Except that a Google employee moving to someplace with a weaker economy has not reduced their leverage. These are people who have the power to simply move back.
A Google employee that moves away both changes the pool of options that employee has (only companies that offer remote or local ones in his new place of living - versus companies in (SF, NY, whatever)), and the alternative options that the employer has (he is now being compared against a much larger pool of people who can work remotely). That is indeed decreasing leverage.
Well, yes, but we're arguing that they have the same leverage in their new place of residence as they did before the move. If they have to move back in order to exercise that leverage, their leverage is actually location-based, and they will have to choose between their old salary and old location and new salary and new location.
These companies are used to this sort of thing. Relocation costs are nothing compared to the cost of hiring. There is effectively no friction on the company's part. Yes, the employee needs to be willing to go through the process of moving, but, provided they're willing to pay those costs, their leverage in the situation is unchanged.
Yes, there is a subset of people that have disproportionate leverage no matter where they are at (by virtue of being really really good devs). But that represents only a minority of SF devs.
A family of four enjoying a large house in some suburb for a reasonable price may find the idea of living in a 2br apartment in SF, or paying a truly exorbitant price for a single family home in the bay area, unappealing.
When you move, it's not just the hassle and expense, but also the life changes. Especially if you have kids, those are big.
Experienced software engineers in general are capable of moving to practically any major metro if they really want to. By your reasoning, all of them should possess the same pay scale, the same cost of labor.
By Jove, I think you've got it!
Believe me, there are Russian programmers earning 1/3 of a U.S. engineering salary that are much more technically competent - the only thing stopping them from capturing the true "value of their work" is that damn market (and U.S. immigration system...)
I think in the long run the SF salary (for the average developer) will be a historical anomaly in a place and time - kind of like the California Gold Rush in the 19th century.
(If your argument boils down to SF having more strictly more competent engineers than other places and that being the cause of the pay discrepancy, I strongly disagree)
It's like Fintech; a black hole of talent away from actually important work that needs to be done. You get that much capital condensed under one company, and it starts to channel itself against overall societal interests as it seeks to ensure it's own survival distributed across jurisdictions, fueled more by ignoramt adherence to past performance predicts future results amongst the capital management class implicitly picking winners through retarded capital overvaluations through overly aggressive M&A's and purging of the competitive landscape.
Right. Such as their entire business model being "hire smart people to get other people to click on ads."