Should your pay be reduced if you move somewhere cheaper? Well, like everything else, the market gets to decide. So the answer is probably “yes” because of market pressure.
Like my father used to say in his own version of English, “you don’t get nothin’ for nothin’”.
The article talks about fairness. But there is much more sides to fair salaries. I wrote about it some time ago
"The reason for discontent and thoughts about unfairness is that people have very different ideas about what is fair. They base salary fairness on different things. Some think it’s fair to base salary on past performance, current performace, past performance and future potential, needs, equality, experience or current market demand."
Market demand is the correct answer. None of us would be making six figures if not for the other nearby employers who would like to hire us. Before the web happened, we were paid like accountants.
> If you hire engineers when the market for engineers is tight, you might overpay compared to your existing employees. A Junior developer might end up with a higher salary than your senior guys.
It's on you to know how much your competitors might offer to lure away your senior devs, and deter it. If you wait for them to negotiate, you might lose some of them.
What if you drive around the country in an RV and call SF home for one month out of the year? If you've got an address there and spend more time in California than any of the other states you visit, seems like you'd be a Californian resident.
You will need to pass California residency test (probably being in California for more than 6 months).
Given the company is employing you, they should know where you reside.
If you're working through another company you could give an address to your actual employer without being resident.
It's not unfair. It's a voluntary transaction, in which both parties benefit. Both companies and workers have always behaved in a profit-maximizing way.
Voluntary transactions that are profit maximising and benefit both parties can still be unfair.
For instance, most people accept that for the same job and all things being equal you should pay a black/white person the same wage. If there was a job posting that said ‘we pay this skin colour X and this skin colour Y because according to our analysis people with darker skin tones are willing to accept a lower wage’ there would rightfully be outrage. It would be unfair, while being a voluntary transaction which is profit maximising and in which both parties benefit.
I know you aren’t arguing for that though - we accept as a society that we shouldn’t pay people different based on race, but lots of people do believe that we should pay people differently based on where they were born and what visa status they hold. I personally think this view will change over time as globalisation and remote working continues.
Some volontary transactions are nonetheless illegal, because to allow them would negatively affect society as a whole. The usual example is that it is not legal (as it once was) to sell yourself into slavery. Also, overly onerous contracts can (in many jurisdictions) not be enforced.
Simply put, “It's a voluntary transaction” can never be a sufficient argument for why something ought to be legal.
It's interesting you bring up slavery.
I think I should be allowed to sell myself or kill myself if I wanted to. I certainly don't want society or a government to regulate on that.
Eg. I'd rather be a slave than starving on the road, I'd rather be dead than in some particular irreversible painful medical condition.
The only actions which are ethically wrong in my book are hurting someone else or damaging / stealing their property.
Incidentally the government breaks these rules legally everyday (eg. taxation, wars, spying on people).
If it were legal to sell yourself into slavery (as it once was), we know what would happen: A lot of companies would try to push people into the position where people would feel they had no other choice to become slaves, and companies would position themselves to take advantage of this fact. We would then have a permanent class of slaves in the world, which would dehumanize them and gradually freeze the hearts of everybody who was made to interact with this system. We know this would happen because it did happen. And it was a long road for humanity as a whole to get rid of it (and we still haven’t completely).
And you would throw it all away because of some personal libertarian principle? This isn’t only about what you would like to be able to do in any given moment, it’s what this ability does to society as a whole. Your ability to someday be able to sell yourself into slavery has some value (for the principle of the thing, if nothing else), but it is certainly not worth the above-mentioned effects on society.
Your salary is only partially based on "the value created by employee" - most of it is the market forces of supply and demand. When you're remote, you're competing with a much larger number of people for the same positions.
Salary is always lower than the (expected) value of work. If the value of work was equal to salary, the employer would have to reason to do this transaction.
The price of everything is always between the value placed on it by the buyer and the cost to the seller. Not a revelation.
At the margin, they are all equal because trade continues until the gains from trade are exhausted.
In many countries and U.S. states, laws guarantee that the cost of an employee to an employer is almost twice as much as what the employee is paid. In those circumstances, the potential gains from bilateral trade are not exhausted and people engage in that trade outside of the dominion of the state.
That's it. I believe, like in any market the top earners, who are hard to get and hurt when they go will continue to get high pay. Since even if you include the world (and most jobs don't, they include some timezones, jurisdictions only) the market is still rather small.
