Isn’t this just a market value? SV companies with a global presence surely don’t pay the same in their Bucharest office as they do in their SV office?
So does opening a physical office in a remote location suddenly make the idea of having “local pay” valid again? Why?
And if not: should all global companies pay equally around the world to anyone who provides the same value within the company? That’s a nice thought but it doesn’t feel realistic.
As a European developer for a US firm I’d love to get what US devs are paid. But for that, they could hire two of my neighbors instead of me, so why would they.
Companies arent paying for produced value, they are maximizing produced value and minimizing cost.
> SV companies with a global presence surely don’t pay the same in their Bucharest office as they do in their SV office?
That's because local offices have limited hiring pools, because a person living in Bucharest can't practically work in an SF office, and vice versa.
> So does opening a physical office in a remote location suddenly make the idea of having “local pay” valid again?
For positions which must essentially be filled by on-site workers in that office, yes.
> And if not: should all global companies pay equally around the world to anyone who provides the same value within the company?
Rationally, they should offer as low as they think each employee will accept, but be willing to pay based on realized value (net, of course; people in different areas, even remote, may impose different costs.)
Otherwise they'll either be overpaying for value from high-cost regions, leaving money on the table, or missing out on talent thst would produce value in lower-cost regions thst take other offers, both of which reduce profits.
If everyone in SF all the sudden agreed to work for 1/2 the cost and your salary was cut in half as a result, would you feel that was wrong too?
There's nothing wrong with paying people less in lower cost areas. If a worker can get the job done for half the price in Austin than SF, that's the market forces telling the company to get the heck out of SF.
Ultimately it's not about the value you provide. You might work at Google and provide x10 value of your salary or you might work at a startup that has no chance of success (thus providing 0 long term value) and still earn a normal salary.
It's about the supply of labor and demand for that labor. that's what dictates the cost.
For consultants willing to serve a given area, nobody cares where they live when deciding whether to agree to their rate. Supply and demand shouldn't work differently from that for remote workers, unlike local workers where a constraint of the job is usually being in a office. (Even then, the residence address is only implicitly relevant through that constraint.)
Yes, this does mean that a remote job might pay less than SF, but also that it shouldn't vary based on the exact location. One rate for the entire pool of qualified people willing to work during acceptable hours in locations where the company is willing to comply with the employment laws.
That said, if the qualified people tend to live in expensive tech hubs, the rate will end up pretty close to tech hub rates, again due to standard supply and demand.
It's true, of course, that the price of labor just comes down to whatever the employer and employee agree on (barring things like minimum wage and other "market distortions"). But it's also true that some people have ideas about fairness, and may be off-put by a pricing strategy they deem to be unfair. Thus, salary calculations like this, assuming they're known to potential employees, could definitely affect a potential employee's willingness to take a certain salary at a certain company.
It’s a two sided market. The clearing price is going to be dependent on the employer’s alternatives and the employees alternatives, and each sides judgements about the other sides alternatives. The employer generally will try to pay just enough to prevent an employee from jumping ship, subject to bad feelings about unfairness reducing productivity. Part of the set of alternatives that an employee has are local jobs, which vary in pay somewhat based on cost of living.
I have been at companies that did the remote cost of living adjustment. End result was that I rapidly outgrew their myopic policies and ended up at companies that didn't.
The real complaint here IMO is that compensation is set by supply and demand not value. That's kind of orthogonal to remote workers and location based pay. If you want to capture more of the value you need collective bargaining, regulation, or to be higher up the food chain where different forces are at work.
- Differentiating based on location can create an HR risk/burden.
- After you subtract out living costs, people living in a more desirable area still end up better compensated because they live in a more desirable area, with the associated cost difference subsidized by the employer.
I disagree with this assertion. Say you move to a lower cost of living area, say 6% cheaper, and your wages decrease by the same amount as the change in COL.
Now all your expenses are 6% lower, but your money left after expenses is also 6% lower. That means that despite being no worse off in terms of quality of life, your savings went down 6%.
