E.g. GitLab, a 100% remote company with 1,400+ employees pays local rates, and here’s why: https://about.gitlab.com/blog/2019/02/28/why-we-pay-local-ra...
Location-dependent pay could go side-by-side with wealth-dependent pay. You already have a trust-fund and no college-debt? You only get half what others are making for the same work.
Suppose the average wage somewhere is $10K/year, and you hire a developer at $100K/year there. I would argue that it might be more beneficial in aggregate both to the remote community and to your company to hire two developers at $50K/year from the same place (assuming those are market clearing prices), both because of the effect on the remote consumption (the two people will consume more than one most likely), and the fact that you're spreading out the economic opportunity in the remote area that you are hiring in (now there are two developers who are well paid relative to the median versus only one - and it's also more likely to spur further investment into development in general).
An engineer that started on-site with regional pay that now went remote does not equal “we’re a company that hires remote worldwide and we don’t adjust to regional salaries”.
A good example would be a company that hires new staff in multiple countries and continents that pays everyone regardless of their location.
So in practice, yes, but companies aren’t so deliberate about it as to have it in policy.
Depending on the company sometimes the differences in base salary will be very minimal, say $225k in Ohio versus $250k in SF.
Common misconception but it’s not how markets work.
You pay whatever it takes to get candidates onboard, but you ideally don’t pay more than necessary. You definitely don’t pay everyone more just because one of your employees lives in SF.
This is more intuitive if you think of any other market you might personally operate in. Would you expect your local car mechanic to charge you twice as much as the other local shops just because they also have a location in San Francisco? No, you’d just go to the next mechanic who charged local rates. You aren’t interested in paying more than necessary and neither is your employer. It’s not nefarious, it’s just rational acting.
Basically: most tech companies don’t adjust the price of their product for the region they are selling it in, but adjust the salary of the people making the product based on the region they live in.
Correct, but you’re forgetting that labor is also one of the product/service costs for a company. They treat it like a market, just as you would if you were hiring someone to work on your car or house.
It’s called the labor market because it’s literally a market. Expecting companies to completely disregard the market aspect and just pay the maximum amount for everyone regardless of their actual cost is wishful thinking.
Some might say there's a power dynamic, and it's just an excuse used by a candidate to negotiate higher - but at the end of the day that is what I heard every single time, without fail, when someone wanted to negotiate their salary.
If that's the case, then it does definitely indicate to me that "where you live" is a variable, and an especially important variable.
As do I. The value of my labor doesn't change because I walked 5 blocks away into another ZIP code with significantly higher/lower costs of living.
The only reason this flies is because most engineers have little to no ability to individually negotiate away such nonsense, while employers are happy to collude with one another to enforce these pay scales.
But guess what, you can still pay the person in Vietnam or India or Belarus or Oman a very strong regional wage and free up cash allowing you to offer a competitive VHCOL salary. There's no realistic reason to pay someone in eastern Europe $400k TC.
If you can't tie your actions directly to cost savings or revenue increases you're just blowing smoke up your manager's ass about value created anyway. It's all hand-wavey negotiation and negotiation is almost entirely based around leverage.
Salaries aren’t high in the bay because houses are expensive. Houses are expensive because salaries are high. There happens to be a concentration of talented and highly compensated people there. That doesn’t mean they will settle for less elsewhere.
In my experience with working with foreign developers, specifically those in eastern Europe, real talent can easily command SF-level compensation from companies that pay SF-level compensation in the US. Employers often get what they pay for when they think that outsourcing means that they'll get equivalent quality work, just with lower costs.
IMO these acronyms have reached the point where they don't really serve a purpose.
“Can’t hire as many people”, “they would stay for the money even if they weren’t happy”.
Obviously this isn’t just about profit but about employee happiness guys.