The Wage Gap 2
elsajohansson.wordpress.com
elsajohansson.wordpress.com
My employer pays me less because of that, and you know what? I'm okay with that. My discretionary income after housing and basic living expenses are removed is way higher than that of someone in a HCOL area.
I have a 3300 sqft house that was built in the last 10 years and a quarter acre of land. That costs me $1400/month. If I wanted a comparable standard of living in SF, the wage gap between here and there would need to be many thousands more that it really is.
So pay me 20-25% less, it makes me more employable and I have a better standard of living than you do.
I’m buying later this year, really thankful I grew up in a place where I can easily settle down, and I’m looking forward to passing that on someday.
Remote work will certainly shift dynamics, I am quite interested in if the concept of 'hybrid' work will take off, and how that would shape cities/communities.
It's already a race to the bottom. It's just the fact that "doing the job well" hasn't been the only factor in the race. Strip off "being able to move to and tolerate living in the right place" and the race gets a lot more fair in my opinion.
Realistically, most companies aren't interested in paying everyone more just because some of their employees are in an expensive location. I would expect any location-independent compensation programs to move toward median compensation across locations, not upward toward maximum compensation in the most expensive location.
Existing companies like the FAANGs don't have a choice because they have a lot of customers in those locations, but younger companies adopting location-independent pay would absolutely be targeting median compensation rather than paying everyone top of market in Silicon Valley just because that's the maximum possible compensation they might need to pay someone.
I talked about all the entitled rich boys that bought $50k shacks in Kentucky (for $300k), and are now whining that their pay is being clawed back.
Anyway, I got a bit of a kick out of that; what a coincidence.
Now, if work can be done else where, magically the supply increases, go figure. So they don't need to pay so much. Instead they can pick someone else for less.
For me, I consider the high pay a payment for living somewhere I don't want to or cost lot to live. If I don't live there I get less.
I know these as a fact that a comparable property in my city would cost me much more than what you're paying. All the while I'm getting payed less than half of my colleagues living in your area.
And there are many other costs that are comparable eg. electronics, vehicles and education.
All this is to say that location based pay is not about cost of living, its about getting away with paying as little as possible.
For electronics and vehicles you are free to google iphone and mercedes prices in India vs Us. Its especially higher if I want specific items to import like framework laptop, fairphone, tesla car
Private education can get very expensive very quickly too. Public schools are not even an option as they don't even have furniture sometimes.
You might say remaining costs are low, but they are low only if we use uncertified, unskilled, low quality services/labor. For even decent quality of work the prices will be in multiples.
About my comment about being payed half, the pay scales are visible to everyone in the company so I know that the least in the US also gets payed 2x of my location
I don't know any company that has a location based pay differential that ranges into 50%.
At least in the US, things don't always look so unbalanced. Moving to <big west coast city>, New York, or Chicago has baggage attached to it. There's other costs an annoyances.
I would need a massive salary to consider even trying it. So how would it be unfair to expect more money depending on location? It really depends on the specifics, and seems to work out either way, depending on the situation.
Lots of people are leaving these high payed areas simply because they don't think it's worth it. Many might be retiring, but you're also seeing them take less glamorous jobs in small cities... I know many of them have already made their money, but it really looks like something else to me.
Or is this article backlash from salty SV employees that are now whining that they can't keep their SV salary, while they pay $300k cash for a $50k shack in Kentucky? Honestly, I would be a little pissed about that, since you didn't see them complaining about the decade they were able to make a half million dollars to move some GUI buttons around and attend meetings. Now they see dollar signs and are mad that they're being asked to make similar dollars to the rubes.
Anyway, what a rant, sorry, especially if that's not what the authors meant. If he's talking about US vs. eg. Mexico, India, China, ect. that's a really interesting question, though it technically has similar issues (eg. I know it's pride, but my Indian coworkers insist their quality of life is the same there, despite lower pay)
I doubt most rich people (ie. everyone in the US/EU) are really willing to deal with the realities of competing on a wider scale, with "fairer" pay.
I don't think there's a lot of value to be found here.