Strictly speaking, if you maintain the same relative ratio of costs to savings, it’s always rational to take the highest income, even if it’s in a higher COL area. This is because costs can be measured as a percentage of income, but savings ought to be measured as an absolute value.
Exactly. This is why it's a pretty good idea to move to Silicon Valley when you're young, rent out the cheapest room you can find, get a job at FAANG and bank 75% of your salary. After 10 years you will have a nest egg and resume that allows you true freedom in what you want to do going forward.
Say you earn enough for an 800k to 1.3 mill home in sv... you live a meager life because of the costs for your home, but in 30 years you have your home paid off, you're nearing retirement you decide -- I'm gonna sell my home and move to utah. You buy a 200k home in utah.. you sell your home for 20% more than you paid for it maybe even more since housing prices are only going up in SV.. ... -- just the value in your home which you'd NEVER have been able to afford on a dev salary in Utah or somewhere else has forced you into buying a home worth a mill and a quarter, now it's an asset and sure you had to go hungry some months and just break even on bills to afford it, but you're set for retirement where as some others wouldn't be so well off...
Your home is a somewhat poor investment due to low liquidity. It takes time to sell a house, and in the process you lose your home.
A home requires expensive upkeep. They can be destroyed through natural disasters, or rendered undesirable by changing fashion tastes.
Investing your money in a broad index fund over 30 years would almost certainly provide much more growth. You can sell your position in a matter of minutes, there’s no maintenance cost, etc.
Short term market fluctuations could reduce value for a time, but over a 30 year time horizon, you’re basically certain to do well.
You can't tell me someone who bought a home in 1980 in SF for 200 or 300k isn't better off financially in 2018 than someone who put 200k in funds and no extra investments at all in the same year.
A 200k home in 1980 is probably worth about 2 million today in SF. It's for this reason I'll never move anywhere near there, I just don't see myself being to afford it even, if I do become a rockstar ai developer or something. I personally would like though for people outside SF to get more remote opps at higher rates than elsewhere, maybe even just drive up the freelance/conctract rates, although I think a lot of contract rates have to do with levels of imposter syndrome, I'm an intermediate dev, who is probably comparable to some senior devs by now, but still feel like I'm charging too much if I go above $50/hour, but part of me knows I can get $100/hour.
How about the clothes you are wearing, do you think they get your the same wage as a worker in the US or Europe? But I bet you like the cheap clothes...
Your Amazon warehouse workers... the aviation repair people in El Salvador... the list is endless. Offshoring can make certain products cheaper and software is no exception.
Software is particular because it is not tied to production location, but that does not mean you are not subject to market forces.
sure, but you can put yourself into a different market virtually. Just because you and your employer are not in the same physical location doesnt mean you aren't in the same market.
Textile industry workers who thought they could get higher wages just because they lived in richer / more expensive countries were subjected to a series of unpleasant surprises beginning around 50 years ago.
It’s hard not to imagine the same thing happening to remote work.
Wages and the prices of many other things are determined by supply and demand. It's going to cost less to hire someone where demand is weaker.
And wages HAVE to be higher where its expensive to live in order get people to live there. And the logistical advantages of having someone down the hall are usually worth the extra expense.
But for remote workers, you're not hiring someone to be down the hall. You're hiring them for certain defined availability, and maybe a certain defined willingness and ability to travel within certain cost and frequency parameters. And yes, for their skillset.
If your whole team is otherwise local, sure. If your team is dispersed across both US coasts, intermediate US states, and Europe - as mine was for much of last year - I see no reason why the company would especially prioritize paying the extra office costs for a worker who preferred remote in an acceptable location.
During interviews do you ask the locals if they have any intentions of moving to a lower CoL city in the near future? If you do, do you start them at a lower rate?
You're definitely right about most employers who hire remote - and they're going to get what they pay for, a race to the bottom in both labor cost and labor quality.
