You are paid based on how difficult you are to replace. Hence the location based pay
You're partially right. Pay is very much about how difficult you are to replace. However Location in many industries is no longer the dominant input.
Location is the dominant input in an office-centric model, but isn't in a Remote model. In an office centric model, the company would have to pick where to locate the office and that location would have a "commute radius" in which they could effectively expect their employees to willingly come in to the office from. This meant that any physical office's "commute radius" was effectively its talent pool.
So if you put your office in a high cost of living area, you now have to pay enough for people to live in that area or be willing to commute in from lower cost of living areas. This reality is the foundation for the "location based pay" detente between Labor and Capital.
It's worth noting that these things are also interdependent and self reinforcing. Eg: An area (like Silicon Valley, or any other business cluster) has a higher density of talent, which is more attractive to employers, which means more employers want to be in that area. More employers means more competition for that talent, which drives wages up. As those wages then filter into the market you see the price for supply constrained necessities (houses typically) go up, and often times that will drive cost of living up.
In a remote work world, this entire cycle is dramatically disbursed and the core foundation of the "location based pay" detente between Labor and Capital is shattered. What this ultimately means is that Capital no longer pays for Talent + Location + Competitive wages within that location. Instead they pay for Talent + Availability (timezones mostly, but internet connectivity is in there as well). This should, in theory, drive a larger talent pool, which, depending on demand for that talent, might lower wages in a given "Availability". If it does, then the cycle starts anew as Employers start to seek out ways to be in that "Availability".
The big question one needs to ask is whether there is enough demand to suck up all the talent within the workable "Availabilities". If there is, then wages stay the same or go up. If there isn't, then wages go down.
My personal opinion is that any company doing "location based pay" in a remote work world is shooting themselves in the foot (unless they have market power in those locations).
In our current world, American salaries are inflated for macro reasons, but the shift you are describing may very well flatten the skilled salaries for currently wealthier regions and increase those for poorer regions.
No disagreement there.
> There are regulations, inertia, cultural and ideological factors, and all sorts of other considerations that come into the capital vs. labor struggle and recreate the radius even with remote technology.
No disagreement there either.
> In our current world, American salaries are inflated for macro reasons, but the shift you are describing may very well flatten the skilled salaries for currently wealthier regions and increase those for poorer regions.
Seems we agree. A pleasure chatting with you.
May be true in general but definitely is unrelated to location based pay (wouldn't it be easier to higher another faceless IC in the bay area than in OKC?)
If you are an American who wants to be a nomad, the company will rarely fire you on the spot in favor of a more manageable new employee of your country of residence, because it already has a relationship with you and hiring is expensive and lengthy. What they can do however, is decrease your salary because they are no longer beholden to American anchor prices. You are no longer part of the contingent of local talent that they hire for various reasons, and will concede the decrease because the company still offers you the perspective of being a highly paid nomad.
Think of it another way: how come it is nearly universally the case that junior American devs are paid salaries that are equal or higher to that of non-American devs working outside of America but within the same company?
They pay you as much as they need to to get you or someone of equivalent skill as you (encompassing all things including communication skills) to work for them. 'Anchor prices' isn't a thing.
> how come it is nearly universally the case that junior American devs are paid salaries that are equal or higher to that of non-American devs working outside of America but within the same company
Because that's how much it takes to get them to work for the company.
That's the only answer to any question of 'why is someone paid this much' (in a functioning market.)
If you combine that with the multiple reasons that might lead an American company in hiring American talent or at least talent based in America, you end up in a situation where you want a portion of America-based employees even though you have to pay them more, but if any individual employee leaves the territory the reason to pay them American market rates erodes away, even if they have the American nationality. They no longer meet the need that led the company to paying those prices in the first place. Keep in mind that if that need didn't exist, and salary was the sole consideration, they would have more than enough great devs around the world to never have to hire in America to begin with.
The nomadic employee has fewer cards in hand because they want to live in a different country and also have a near American salary, which leads to a compromise where their salary is decreased. If they start to make too much trouble to the point where starting the hiring process anew is worth it, they can be replaced by an equally intelligent and capable local dev who will quietly accept the salary in question.
This doesn't make sense to me.
If my company employs me because it wants me to write a Ruby compiler, and there are only so many people in the world who can or want to write Ruby compilers and can communicate effectively about it, then exactly which 'reasons to pay them American market rates' do you think have gone if I move? They weren't paying for that in the first place.
They were paying to get something done. It's still getting done no matter where I am. Me moving doesn't mean that someone else suddenly becomes able to do my job for less money if they weren't before.
Companies pay to get things done. If the find the best people to do that is people who happen to be in the US then they hire there.
It also wouldn't make sense that American salaries would be much higher in general to begin with, since the corresponding premise that America-based devs are that much more naturally talented than the entire rest of the world is not plausible, even if obviously there are massive concentrations of talent in the US. This latter concentration suffers in itself from chicken-and-egg circularity, since people came to the US due to the salaries involved.
The only plausible explanation is that for historical and geopolitical reasons there is a disproportionate amount of capital flowing into the US, and American companies have an incentive to hire US-based talent regardless of the tasks needing to be addressed.
Try to reverse the analysis here: if the market rate factors aren't gone if you move, why would Atlassian ever 'adjust' salaries for remote workers who leave the US? You're still doing the same job, so it can't be that they were paying you solely for it to be done.
This does make sense - they have better technical skills (because of better education - you said this yourself) and better communication skills (because of cultural context) and also in general I think better attitude and aspiration.
> why would Atlassian ever 'adjust' salaries for remote workers who leave the US?
In a foolish attempt to save money that doesn't make any sense, based on the same misconception you have.
If they could hire people for less money to do the same job then why weren't they already doing that?
This isn't a plausible explanation if you are at all familiar with the tech world outside of the US, or even higher education systems. It's easier for an American to get a good education, but the quantity of quality educated people is high in every developed country. Besides, for the explanation to make sense, the Americans wouldn't have to be slightly better, they would have to be multiple standard deviations better to merit the current salaries.
>If they could hire people for less money to do the same job then why weren't they already doing that?
Because the whole point is that locality is a factor in the hiring practices of tech companies, though this is changing significantly
I live outside the US and work in tech, so I am familiar with it.
> or even higher education systems
I'm also a Visiting Academic in a higher education institution, so I'm familiar with that too.
> the quantity of quality educated people is high in every developed country
I'm not so sure - I'm in the UK, and we have a chronic lack of skilled technical people. It's a big problem - big enough to be a national security issue. We just don't seem to have the knowledge, skill, or aspiration to produce a lot of talented tech people, outside of a small elite.
And I think the UK is in a good position compared to places like France, Italy, etc, which are even worse.