But if you're just the average developer, like most of us really are - the higher competition will surely make it harder to negotiate higher pay.
> In many countries and U.S. states, laws guarantee that the cost of an employee to an employer is almost twice as much as what the employee is paid.
This might be true at the lower end close to minimum wage, but payroll taxes are a specific % (usually around 15% at the federal level, and the employee pays about half that) and insurance and other benefits are typically a fixed cost per head (15k to 30k per year at most of the places I've worked). The only thing that might be variable are things like 401k match. Once you get to six figure salaries, the fully loaded cost per employee is 120-130% of their salary.
> Your salary is only partially based on "the value created by employee" - most of it is the market forces of supply and demand.
Value created is the driver for the demand side. Yes, the supply side will differ regionally, but for a service that isn't differentiated by the region it comes from, that doesn't matter—the law of one price should, in a competitive remote hiring market, prevail equalizing wages for remote work. Firms trying to normalize location based pay are trying to short-circuit the law of one price—or at least slow the development of equilibrium by introducing friction—by way of creating artificial market segmentation, which can only work so long as the market is not competitive because of either a monopsony or an explicit or tacit agreement not to compete for labor.
The public discussion that passes for transparency and explaining to prospective workers isn't just about that, it's most signalling to other employers to get them onboard.
> Firms trying to normalize location based pay are trying to short-circuit the law of one price—or at least slow the development of equilibrium by introducing friction
Considering the firms lowering the prices are currently paying far above the median in global wages, they’re doing the exact opposite of short circuiting the “law of one price”.
The whole reason for paying higher than median wage was the friction of being geographically located in high demand areas.
The author argues against fair and equal salaries because… T-shirts made in Bangladesh might become more expensive? Because people in foreign nations might be paid more? This feels very similar to the common arguments against raising the minimum wage, and I really don’t buy it.
I didn't read it as arguing against or for anything. Rather, I read it as "I really want <this>; extended to its logical conclusion, that would also suggest <this> which I don't want. Conundrum!"
It even says at the end, "I’m not here to make any grand pronouncements about globalisation… My only point is that, when it comes to “location-based pay”, maybe we should be careful what we wish for." I take that as a pretty explicit "hey, this is difficult and I don't have a good answer".
The value of a T-Shirt is pretty low and manual labor can only produce a few T-shirts per hour. That forces T-Shirt production to go to low cost labor countries. If you could somehow train those workers to produce 10x as many T-Shirts they would also get paid 10x as much.
There simply isn't enough value to pay them more. Software is the opposite. Each worker produces a lot of value so companies can afford to pay them more.
A few decades ago western countries were worried that Japan would take over the electronics market because they could produce much cheaper there. In reality Japan went up the value chain and Japanese products are just as expensive as in any other western nation.
Mass market T-shirts are worth some maximum amount to consumers. It’s a circular argument with its center rooted in this fact.
A T-shirt manufacturing employee’s wage is capped as some fraction as the value of that shirt to an end consumer times the number of shirts they can make in a year.
But how much would consumers pay for clothing if mass-market clothing (which is only possible due to low wage labour) wasn't available? What with clothing being pretty essential to everyday living, I'd guess quite a bit more than the current market value of a t-shirt.
If you’re going to charge $100 for a shirt, I’m sure not going to have drawers and drawers full of your shirts. The first reactions will be sharply reduced consumption, increased repair and secondhand purchasing, long before people are going topless.
I can't find it now but I read an article once with a title like "The $10,000 Shirt" or something like that, which argued that in medieval times, the amount of labour that it took to produce a single shirt would cost about $10,000 at modern minimum wage.
If you were a peasant back then you might have owned two shirts: your regular one that you wore every day, and a 'fancy' one for church, weddings etc.. When your shirt got too ragged you cut it up and tailored it into clothes for your children, or used the material to patch up holes in other clothing. When even those got too decrepit you'd use them as kitchen rags etc. until they literally disintegrated. Cloth was too valuable to waste!
We truly do live in a world of abundant excess in the modern era, and we should appreciate it.
> We truly do live in a world of abundant excess in the modern era, and we should appreciate it.
We do, as in you and I, sure. But isn't the point here that those making things like mass-market t-shirt for very low wages are not sharing in that world of excess. At least not in an equitable manner.
