So long as companies pay proportionally less when you work from a lower cost-of-living place, as most seem to do, it's not going to become especially popular to work from a cheaper location. And why should they -- being able to work remotely is something workers want, and companies have the perfect information of your permanent address; supply and demand dictates companies will continue to be able to get away with this kind of policy. If it works the other way around, and companies will pay more when you move to a more expensive area, I expect California to become _more_ popular, not less.

I think you are discounting the differences in quality/types of living between locations. Even if the an employer pegged compensation to regional median income, you can have differences. Median income in sf might afford a small apartment while median income in Wisconsin might afford a large house. Some people may prefer the latter.

For in demand jobs, the employee has the leverage and cost of living adjustments go away.

I did consider this. There are many things (especially consumer goods, like cars) that cost more-or-less the same regardless of where you live. And that's to say nothing of intangible advantages of many of the more desirable / more dense areas. Your point is taken, but I think for every person who prefers the cheaper location, you'll find one who prefers the more expensive location. And so I stand behind my previous comment.

I don’t have any data on what people will prefer in that situation, and am happy to cede the point. However, this is only the case in when the employer has all the leverage. When I have to fill a hard to fill position, I don’t care about local cost of living. This is especially true for contract and consulting work

It's not so bad. I'd gladdly take a 33% pay cut to save over a million dollars on a house. Plus many of your other COL will be half too. Plus, you'll pay less in taxes too. Earning a decent income in a high COL area can be quite punitive.