I'm not being naive, I'm simply focusing on the minority of remote employers for which most of us on Hacker News might want to work - who frustratingly still often adjust pay by cost of living.
Paying salaries based on location is purely based on offer//demand.
When you are a full remote worker, the offer and demand for your market is based on the global availability of remote workers. Which means that you are competing with that Ukrainian developer ready to work for 20k$/year.
The best way to hack this situation of course is to live cheaply in a high-wage city.
Some of my friends managed to find a flatshare for less than 1k$/month in the bay area and are literally saving close to 8k$/month.
I don't mind paying remote workers based on their localised market rate. I have a problem with workers being rated based on their postcode (zipcode) though. I work in London. I commute in. Many of these pay calculators underestimate my wage potential by a large percent. That's BS and just attempting to get cheap developers for low pay.
then the offer//demand theory dictates that you should find another employer that will not differentiate based on the zipcode.
The differentiating employer will lose you, and hence maybe reconsider his policy if no workers can be found with the current policy.
I'd speculate that the reason for failure in many off-shored projects had a lot more to do with the type of developer that's willing to commit to a lower hourly-rate, than with remote work & management limitations.
Pay is never never never about value. It's about supply and demand. If the only way to hire that SF engineer is to offer competitive salaries, then you have no choice.
You are both getting into a weird sort of definition fight here.
Pay is a reflection of market demand, not the monetary value you bring to a company which is not easily quantifiable.
Walmart wouldn't function without someone at the register, but how much "value" that person at the register brings doesn't dictate their salary. The supply of people who could do the same job does.
What you're saying is true at the bottom end of the job market, where labor is highly exchangeable. At the other side -- say a one of a kind performer, like Beyonce -- price gets set by an auction of gigs, where she accepts those that keep her busy and leave her with the highest margins.
In between, where most of us live, neither candidates nor jobs are fully exchangeable, so both value to company and appeal to candidate (however imperfectly estimated) come into play. A hiring manager's job is to pay an employee less than the value they generate, but as much or more than they would get at a job they like just as much.
Paying a Utah programmer 80 cents for what a SoMa dev gets a buck for sends the message that (a) you could pay either of them more than a dollar but (b) you could replace either of them for less than .80. Yet (c) for some reason you want them both to have the same left over after paying for their very different apartments.
> Pay is a reflection of market demand, not the monetary value you bring to a company
Market demand is itself based on the perception of the hiring parties of the value you would supply. Companies hire people [0] only when they expect that that the cost of doing so will be justified by the return.
But, yes, I agree that supply and demand set price, but I just disagree with the idea that those are somehow unrelated to value.
> Walmart wouldn't function without someone at the register, but how much "value" that person at the register brings doesn't dictate their salary.
The value sets an upper limit to what WalMart will pay, just as the perceived opportunity cost to the worker of taking the job sets the lower limit of pay they’ll accept. The former is demand, the latter supply.
[0] outside of hires where a decision maker is funnelling business resources to the hired party as a kind of personal gift, which do happen, sure.
That sounds very much like what said about setting an upper limit, yes.
> It's meaningless when you are talking about giving paycuts to people you know are in cheaper locations.
Sure, each side is actually seeking the other sides limit price: as an employee, you demand what you think you are worth to the employer; as an employer, you offer what you think the employee is willing to work for (both sides, of course, present this as reflecting their own side rather than their guess of what the other side will accept.)
This gets weird when an employer continues to try to do this but tries to have salary transparency, because then they either have to abandon elements that go into their estimate of what employees will accept or make it clear that that' they are targeting an estimate of the employees lower limit.
What lets you pay them less is not their lower costs, it's the unavailability of higher pay in their area. So if you're going to do it, size it that way and, ideally, call it what it is.
If employers valued the labor of remote workers as much as local workers, we wouldn't be having this conversation. Tech isn't a monopsony.
They'd all be competing for the same national pool of workers, and anyone that wanted to use cost of living as an adjustment for their offer would find that another company would beat them by offering the market rate for the fungible labor.