Why is it that these people should work for low wages so that you and I can enjoy cheap T-shirts, but I'm not expected to produce websites and computer programs for low wages so that people can enjoy cheap business tools?
Scarcity of people who can create websites and computer programs as compared to the demand for that vs the lack of scarcity of people capable to make T-shirts vs the demand for makers of T-shirts.
This is in large part driven by most website development being semi or entirely custom. (People who use Shopify to make storefronts or Facebook to make company landing pages don’t make the same amount as Shopify or Facebook devs.)
It seems to me that much like remote workers often get location-based pay which is lower than that for someone for doing the same work in a location like San Francisco or NYC, it's less that there is oversupply of t-shirt makers, and more that the pay rates of their local market are lower overall which puts them in a weaker bargaining position.
And when you start looking at why that is you get pretty awkward answers like: because of selectively enforced free market ideals where capital is free to move across borders but labour isn't. Which are ultimately backed up by military power.
A thing is “worth” whatever people are willing to pay for it. T-shirts are cheap because they are cheap. Diamonds are expensive because they are expensive. But perceptions can be changed, and circles can be broken. These things are not unalterable.
If you doubled the hourly wage of the workers in Asia or Africa, the price of a 20 Euro T-shirt sold in Europe would increase by.... 20 cents (incl. VAT).
Companies do this because they are not hold liable for the environmental damage done locally and by the transport, not even mentioning the low safety standards etc.
One thing about this is that the money saved by paying employees less, goes into someone’s pocket. Senior management, or the owner. Some people will benefit massively from this. And don’t forget zero office costs since everyone is remote. I’d also expect to see coworking spaces in some of the larger towns to be thing soon too.
If this continues, expect to see a lot of high-paying jobs leave high earning markets like San Fran and New York as pay decreases to meet lower cost cities and countries. Working from a lower cost area could be all the market supports in a few years.
>Working from a lower cost area could be all the market supports in a few years.
At which point, SF and NYC would be low cost areas as well. This won't happen for various reasons but real estate is determined by demand of which employment opportunities are a big component outside of resort communities and similar.
Companies have no business telling me how much they think my life should cost nor how I should spend my money. If they're paying "lifestyle" choices, based on bullshit cost of living make believe metrics, they should reward my lifestyle choice to travel constantly and pay that cost of living accordingly.
I'm not surprised tho, remote work is still an embryo, I'm gonna keep pushing for what I want but we can't expect too much.
When I'm rich and successful I'm gonna pay a standard global rate for the each role. No bullshit country adjustments. The market will just have to eat it
Markets are two-sided. If you pay a single, global rate, you may find yourself setting that rate such that you’re priced out of certain markets and lack access to money-motivated talent there.
Hahaha thanks. I'm not smart enough to consider second order effects at this point. It's more of a personal crusade that I know is right so I'll just have to do it see what happens .
What will happen, unless your product is unique, in high demand, and has a large moat, is your customers will purchase from a competitor selling goods at a cheaper price. See what happened to US textile and manufacturing industry.
I suppose I'm idealistic to think that paying people more (what I think of as) fairly will better motivate them retain them and lead to better productivity. And also we'll be able to attract better people everywhere to produce better product. I could be wrong. Sad if so, but it's worth a try
Motivation is a complex topic to be sure. An argument that has always resonated with me (and I bring up mostly to see if we can find a good rebuttal here) is that if I’m paying someone wildly more than their second-best alternative, they are in part motivated (to keep the gravy train rolling) and in part trapped (“I better learn to deal with this, because I can’t go anywhere else without massive sacrifice for my family”).
The latter can lead to “I’ll quit mentally but not actually” which is horrible for all parties. (I’m not saying that’s an excuse to underpay people “for their own good”, but I think anchoring pay to an employee’s actual market makes some non-zero amount of sense.)
> An argument that has always resonated with me (and I bring up mostly to see if we can find a good rebuttal here) is that if I’m paying someone wildly more than their second-best alternative, they are in part motivated (to keep the gravy train rolling) and in part trapped (“I better learn to deal with this, because I can’t go anywhere else without massive sacrifice for my family”).
The rebuttal to this argument is that if you’re selling a commodity product, then you’re going to get steamrolled when Walmart/Amazon/Aliexpress/Multinational company comes rolling through and offers a comparable option to your product at 50% less by arbitraging labor costs.
