I mean here are their salaries[1], how much do you think their fancy "cost-of-living bands" are actually saving? It's probably more of a bureaucratic headache to make sure the bands are always up to date. Speaking of savings, it's always a bit gauche when a CEO/founder pays themselves the biggest salary, especially in a startup, where they have the most equity and the most long-term upside, but that's neither here nor there.
Because you should pay equal. If you just use the same number on the payslip, some get more than others. It's like with currency. There is no reason to pay everyone 10k of their local currency, as that won't make sense. But paying 10k of the same makes none as well as for some this means they can have butlers, and other only get a bed under the next bridge.
Payment should be equal in Terms of living standard. Otherwise they are not equal.
right, or you were born there and have obligations and connections that keep you from saying well I am going to move now because my computations indicate that will be the optimal result!
At any rate, if I am in a higher cost of living area and your company will only pay the wage that fits the lower cost of living area that obviously means I will not work for you, and I think that is the case for anyone working in higher cost of living areas. So if you want to hire someone in higher cost of living areas you will have to handle that situation. And then we come back to the considerations that the parent poster said.
Companies are purchasing labor (a product). Trying to undermine the costs because they have inside knowledge on how the meat is made (or where the meat is made) is just them using their leverage to extract a better deal. Totally normal tactic, they do this in every facet of their business. Employees should also grab as much leverage as possible from shopping their product (labor) to competitors or banding together with others (union/guild/etc) to get the best deal.
tl;dr It makes rational sense for companies to want to pay different per location. It makes rational sense for employees to say "cool, but no." There are many examples of price not being location-dependent in our capitalist system, at least many I have experienced at a consumer level. But maybe you are onto something and online consumer stores should all start changing the base prices once they see your zip code/state/type of credit card (I'm positive there are already some out there that do things along these lines).
that is probably incorrect. Lots of places charge different based on location.
If you are a highly paid engineer and want to keep it that way, you should do everything in your power to limit the industry to specific geographical locations.
There might also be value in having your employees be able to easily physically meet, and then location-dependent salaries make sense.
I get that some people have arguments for it, I just entirely disagree that any of them are valid. Whether I'm in a city that costs a lot to live in is no more the responsibility of my employer than whether I like to drive Ferraris.
Maybe that price gets driven up because of HCOL, or maybe it gets driven up by market competition, or skills scarcity (putting the employee in a position of bargaining). But it also gets driven down by the opposite effects. In the global market there are people with lower costs, lower market competition, but the same skills, and they are going to accept a much lower amount.
Take insane wages in SV as a great example, HCOL causes people to not accept lesser amounts, as does market competition. The fact that someone is getting paid more in SV is not because they add more value, it's because they won't accept any less.
In a way it's a system designed to extract the most of the value generated by a local industry, "taxing" it at every layer, first you give some money to a engineer that then has to part a good chunk of it for rent and then even plumbers get their cut (who in turn spend it elsewhere), etc.
The key insight here is the word "local" in "local industry".
As the industry itself starts to be less local, this mechanism breaks down.
I live in New Zealand, cost of living here is insane. Local salaries are not.
A software engineer in SF probably has a higher BATNA than one in Delhi. Not in every case, but in most cases. So the amount you'd need to pay her to accept is higher than the amount you'd need to pay the engineer in Delhi.
You could decide you'll pay them both the same. Or you could decide you're not willing to pay SF salaries and will only hire people outside the US.
But, even if you do this, would you be willing to pay every employee at each level the same amount as the highest paid employee at that level?
If the answer is 'yes', what's the most expensive city you've visited? How much was a typical restaurant meal there? Do you pay that amount at every restaurant you visit, wherever in the world you are? I mean, the value of each meal is the same, right?
No, I'd negotiate. I'd get the cheapest ones first, then raise my offered salary until I couldn't find anyone, then again, then again. Note how none of this has to do with their location, because the engineer in Delhi will get a higher salary just because all the cheap ones have been taken.
This indicates to me that location has nothing to do with salary, it's all market forces, and trying to insert COL adjustments into the mix is awkward and easily refuted.
Why did you assume the gender of the software engineer?
Plumbers charge more in SF than in rural Idaho.
A plumber that moves from Idaho to SF starts charging more because 1) they need to to compensate for the high cost of living and 2) to keep up with market rates.
SF would have no plumbers if they all thought it was immoral to charge more than their counterparts in Idaho for the same work.
And SF would collapse economically if all salaries in all industries across the city were suddenly paid based on a national average, independent of cost of living.
If this hypothetical plumber had a hypothetical way of traveling to SF for very little money and time, and would hence be able to charge much less than the local plumber, while having the exact same skills, which would you choose, and how much would you pay? If this hypothetical plumber now moved to SF for [reasons], would you pay more for his exact same service?
So, they pay less based on location because they can, your alternatives to a 70k salary are 50k salaries, and they know that. On the other hand, in the high paying area, the alternatives to that same 70k salary are at 150k, so you would never hire anyone. I think the more interesting question is why companies hire people at 150k when people at 50k exist (but this is a different question which has already been discussed plenty of times around here).
If you’re talking about remote, maybe the argument stands up more, but I’d add that if a remote worker adds less value to the company (which I believe as a rule to be true, like for like), then you would pay them accordingly by that reasoning.
I am, as the post is too.
> then you would pay them accordingly by that reasoning.
Okay, but still none of these arguments means that one remote worker should be paid differently from another remote worker.
You probably do - you're probably hanging out with other programmers more, maybe you can meet up with colleagues sometimes - or, even better, suppliers and clients.
And you have more options for other employers, so you can capture more of the spread as producer surplus rather than consumer surplus.
HCOL: High Cost of Living.
For the poor minds like me outside of San Francisco.
I agree, as a resident of Gold and Diamond Castles Avenue.
