People working remotely from Palo Alto are in the same labour pool as people working remotely from Eugene, Oregon... And the wierdo who lives in a goat farm in the middle of nowhere, Idaho.
The labour pool argument only makes sense if you commute into the office.
With remote work, everyone in the same country + timezone belongs to the same labour pool.
Companies that will treat the remote labour pool as uniform will trivially be able to outbid companies that underpay people in low COL areas, and overpay people in high COL areas. Why would I work for Gitlab, with its 0.66 COL multiplier for my town, and a 1.2 COL multiplier for NYC, when I could work for Foolab, which has an across-the-board 0.8 COL multiplier?
Given that situation, you'll quickly find that the only people working for Gitlab are people based in high COL areas. Instead of a money-saving technique, it becomes a money-spending technique, as they end up subsidizing employees relocating to the highest-COL areas.
So as people are able to earn more in remote locations our rates will go up with them.
I think most companies will end up paying local rates https://about.gitlab.com/blog/2019/02/28/why-we-pay-local-ra... so as more companies start hiring remotely the rates will go up gradually. I don't think think that there will be many Foolabs that pay one rate.
Market rate is, in reality, a close enough proxy for COL. I'm happy to use the two concepts interchangeably. My point still stands.
Any firm that will provide an equal across-the-board wage, that's significantly below market rate in NYC/Bay Area, but significantly above market rate in low COL areas will eat your lunch, in terms of wage competitiveness among the latter group. They won't hire anyone from the former group - but just being in the bay area does not make you a better engineer.
You'll be stuck paying expensive people in high COL areas, that are doing the same work as cheap people in lower COL areas.
People who relocate to hot labor markets are more invested in our careers than people who don't. Employers who pay extra to draw from hot labor markets have different problems leading to different skillsets. For better or worse, we're earlier adopters.
Why compete on the high-billing end of the salary curve, when you can compete on the low-billing end of the salary curve, for the exact same quality of talent?
"We won't pay NYC wages, but we will pay the rest of you better wages than our competitors" is a great pitch to employees[1]... While being a net benefit to your payroll.
[1] Except for those living in NYC, of course. But you don't have to hire them.
> That would restrict all your hiring to the lowest wage markets.
The talent quality is the same.
Some of those reasons in the link are directly contradictory, some are nonsense, and others are inapplicable to other firms (But sure, they may well make sense for Gitlab.)
> A concentration of team members in low-wage regions, since it is a better deal for them, while we want a geographically diverse team.
May be a priority for Gitlab, but that is not a priority for any firms that required people to relocate their butts to Silicon Valley, or that never supported remote work prior to Covid.
> Team members in high-wage regions having less discretionary income than ones in low-wage countries with the same role.
Seriously? Do team members with more obligations, like children enrolled in private schools, ailing parents, or overleveraged mortgages also get the same amount of discretionary spending as their less-burdened coworkers? Isn't choosing which zip code to live in discretionary? And why does this even enter the picture, when, as you claim, your wages are set by market, rather than by COL? The market doesn't care about employee discretionary income. There's nothing fair about market wages, just like there's nothing fair about the weather. They just are.
> Team members in low-wage regions being in golden handcuffs and sticking around because of the compensation even when they are unhappy.
This is an incredibly employee-hostile reason. "We don't want to pay you too much, because imagine if you ever become unhappy." Good lord.
> If we start paying everyone the highest wage our compensation costs would increase greatly, we can hire fewer people, and we would get less results.
This, however, is a fantastic reason. See my previous post on why it makes sense for a remote firm to not pay anyone NYC wages.
> If we start paying everyone the lowest wage we would not be able to attract and retain people in high-wage regions.
Why is this a goal of the firm? Scratch that - if that's a goal of the firm, that's fine. It's a weird goal, though. Companies typically don't go into business with the goal of attracting and retaining people in high-wage regions. They typically go into business to make a lot of money by solving problems for their customers. So, it's fine that this is a goal for Gitlab, but it certainly does not seem to be a goal of any company I've ever worked for, or am likely to work for.
You adjust wages up for employees hired in, say, non-NYC, who choose to move to NYC. How would doing so meet that goal? Is someone from Oklohoma who moved to NYC for a raise suddenly providing a diversity-of-skills-and-perspectives need that was unmet, prior to their geographic relocation? Are they now providing more value, that necessitates paying them more? If not, why was hiring in high-wage areas a goal in the first place?
Before I relocated to the Bay Area, I had never gone on call. Never diagnosed a system by only looking at graphs of metrics it emitted. Never ran experiments against tiny percentages of production traffic. Never had to maintain consistency while failing over between regional datacenters. Being here did make me a stronger engineer, because companies here are earlier adopters with tougher problems, and the scale to make solving those problems worthwhile, and people who have been studying them. Maybe someday these experiences will be evenly distributed among remote workers everywhere, but right now they're concentrated in the strongest labor markets.
Your salary isn't proportional to the value you create. It only has to be less than that value, but otherwise it's just determined by offer and demand.
Cost of living and taxes are very real. CA income taxes are > 10%. Some states have 0% income tax. On that basis alone, CA employees should make 10% more than those places without income tax. Then there's cost of living, rent, etc.
You can legitimately earn more while being paid less by moving to a lower cost location.
I don't think it's fair for businesses to extract more profit from me because I live in a cheaper area than my coworkers