I agree with that observation. I don’t understand how that rebuts the presumption that I should pay market wages to avoid trapping overpaid employees in jobs they don’t find fulfilling.
It probably depends on what their intrinsic motivation related to the job is. Do they find it fun, mentally challenging (in a good way), etc,? If they're motivated in that way, the extrinsic motivation of above-market pay is probably a good thing. But if that's their only motivation and they'd rather be anywhere else if it weren't for the money, that's a negative.
100% agreed. My hypothesis (previously unstated) is that some slice of people who start out in the first bucket inevitably turn into the second bucket. (They get bored of "doing the same old thing" or they "just want a change".)
All of the things you posit do occur. Costco employees are better, and better paid, than Walmart employees. That doesn’t mean both firms can’t exist in something close to the same market niche. And Costco’s strategy is not infinitely scalable. Paying more gets you better employees. It doesn’t automatically get you more profit.
There's a few segments of the customer market that will pay varying premiums for more customer service/quality, but only so much. Costco exists only in areas with above median wage shoppers, and can afford to exist by offering a limited selection of items sold in bulk. Similarly, a handful of retailers can afford to exist in this market, such as Trader Joes/Nordstrom/Apple/REI/etc, but most consumers are fairly price conscious and won't hesitate to shop elsewhere that offers lower prices. Or they can't afford the premiums for these places in the first place.
> Markets are two-sided. If you pay a single, global rate, you may find yourself setting that rate such that you’re priced out of certain markets and lack access to money-motivated talent there.
Except for differences imposed by differential transaction costs, freely competitive markets have one price for a given good. If there's not a single, global rate for a nondifferentiated good, it means it's not a competitive market and a cartel or monopolist is imposing segmentation.
If there's some places where the supply (in the economic sense of the function relating price and quantity delivered) is restricted so nothing is delivered at the global market clearing rate, then that place just isn't a source of the good.
The benefit of segmentation for buyers isn't that they get to avoid being priced out of markets where you pay more for the same service, it's that imposing segmentation lets you reduce the price you pay to suppliers in low-cost regions to a level below the global market clearing price.
> If there's not a single, global rate for a nondifferentiated good, it means it's not a competitive market and a cartel or monopolist is imposing segmentation.
Much of the work of product development and marketing is creating differentiation (real and perceived). Is a Mercedes E-class different from Toyota Camry? Is 90% lean ground beef from Whole Foods different from 90% at Trader Joe’s?
Is economy class 21-day advance, Saturday night stay required travel different from a walk-up ticket out Tuesday back the same Thursday?
> Is a Mercedes E-class different from Toyota Camry?
For this example, obviously they are different. The job of marketing is to justify the difference in price for whatever differences the Mercedes offers.
> Is economy class 21-day advance, Saturday night stay required travel different from a walk-up ticket out Tuesday back the same Thursday?
Yes, for the seller, guaranteed payment 21 days before is different than a volatile payment minutes before the goods expire.
> Much of the work of product development and marketing is creating differentiation
Sure, and that's definitely an important phenomenon, but it is not really germane to hiring for a role and paying differently for the exact same role depending on where the successful applicant lives.
> If they're paying "lifestyle" choices, based on bullshit cost of living make believe metrics, they should reward my lifestyle choice to travel constantly and pay that cost of living accordingly.
Why not ask them to? Companies pay for people to get things like masters degrees all the time.
I mean if you have a strong network in multiple cities that you're letting them access then they should absolutely pay for that. Or if you're traveling around and using the stuff you learn to improve your design skills or whatever.
you can do it, my current single contract pays 325k, and i'm just doing jquery(much to my dismay) and C# for it, all remote... been doin it for almost 3 years now. I live in a not very popoulated area . I've learned that there are plenty of very high paying jobs with a low bar..the things people go through to work for these big companies for such little pay and having to live in cities blows my mind. The best part is my current job leaves me lots of time for sidework to and to get experience in technologies i prefer to use.
- you're making this up, and have no conception of what you'd do
- you won't be able to hire people from places where the cost of living is high, as your global rate will be lower than competitive salaries there
- you won't survive, as your competitors who do location-based salaries will be able to offer your customers more value for the same price, or same value for less price
Even across the US, it's hard. Basecamp is an outlier.
