I don't believe this scenario (a reduction in wages) is likely. Here's my reasoning.
If a company was paying SV wages to someone, that must be because their labor is worth > that amount to the company. Salaries within SV, not hitting a profitability cap, exist on a supply / demand curve. Companies are rational actors, so they have no reason to be paying their SV employees any more than is necessary.
The current pay dynamic for all companies (that I know of) is location-based pay. Either they only hire in one location (so are trivially location-based), or they pay US employees more than overseas employees. Maybe they, like Google, are moving to a more granular within-US system.
Now, for the leveling. What mechanism would force a company to pay non-SV / non-US employees the same as SV employees? Possibly a law, maybe a union at a specific company, or simply social pressure from employees of the company.
So the facts are: 1) the company can afford SV salaries, 2) that company pays less than SV salaries for workers outside SV, and 3) we assume a leveling event that changes that.
Now a company has (roughly) two actions when this happens: bring SV employees down, or everyone else up.
In the first scenario: you're an SV employee. You're being paid market rate for SV, and the company announces they're bringing your salary down. You'd quit, right? Other companies aren't doing this, and since your salary was market rate, you can simply hop over to another company in SV that's paying your old, higher salary. There's a coordination problem for the companies here: if they all made this change at once, nobody would move and the SV salary would reduce (at least in the short term). But that would be illegal (see the Apple/Google recruiter ban lawsuits). So instead, they would quickly attrite all their programmer talent to companies who haven't made this move, until they are solely employing non-SV programmers who are happy with whatever the below-SV-market-rate salary is. Which may be fine! Many companies locate outside SV and pay less in comp as a result. But the most successful American tech companies locate in SV (or similar CoL areas, like Seattle), so they must see something to hiring those programmers, even if they're more expensive.
In the second scenario: the company brings up the salaries of non-SV employees. This has no effect on you as an SV employee, except perhaps making it easier to get a job in the area, since companies have less incentive to outsource.
Now here's a major caveat: companies often outsource easier work to lower-CoL areas, but I think this is a broken / honestly somewhat offensive practice. I think it's OK to pay, say, someone who's main skillset is banging out internal apps using low-code tools less than a senior full-stack engineer with deep performance / kernel tuning experience. People able to do the former are more common than the latter! But companies, falsely and offensively, assume the former = non-US, the latter = SV, and then assign their pay in that way. But why shouldn't someone in SV trying to break into programming be able to earn $40k doing the internal apps? And, conversely, why should a high-skilled engineer in, say, India be forced to move to the US to earn wages at American companies that are equal to their skill? (sans timezone issues, etc., if that's important for the role, which is a separate discussion).
If Google can pay an L4 280k in SV, they can afford to pay an L4 in Minnesota, or India, or anywhere the same amount. They wouldn't pay an L4 that much in SV if they weren't worth that much (and, realistically, they're worth much more).
Conversely, if Google wants to hire a contractor for cheap, that's fine! That job just shouldn't be tied to location either. Why shouldn't someone in the US be able to take that job, if they want it?