There isn't a great answer for this. Building housing in the places where tech companies have big offices helps, but a lot of folks don't want to live in cities or move halfway across the country.
It costs less to live in some places... if someone was willing to pay me SF wages to live in suburban Texas... cool, I'm all for that. But it's stupid on their part.
Base cost of living on what goes into the employee's pocket.
Texas doesn't have an income tax... cool, you don't need to pay as much as SF to get workers who are every bit as happy. Moreover... if I paid my guy in Austin the same as my guys in SF, it'd be like giving him a massive raise and showing a lot more favoritism.
If I just have rate X to spend on salaries, then the only people who I get live in cities where rate X is a good deal. I need flexibility to hire from anywhere, attract talent in Seattle, Boston, SF, Chicago, Geneva, Sydney... you get the idea.
> It costs less to live in some places... if someone was willing to pay me SF wages to live in suburban Texas... cool, I'm all for that. But it's stupid on their part.
No one is paying you to live in Texas, they are paying you to do some specific work. If you can produce as much value as the guy who lived in SF, and will accept 95% of the salary that applicant would, but the employer passed on you because you won't except 80% of what they’d pay for an SF developer, and they hire the SF developer instead, they’ve lost money.
Location pay when the job isn't tied to a location is irrational and involves the employer losing money.
Would you subsidize other employee lifestyle costs? Extra pay for a larger home, or more expensive car, or more frequent international travel? If not, why should you pay more for the same job because the employee lived in a more expensive region, when the job is not tied to that region?
I always wonder if the reason for "Cost of Living" pay is practical. If you are paying about the market rate everywhere it means you can hire from anywhere. If you just payed some set rate for everyone it could price you out of the more expensive areas. I really wish companies didn't have cost of living pay because I really prefer the cheaper places in the US but it makes sense overall.
Nonsense. Fair pay is determined by a number of factors including local cost of living. A number on it's own is meaningless. There is a difference between price and value, otherwise there would be no difference in cost of living (a liter of milk would cost the same in any country, but it doesn't).
Let's say the cost of living in Cracozia is 1/3 of that in San Francisco. If you pay an engineer in Cracozia the same as one in San Francisco, then the engineer in Cracozia is making 3x the amount in relative terms, e.g., instead of say $150k in SF dollars, you'll be paying him what amounts to $450k in Cracozia dollars relative to his own domestic market.
Let's say the cost of living in Luxurbourg is 3x that of San Francisco. If you pay an engineer in Luxurbourg the same as one in San Francisco, then the engineer in Luxurbourg is making 1/3 the amount in relative terms, e.g., instead of say $150k in SG dollars, you'll be paying him what amounts to $50k in Luxurbourg dollars relative to his own domestic market.
This blog post rests on a thick, greasy layer of schmaltz.
Rants that start off without defining what or with whom they're arguing really come across as "Old man yells at cloud".
Of the limited samples I've seen "cost of living" is a fraction of base salary. They're not paying so that on-site staff live a champagne lifestyle. It's "how much does x need to live, eat and get to work". Cheaper housing, zero commute, etc all mean remotes "need" less to achieve this level.
Labour is also a marketplace. A big city, for all its sins, attracts more companies. And there are usually many times more on-site positions than remote (role dependant). So the best employees from a distinct location are scarce, and competed for.
People who work remote can be adult about this. They get other non-monetary benefits from not having to commute, seeing their family, having a bigger house (hey, even just owning their house), lower rates of crime, etc, etc, etc. Living in a city can be hard work in itself.
More than anything, they can argue their worth, they could move, or they could find another job.
> It's "how much does x need to live, eat and get to work".
Employers should not care about these things. It should be, "I need three devs and I can afford to pay each $X." It absolutely should not matter where they're located if they're allowing remote work.