Now, in practice, a fair number of companies probably don't have large systematic salary adjustments by US location, including remote generally. But they mostly do it by just not paying market rates in the highest paying markets like the Bay Area and, especially, not going toe-to-toe with the likes of Google and Facebook.
I hope you are irreplaceable then because they are paying you based on a) how many people are competing for your job and b) how many other companies are competing for your skill set. If you are fully remote then you are competing with at least as many skilled people as are in your time zone and at most the number of skilled people in the world that speak the same language both of which are a huge increase over the number of skilled people in your metro area. The number of companies competing to hire you will also have gone up but I doubt it is on the same scale.
I do not want to debate the fairness of it, because it is way too complex for a comment.
But there is another downside of pay cuts for remote workers: A remote worker does not have access to the same market as someone living in a hot cluster like The Valley.
A real-world example from Europe: If I take my Berlin salary and live just 50km out of the city, I am easily one of the top-earners in that area. Naturally, I lose easy access to many offerings of that city, but that's part of the deal, I think. Now if I ever wish to switch employers, I can look in Berlin, but I am at a disadvantage if many companies insist on on-site work. If they don't, I compete on a much larger market with many more would-be employees. This problem should be reflected in payment, I think.
So from my, completely egocentric, perspective it would be ideal if companies demand on-site one or two days a week, so I can choose the best spot for living in a larger area, but still only compete in a limited market.
>So from my, completely egocentric, perspective it would be ideal if companies demand on-site one or two days a week,
Pretty much all the surveys I see suggest that this will be the most common outcome. Maybe roughly 20% fully remote and 20% mostly back in the office. Though doubtless not uniform across companies. (I expect my company will tilt more towards remote given that we were relatively heavily remote pre-pandemic.) Which implies that most will probably remain in the orbit of a larger metro; many of the jobs aren't in the city anyway. And many people will want to stay accessible to a metro for other reasons.
I had about a 45 mile commute most non-travel days at one point for a while. (I did take the train some days.) It was pretty doable 1-2 days per week but wasn't sustainable on a daily basis.
I'm applying to jobs now (in the UK) and I'm yet to speak to a single company that plans on a full return to the pre-pandemic normal. Everyone is either staying 100% remote indefinitely, or they're hoping to adopt a hybrid approach like what you describe.
It's a bad time to own city-centre commercial real estate.
For most people who have proven they can productively work remote, it's sort of a no-brainer. Even if they don't want to move to the mountains or otherwise go 100% remote, most people will at least want the flexibility to commute fewer days and spend some days at home/out-of-the-office for all sorts of reasons. (As well as more flexibility in how close they need to be to an office.)
I expect a lot of companies just don't really know how things are going to play out right now. So, unless you know that a position can be 100% remote for all time, the conservative thing to do is to basically say "You're going to have to live somewhere that allows you to commute in a couple of days a week." You don't want to put yourself in a position where you've told someone they can live anywhere in the country they want and then, in nine months, tell them "Just kidding. You need to move to London."
Notably, the market is such that a skilled candidate going in and explicitly negotiating how remote they want to be has a good shot at getting it approved. At least if aiming for e.g. 80% remote.
It's also notable that now being someone with longer experience in working remote - especially managing remote teams - has suddenly become a very valuable skill.
> Pretty much all the surveys I see suggest that this will be the most common outcome. Maybe roughly 20% fully remote and 20% mostly back in the office.
While intriguing as an employee, this seems very pricey as the employer. Office space is expensive. Is it worth the cost given the low utilization? Would you really miss out on an excellent employee who cannot come in the 20% of the days others come to the office? How intriguing is it gonna be to hire someone who works the same time zone, is equally qualified but only costs 30%?
> But there is another downside of pay cuts for remote workers: A remote worker does not have access to the same market as someone living in a hot cluster like The Valley.
It’s not another downside, it’s the very reason the employer can reduce pay. They are betting your supply and demand curves are moving in such a way that you will be willing to accept a lower price, because you won’t have a better option.
Let me take it another step: Every reason that it's "rational" that remote workers are payed less, i.e. not just a stupid faux-rationilization of the labor market reaching a new equilibrium, is evidence that remote work is a failure.
A world of resort-town skilled works chained to their hegemon isn't just terrible for workers. It's a terribly inefficient market: a "sharded monopsony". The very unplanned interactions that allow hot-spot workers to change jobs is also a big reason cities are such dynamic economies in the first place.
