very good. Those programmers that are very good at their job either immigrate to the US, and start earning an American salary, or they raise their prices high enough so that the benefits of offshoring are less clear cut.
As far as working with remote employees off shore, time zone and language regularly remains the biggest barrier; Covid hasn’t fixed that.
Time zone? US has 2 continents + you typically need a maximum of 3 hours overlap a day. This is possible even in Europe-EastCoast setup, I typically wake up 11. In US that's 6am sure, but I end my day at 7pm which at US is 2pm.
Covid has knocked down a lot. The biggest wall to crush was the psychological ones. So its now, not only genius contractors who could negotiate reasonable flexibility. Also when 60% is WFH now, there is little point in fighting/readjusting. If this was 10% you could try and battle or continue to limit that.
Time zones matter, a lot. Crossing America’s time zones isn’t fun, but it has nothing on Eastern Europe or India. 8pm meetings to interact with your international workers will burn you out quickly. As will suddenly remembering that most of the world doesn’t do DST, so your 8pm meeting just became a 9pm.
You also need to know a hell of a lot more than “some vocabulary” in order to communicate effectively with a boss (me, in this scenario) or a stakeholder. Some consultancies will have specialized personnel whose only job is to translate for engineering teams, but these people are extremely expensive for obvious reasons.
You can overcome these problems, yes. But often a lot of the supposed cost savings of international workers disappears or shrinks massively by the time you’ve found an arrangement that’s as productive as local engineers. Typically the most sustainable approach here is to use one of the larger contracting companies like EPAM or Globant, but that eats up your savings and the attrition rate from those companies is very high. I’ve personally lost contractors because they were tired of the contracting company, not me or my company.
I’ve worked with international teams, and I continue to work with international teams. But the idea that Covid has made replacing domestic teams with international teams does not hold water.
As described here[1], my company already has a majority of the new headcount in the non-US countries. The only caution they are taking is to avoid tough timezones like India. But it doesn't matter to a team if the new team member is from Colombia or Canada or Kansas, while it matters a great deal to the execs to hire that person outside US since that saves a lot of money to the company.
Who benefits? Shareholders, execs and the middle class in the non-US countries. Who loses? US middle class. We have seen this movie before with manufacturing.
We have seen this movie before with manufacturing. The winners of this move will be the shareholders / execs and the middle class in cheap countries. The losers will be the American middle class.
I see that as a good thing as well. If it is a problem to have all the wealth of a country in a few regions then it is equally bad to have the wealth of the world in a few countries.
It might have been painful for some Americans but globalisation has been a success for most of the world.
> globalization has been a success for most of the world
It has led to decimation of big industries in the US / Western Europe, fueling the rise of demagogues (Trump, Le Pen, AfD, ...). It has also given power to despot regimes like Chinese Communist Party.
You’re no better than someone on the other side of the globe who will have lower living expenses. If your employer doesn’t see value in having you on site, location is meaningless. If I were Google I’d start looking aggressively into labour markets that are cheaper but with good education. Poland, Phillipines, Romania. Just three I’ve worked with that have been exceptional.
All these companies care about is being as competitive as possible. They have a pretty much unlimited supply of money, and one of the most primary things driving their business success is how good their engineers are.
Then why do the same engineers (pre and post-transfer) get paid such ridiculously different salaries between London and the valley?
Do you get special scaling powers when they stamp your visa at SF?
And frankly, the UK team was coding circles around much of the US engineers.
It was incredibly eye opening, and humbling.
They must know the market in London isn't competitive so they just pay a competitive rate in the market. It seems like salaries are generally going to go up everywhere for top talent but down in markets like Seattle and SV.
Another interesting aspect of London is that it is in a TZ so far away that there isnt any overlap with PST in the states, so they kind of know you are screwed if you are working there.
Another interesting fact about London is that it has some of the highest rents in Europe.
And as someone in said timezone who works with the west coast, it's OK as long as you travel once a quarter, and both you and your west coast colleagues take meetings from home because of timezones.
> They must know the market in London isn't competitive so they just pay a competitive rate in the market
It's actually worse than this, finance companies (hedge funds et al) actually pay really really well (like US FAANG well, with better bonuses), but all of the FAANGs have decided not to benchmark against finance, for bullshit reasons.
Essentially then, the only people who work for FAANG in London work for a year, then transfer to the US on an L1/L2 to actually get paid well.
For most of these companies engineering output is their entire product and they are sitting on mountains of money. A few good engineers can make a massive difference to their products and success while a few bad ones can sink the entire business.
FWIW FAANG aren't the only companies paying ridiculous salaries, they are a small subset of the SV / Seattle markets. I work for a company that pays salaries similar to FAANG. We don't interview like they do and if we did we would have a harder time hiring good people.
I’d go even further and say that nothing is paid for in terms of value provided.
Price is a negotiation between two parties, where production and use value form the floor and ceiling price, respectively.