Edit: Let me put this another way. You live where the company headquarters are but they're a remote company. During negotiations, do you think it would be fair if the employer asks if you ever intend to move? They should not be allowed to ask this any more than they can ask a women if she intends to ever have children. It's not their business and it should have no bearing on if they hire you and at what rate.
> During negotiations, do you think it would be fair if the employer asks if you ever intend to move?
Yes. Clearly you are ignoring the reality of different labor laws in different places, and making sure the company is prepared to meet the needs of the law.
For example, when I worked at a small 5 person startup based in NYC, we hired a remote dev in St. Louis. Our cool tech-startup HR software _was not able to pay him_ because they were not prepared to operate in St. Louis. It took like about a month and a half to get that sorted.
Your logic is nice, but it fails to account for the realities of the world. Buisnesses will reduce risk in any way possible, and the situation you are describing is literally unlimited downside risk for the business. Those are nice signals to employees but create new overhead and problems for the business.
> I need three devs and I can afford to pay each $X.
Okay so far, but if market prices dicatate that they could hire four devs for $X0.7, then wouldn't it make sense to do that? Or still hire three devs at $X0.7 while reducing the company burn rate and extend their runway?
Don't get me wrong, as an employee I'd be thrilled if an employer wanted to overpay me in relation to my peers (meaning those who do what I do, where I do it), but I'm not going to expect it.
Considering how often remote companies turn into in office only companies, any company paying remote workers less than they would make locally is also basically saying to their remote employees, "you're only worth it if we can get you at a discount." I'm sure that attitude that these companies hold, often unknowingly, does wonders for output and productivity. /s
Obviously market forces should dictate what an employee should be paid, but I think the problem here is what we consider the market to be. If you are hiring remote employees from all over the world, the markets you are hiring from are not San Francisco, New York, London and Bordeaux, it is just one market, the global remote employees market (excluding timezone considerations).
I would define an employer market as the set of all the employers that a given employee is willing to work for, should he receive a competitive offer. Some Canadians really want to stay in Canada and therefore their market is Canada, others don't mind moving to the states and therefore their market is Canada+US (and obviously they move to the US). Canadian employers claim to pay "market rate", when in fact they only do so for employees unwilling to emigrate.
If you have a remote employee making $30k a year in Krakow, and he gets offered $150k by a SF startup that really likes him, can you reasonably argue that he was paid market wages, and now he's overpaid? I'd say that his market value is now $150k on the remote market, and if a different employer wants to poach him they need to compete with that.
I would expect a rational employer to set a hiring bar and then keep on hiring people and raising salaries until they can hire as many people as they need. Regardless of whether that turns out to be $40k or $120k (obviously depending on productivity, salary can't grow forever). What I think is happening here is that employers (and their friends and first employees) are making an emotional decision to somehow justify them being "worth" their salaries, and almost always scale salaries down but never up, effectively hiring from their market and less competitive ones. Then they start justifying this as being "fair" and "based on cost of living", when in fact it doesn't have anything with those at all.
> I would define an employer market as the set of all the employers that a given employee is willing to work for, should he receive a competitive offer.
Isn't that a mostly circular definition? The competitive offer from a less desirable employer would simply be higher than it would be for a more desirable employer.
That wasn't very clear, let me clarify what I mean.
Let's say Bob is a programmer and always loved games, and only wants to work for game companies. Let's also say that game companies pay roughly $50k, and the Google office down the street pays roughly $200k. The market rate for Bob is $50k, not $200k, because he is unwilling to work for Google (since it's not a game company) and they are therefore not part of his market. His market is only game companies.
I think examples of this happening are:
- game programmers making considerably less so than other programmers simply because their employers can pay less and still get enough applicants
- big tech companies paying through their nose because a lot of people are unwilling to put up with their hiring process bullshit
- finance companies in London paying a lot because a lot of people don't want to touch them
So for programmer Joe, the market is the intersection of companies which would hire Joe and companies which Joe is willing to work for.