The company will pay you the lowest amount you are willing to accept. Location has nothing to do with salary rates. If they could find someone at lower salary, anywhere in the world, they would hire that person. They can’t, that’s why they are paying the current salary rates.
The company may use it as an excuse, but you can choose to walk. When enough top level people refuse pay cut, the company will drop the charade quick. Even if just 10% of high performance engineers decide to walk, that would cause major disruptions in the roadmap and cost millions in development costs.
Simply demand higher salary and negotiate. The company will make adjustments to fill the in demand positions. Be prepared to walk away and find the company that will pay the higher salary.
The concept of a “profession” or “field” is, properly speaking, meaningless, because every situation is slightly different. What is, then, this concept we have of what a fair wage ought to be for any given group of people with a similar occupation? I would guess that the concept of fair wages is a rudimentary, and emotion-based, form of unionization. If everybody can’t help but feel upset about something which is “unfair”, this is, in effect, a form of collective action – a sort of union you can’t help but be a member of.
In this light, the idea of a location-based pay can be seen as a simple hack to neutralize this de-facto union. If people otherwise aren’t unionized, this hack gives employers back the sole power in the employer-employee relationship, which was what employers wanted from the start.
One of the main problems here is that the companies have absolutely no idea how much an employee is valuable to them, or at best not until they have been working there for several years, and even then only in vague terms.
I think the problem is that the conversation is "we'll pay you X of which one factor is where you live" when it should be "we'll pay you X if you work for us, do you accept?". The reasons for people offering a salary amount is irrelevant, it's about if the offer is acceptable to an employee. If I move somewhere, I get paid the same, and if it's cheaper I get more spending money, if it's more expensive, I have to swallow the costs.
If the contract says "we can renegotiate if you relocate", that's not a contract I'd sign, but it's up to the company and employee to decide if that's an acceptable clause in the contract.
A contract which says "we'll pay you less if you move somewhere cheaper" must also say "we'll pay you more if you move somewhere more expensive" but then suddenly my employment incentivises my location. I wouldn't move from Warsaw to Bangladesh but it might make economic sense to move to Zurich. If it's in the contract that the employer must honour the movement, then they have unexpected cost recalculations to do. If it's not, and you're just hoping for a "good faith" agreement, again that's not a contract I'd sign, but others might.
> A contract which says "we'll pay you less if you move somewhere cheaper" must also say "we'll pay you more if you move somewhere more expensive" but then suddenly my employment incentivises my location
I believe this is a key point in the argument. Currently, I see only one party having an upside but no downside.
Because only one party has the upside when the seller of labor moves to a location where they have few buyers of labor.
A seller of labor that has multiple buyers can negotiate for more pay in places where they have lots of buyers for their labors (and their buyers can afford to pay).
A buyer of labor will not explicitly state this for obvious reasons, just like a seller of labor will not explicitly state they will accept lower pay if their situation changes, but every transaction in life is possible to be subject to negotiation.
To be very capitalistic about it, that is a choice that the seller makes. Why should the burden of relocation fall upon the purchaser of goods when it's the decision of the provider of goods? I shouldn't have to pay more for a product because they decided to move their manufacturing process, that's their call not mine. They can price it in to their new rates, but then it's up to me to agree or disagree if I'll pay them. But equally, if their manufacturing costs drop, I have no recourse to demand a rebate.
I definitely agree that it's strange that the same labour is worth different amounts depending on point of origin, when the goods sold is essentially information. I don't like it, either. But employers are not beholden to the relocations of their employees, it's the responsibility of the employees to negotiate the agreement.
furthermore what's to stop someone from living as a fulltime itinerant within the cheapest parts of the 2nd world while keeping a p.o box within the highest pay bracket and claiming that as their residence?
This is why I'm concerned (selfishly) that the remote work trend might end up being terrible for wealthy countries.
If you’re working 100% remotely in the US, is there really no one in India who couldn’t do your job just as well? Are you sure? There’s a lot of people in India, and they all have a much lower cost of living.
(I don’t mean to single out India, it’s one of many countries.)
But singling out India is somewhat sensible here (in a positive way). The Indian education system churns out tens of millions of new grads each year, most of whom speak English and many of whom have a strong grounding in math/comp-sci.