We have zero debt. I paid off our mortgage in about 5 years. I put money aside for my son’s education the day she told me she was pregnant. We’ve spent the last 10 years spending less than 40% of our combined income annually and now we’re reaping the rewards.
I am fortunate enough to not have to work at age 40, but I do need some kind of obligation to keep me content so I plan to have a remote web dev job by the end of the year.
I would be perfectly fine taking a lower wage due to my location. And that might make me more attractive to employers.
No way would I make that trade. My _PURCHASING POWER_ is probably vastly stronger than theirs. You say 40% but I could legitimately live off of 20% if I so chose. In fact, one of the problems I have is that I have absolutely no credit. As in, credit reports come back with zip, zilch, nada. And that can be problematic for people that don't trust seeing that.
If I'm being honest, it's a super power that I'm sad to see others are figuring out.
If you don’t have credit I would recommended getting a card and using it for everything.
Our situation is 100% by design. I live in a neighborhood filled with people making $100K+ plus per year who are all leveraged like crazy and probably have no significant savings.
But the husbands all drive $50K+ trucks to go to their office jobs and their wives have the latest and greatest SUV.
In contrast, my pick up truck never gets used unless I need it for a specific task. Other than that it sits parked. My one “nice thing” that I allow myself is my Land Cruiser.
It's just not my thing.
I don’t have an exact number in front of me, but I imagine that we receive at least $8k back annually in rewards from our various cards.
The only thing that doesn’t go on a card is the electric bill because they didn’t allow it until recently. But I believe they now do so my wife will change it soon.
In addition to the free money, it’s also safer. I would never use a debit card.
Nobody got wealthy by using credit cards. The “free money” is a cheap psychological trick. I don’t have the hubris to think I’m better at resisting unnecessary spending than the marketing department at Visa who wants every extra dollar in my wallet.
What many people find, after falling into the “but I fully pay my card each month” trap, is that turning off the card after this point is difficult with their current income, because they have effectively pushed their real wages a full month into the future. Depending how heavily you’re into credit it can take several months to build up a cushion to avoid dipping into emergency funds to cut the cards for good.
In addition, my debit card is attached to an account I use specifically for said card, and generally speaking I only keep enough money in it to cover what I plan on using it for, this limits the amount of damage someone can do by stealing my CC, and I don't have overdraft protection on it to further limit my exposure.
I don't think it's fair, but the reality is that companies pay what it costs, and in Europe there are fewer companies willing/able to pay high salaries, so they are lower.
The thing that would bring about this change is more companies being willing to hire remotely, particularly in places like Poland.
Why are fewer companies hiring and competing on salary in Poland/etc than other countries? I have no idea, but that is the real barrier to higher salaries.
Let’s suppose for a moment that employees are interchangeable resources without discernible differences and companies are profit maximizing entities. How is it possible under such assumptions that 2-5-10x salaries exist when 1x replacements are readily available elsewhere? To argue that people are only paid what their replacement would cost also requires an explanation why a garden variety remote employee (or a team of four experienced veterans) is not a replacement for locally grown organic talent? So far there is no convincing explanation to back that up. *
Because companies don't always go for the cheapest labor. There are other factors...
1) Managing remote workers is a harder task than managing in office employees.
2) Time zone differences can slow work.
3) Cultural differences can cause problems with team cohesion.
4) Tax differences add to the cost of distant employees.
1) With hybrid work on the rise managing remote is already a task, granted there are different levels to it
2) Similarly time zone differences can be taken advantage of, there are people to handle on call during normal working hours and cover national holidays for example. Also, some kind of work not depending on cross timezone collaboration can be done faster e.g. answering customer inquiries.
3) Also there is strength in diversity. A diverse set of experiences and backgrounds can help not to be blindsided by a monoculture for instance
4) Indeed, taxation can add accounting overhead, but even if we take that into consideration local wages will still dwarf the full cost of remote teams in some cases.
While I find it plausible that someone would put more value in having local employees even in a multinational setting, I would argue that is the exception rather than the rule.
I imagine they would also change their tune a bit if there was really no location based pay, so developers in Silicon Valley got paid the same as developers in India or China. Don't complain about how good you have it Americans.