Pay reflects replacement cost, not value the employee adds to the company. This is why janitors don't make six figures in SV even though the office would shut down without them. Replacement cost of staff in remote markets is often lower than local staff in SV. That is all that matters.
From whose perspective is this written? The employee? The employer? Current employees? Future employees? I'm not really sure.
On all four of those options, there are arguments to be made in either direction, and I think the idea it is a single, one size fits all question is misplaced.
Part of the allure of remote work is reduced cost, and longer runway. On the flip side, remote workers get to offer a discount in return for vastly larger employment options despite some additional problems created by a lack of physical proximity. That even with the discount it is more money than locally available is a double win. A universal change would also change hiring. I doubt many people would hire equally qualified, equally paid workers remotely versus in-house.
I think that proceeding from an unclear perspective makes the conclusions less relevant, and misses some of the nuance of the question, on all sides.
I agree with this article, but I also think a lot of the comments on this thread that disagree raise some good points. One point that I haven't seen raised is that if if it became a trend for companies to pay the same high rates, regardless of worker's location, it might help reverse the "brain drain" that a lot of small places in the world are experiencing these days. Ultimately, a company can choose to justify the rate they pay in any way they want, but personally, I tend to prefer working with companies that pay the same rates regardless of a candidate's location, race, gender or citizenship. Companies that pay based mostly on skill and experience seem (to me) to be correlated with companies that value treating employees fairly.
Most of this isn't exclusive to remote work at all. The American office pays more than the UK office, the New York office pays more than the Miami office. Of course it's BS, pay never rewarded people equally to begin with.
But in that case, you're paying people for a different bundle of agreed job duties in each case, where one important differing constraint is location.
I just moved from NYC to Montreal. Same time zone, cheap to visit NYC, I can work legally in both places (and Canadians can easily visit NYC on business even without being American), etc.
A remote employer shouldn't change my salary much based on that - if anything they should raise it if they already deal with Canadian/Quebec payroll/benefits, since NYC benefits cost them more, or lower it just enough to compensate for the added compliance and travel burden.
What exactly is equal? What is the correct amount? You really need to dig into these concepts to give a cogent answer, and look at how everything else works on the market. There's nothing unusual about this particular issue.
Would you pay someone in India the same salary as someone in San Francisco? You could argue that you'd be screwing your American employee in relative terms. The alternative is not to hire Indians if the cost is the same.
If any company does this to you they are clearly telling that you are just another cog in their machine and they primarily value the number of cogs over the productivity and value of an individual. Use that information as you will.
I've been working remotely for more than 4 years and never accept cost of living pay. Of course, I don't make Silicon Valley salary but I'm paid a reasonable rate based on my experience not where I live.
I'm about 2 years in on 100% remote. When I moved from one state to another did my employer care that my phone/Internet, my car insurance, my health insurance and cost of food was higher? Did they care that if I hire some guy to work on my house his rate is twice what it was where I used to be? No, and I didn't think they should care. I get paid what they think I'm worth. How and where I spend the money isn't their problem. So I agree, I don't make SV wages, but I sure can't complain - especially when I get to live where I want to live. It is hard to put a price on that.
I always wonder what the behind the scenes really looks like at places that do this. For example, would a hiring manager say, "this person really would be my top pick, but lives in SV. Instead, I'll pick the candidate in Omaha I'm not so sure about and that's 1/2 of my budget so I can give myself a bonus later."
Basically I wonder what that tipping point in pay differential between candidates would need to be to sway a decision to hire someone less skilled or desirable. (Not to say those outside of pricey metros are less desirable per se).
It's not about "cost of living". It's about "You're willing to work for less money" and "you have fewer alternative options than this offer". If you're willing to agree to work for less than your teammates who live elsewhere, that's up to you.
That's just how free markets work.
(I say this as someone who worked for a US-based company out of the Toronto office for a long time, getting less pay than my equivalents elsewhere)
We don't think cost of living make sense. We do think paying market rates is the way to go. Market rates vary around the world and so does our compensation.
