This would certainly be true for a business where all the employees and clients are local, but doesn't have to true for a global company with fully remote jobs. If I'm providing as much value as an SF-based employee and demand a raise to 80% of SF pay, the company would be foolish to let me leave.
One thing I've learned is that companies are extremely foolish when it comes to compensation and attrition.
The average 1 bedroom apartment costs $3,060/month [1] or $36,720/year. The tax rate is high, and depending on where in the world you are, there are additional expenses such as healthcare that need to be factored in as well.
If we're only concerned with fairness in compensation, cost of living must be a factor.
No. The most fair thing a for-profit company can do is pay people proportional to how much value they add to the company. If it's a lot of value you can choose to live in an expensive city. If not, you have to live somewhere cheaper.
Companies are not social services, they don't aim to offer some welfare. It's a harsh reality, but their competition is not doing them a social service either. So everyone is doing their best to find the best balance which bring them the best outcome.
Fundamentally, if they can find a replacement at a lower cost, they will. Businesses are about the bottom line. No matter what their size is. Fighting that truism will only lead you to frustration.
If that was easy for them, they wouldn't have SF-based employees in that role.