As you well know local market rates are very much tied to cost of living, so you deny believing in cost of living but in effect are adjusting salary based upon cost of living.
And sometimes the best people live in cheap places and still ask for a lot of money.
What you're saying is self contradicting, and in any case GitLab does take cost of living (rent being the largest part of that) directly into account when calculating compensation.
The upper bound of salary is determined by the value that employee provides (or is expected to provide over their time at the company). But more realistically, pay is determined by the amount of money required to prevent an employee from quitting. This leads to pay differential by city, country, etc.
Cost of living adjustments make no economic sense, but that doesnt mean that peopler remotely should get the same income as people that work in-office.
It is very easy to find out how much employees charge in the US, but not so easy for remote. You can find remote workers from oversees at 30U$S, while engineers in SF make 70~80U$S on-site.
Also remoting as a contractor, when it includes differences in benefits and costs, compound: no lunches, office space, etc is very valuable to an employee and costly to the company.
OTOH, the employees that say that they should be able to make the same money working remotely because they provide roughly the same value really do not understand how fierce the competition for remote is, and how low their productivity, percieved or not, can get from that switch.
I'd support a law that says you aren't allowed to ask where someone lives.
This would mean that working a remote job in SV pays the same. Which would mean workers in SV would have an incentive to get out of SV which would mean little pockets of cool would pop up as developers realized they could do things like move with a group of peers to a small town and still make SV wages.
This could help alleviate pressure from the SF housing market.
What, so companies are supposed to just magically stop having physical operations?
What you're proposing is completely insane. No reasonable business owner would put up with it, and hiring in any sector beyond menial service industry jobs would disappear from whatever jurisdiction enacted that law, while management works on spinning up operations elsewhere.
> What, so companies are supposed to just magically stop having physical operations?
If someone is applying for an on-site job, why does where they live matter? The duty is to be at the specified place at the specified time, how they acheive that isn't really the employer’s concern.
I'm simply saying don't ask your team where they live -- let them decide how far they want to commute. Also, for remote jobs, there is no reason to ask where someone lives.
Is it insane to say "don't ask people where they live, hire them based on their merits and abilities not on where they sleep at night?" I don't think so.
Negotiation is an often-misunderstood part of a market economy. It's not good or evil really, it's just a part of what makes a market function in the face of anything more complicated than a take-it-or-leave-it offer.
I think the author just doesn't understand negotiation. I am no expert either, but perhaps they should read a couple books on the subject.
You're probably right, but a lot of these points aren't particularly strong dude. You'll be more listened to if you make reduce the entropy of your arguments.
> They need to set a price they're willing to pay for a job and hiring based on that.
The problem with this line of thinking is that employers don't actually need to do this. There are no external pressures that would force this behavior, so why would they bother?
in my previous workplace, we had remote engineers from Portugal and Kenya, both cheap countries to live. we paid them based on their local market rates. I still don't know if it's good or bad but I do know that if you'll pay someone in Kenya a SF salary it will unbalance the local market.
EDIT: why downvote? i simply describe a situation i had at the past with my company.
Why should an SF company worry if their hiring someone in Kenya with a wage proportionate to the value they receive raise the overall wages of the Kenya market to stabilize with the SF market? It's better for Kenya overall if one of their markets increases in value, so don't worry, Kenya won't mind. ;)
Why would a SF company pay the employee in Kenya more than they need to? They aren't trying to help out Kenya. They are trying to get the best workers they can for the cheapest that they can.
If they don't do some form of adjustment by location, they will either end up paying more than they need to for people in locations with low wages or they will get outbid when trying to hire people in locations with high wages.
> Why would a SF company pay the employee in Kenya more than they need to?
Let's say an SF company limits max pay for Kenya remote employs to 10% of the maximum that Texas remote employees would get paid for the same duties, which is in turn 80% of the max that Bay Area remote employees would get.
The the actual applicants, of equal ability, are a Kenya applicant who will accept a minimum of 10% of Bay Area pay, a Texas applicant who will accept 85% of Bay Area pay, and an Oakland applicant who will accept 100% of Bay Area pay.
The first two don't get hired because a mutually acceptable salary can't be agreed, the last one is and the company pays 10× what it needed to.
It makes some sense to scale offers based on factors that you think will shape what people will accept, except where this is prohibited by law (e.g., protected class), and location may fit within that [0]. But it doesn't make sense to adjust the limit of what you accept that way.
Of course, if you try to have a consistent transparent salary methodology, you either have to give up location-based offers or accept the inefficiency of location-based pay limits. But the whole point of salary transparency is to avoid the perception that people are being paid differently for the same work based on non-germane factors as a way of exploiting people from disadvantaged backgrounds, so why you'd keep location-based limits with transparency is beyond me.
[0] Or may not: location clearly correlates with various protected attributes, which may get you bit by disparate impact if location isn't measurably linked to value.
Of course, but that is just a badly designed pay scale. Most companies intentionally avoid salary transparency because it makes them pay more than they need to in some situations and get outbid in other situations. Even companies that do have transparent pay scales usually build some wiggle room into the scale, e.g. you are hired as a Senior Developer instead of a Developer or a Lead Developer instead of Senior or you get a higher experience modifier or something like that.
So the company adjusts the price it is willing to pay to the Kenyan and Texan employee and then they get hired. This happens all the time, paying the market price.
> I still don't know if it's good or bad but I do know that if you'll pay someone in Kenya a SF salary it will unbalance the local market.
It seemed to imply that for a company that was trying to do "good" as opposed to getting "the best workers they can for as cheapest as they can", it might be bad that they unbalance the market in Kenya in the sense that if SF regularly hired based on the value they receive then employers in Kenya might not be able to keep up with the rising wages. My reply was, basically, it's not bad for Kenya overall. Sure, it's bad for the SF company in the sense that it costs them more, but if we're talking about if it's generally a good or bad thing to happen, then it's good for a company that is trying to prioritize doing good over being cheap.
In the end, I don't think we'll see a trend where companies prioritize their employees over greater profits. This is a matter of workers becoming as good at negotiations as companies, and just as companies try to lower the price by looking at worker's cost of living, workers should try to raise the price by looking at the value they'd be giving to the company. If the majority of workers did this, then the price should effectively rise, and provide a more equal quality of life overall. The difficulty here is getting workers to learn this and be as effective at negotiating as human resource workers that have specialized in doing these negotiations. It also doesn't help that there's a general culture, which is probably stronger in developing countries, where employees try to work hard beyond what they owe the company for the honor of being labeled a hard worker.
EDIT: Changed "morally good or bad" to "generally a good or bad thing to happen" and "being good" to "doing good". I meant to match shubidubi's use of good or bad, rather than imply that it's immoral for a company to negotiate.
Probably more about golden handcuffs than anything else, if I’m getting paid 3x more than anyone else can pay me, I’ll never quit, even if I hate the job I’ll just do the bare minimum to get by
This is the reason it's risky as an employer to overpay someone's market value too much. It removes all incentives for them to leave even when they are miserable, which is not good for you as an employer.
If they're miserable for a fixable reason, work with them to fix it. Otherwise, give them a gradual reduction in the above-local-market surcharge during a goodbye transition period.
Perhaps your experience is not down to the engineers being crappy but rather to you not being able to work with them appropriately, after all you are guaranteed to be the common factor in all of your working relationships with offshore colleagues
So does opening a physical office in a remote location suddenly make the idea of having “local pay” valid again? Why?
And if not: should all global companies pay equally around the world to anyone who provides the same value within the company? That’s a nice thought but it doesn’t feel realistic.
As a European developer for a US firm I’d love to get what US devs are paid. But for that, they could hire two of my neighbors instead of me, so why would they.
Companies arent paying for produced value, they are maximizing produced value and minimizing cost.