India has the raw materials to be super-competitive in a remote-primarily software development environment. You might single then out as they’re a place with one the best combinations of these raw materials and still a relatively low cost for daily living.
(My company is remote-forced right now and intends to go remote-first/primarily when COVID’s acute phase is behind us. I don’t think remote will be as terrible for wealthy countries if COVID is contained in 2021. Remote is hard and comes with its own set of drags. Once companies can get back together, I think you’ll see “remote but with monthly travel to HQ” or “1-2 days in office” dominate over “I never have a lunch with any colleague” modes of working.)
US tech workers are massively over-payed so it's tough to feel sorry for ourselves. I moved here from Europe and the salaries are completely absurd, especially at the junior level. People are being brought in from college, they can barely tie their shoe laces without someone there to help them and they are given 6 figures. Meanwhile I know people in the UK who are seasoned lead engineers who work hard and literally put entire companies on their backs and they make half the money.
European salaries are absurdly low. As an expat who doesn’t benefit from government services the same way an EU/UK citizen would, it’s a non starter. London is easily as expensive, if not moreso than San Francisco. I don’t understand how engineers can work for 30-45% less.
Often people are paid a 'London Allowance', to maintain their residence equitably. Their engineer/other salary being the same as places further away. I assume there is a cost of residency allowance for other UK cities that have a premium. If you move away, that residency allowance is adjusted to where you work from. Thus the technical salary is ~~flat. After all this allowance is a pass through to the landlords. Those whose parents onw London center digs do very well. I am not sure how property taxes are levied in the UK, but one would anticipare the Lords would have long since levelled that via head taxes that are levelled in some manner? Any UK people care to weigh in here?
"Often people are paid a 'London Allowance', to maintain their residence equitably.
Their engineer/other salary being the same as places further away.
I assume there is a cost of residency allowance for other UK cities that have a premium.
If you move away, that residency allowance is adjusted to where you work from. Thus the technical salary is ~~flat.
After all this allowance is a pass through to the landlords. Those whose parents onw London center digs do very well.
I am not sure how property taxes are levied in the UK, but one would anticipare the Lords would have long since levelled that via head taxes that are levelled in some manner?
Any UK people care to weigh in here?
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Reformatting for readability, sorry aurizon my brain was struggling.
Public sector jobs often have an explicit "London weighting" (or HCAS), it's set at 20% of salary up to a cap of about £7k, and decreases the further you get from central London. Some private sector firms do similar apparently, but I've never heard of it in the tech sector.
Other cities don't usually get similar supplements, even places like Cambridge where housing costs can be really high.
Property taxes are called "Council tax" here, they're probably the most regressive tax in England (the rest of the UK have slightly different rules). The amount of tax depends upon both the local area and the value of the property in 1991. Everyone who's house was work more than £320k in 1991 pays the same rate. This means in Kensington, London someone in a swanky 250 sq.m. £8million house pays £2473 per year...as does someone in a £million apartment on the next street. The person a few streets over in a grotty 20sq.m £300k studio will be paying £962 per year.
> London is easily as expensive, if not moreso than San Francisco.
As a Londoner, I find that hard to believe. London is a huge, diverse city with many industries other than tech, and the vast majority of London's population don't make anything close to an SF tech salary. If London was as expensive as SF then I know I wouldn't be able to afford to live here.
One of the things that distorts these discussions is that it's not just SF proper that's expensive for the most part. It's also the South Bay, Marin, and even parts of the East Bay. It's hard to have a decent daily commute from anywhere that's relatively inexpensive. That's not the case with most cities where a 20-40 mile drive (or even a commuter rail) to where the jobs are (which may or may not be in the city proper) can get you into fairly reasonably-priced housing.
London also has excellent public transport. (Some Londoners might disagree, but have they ever travelled? I've never been to any other large city where it was easier to get around by train and bus.) It's very easy to live in London without needing a car, which brings the cost of living down substantially.
London is very well connected in a bunch of ways (bus, tube, ferry, overground, DLR, tram, train, boris bike...) and in the centre is a lot more walkable than you might think, to the point of not really needing any of it in certain areas.
The reason we call it shit is because (before COVID) they're pretty much all pushed beyond capacity during the commuting hours, or practically all the time between the main tourist spots. Commuting in London is a truly hellish experience.
And that includes the commuter trains that are frequently delayed or cancelled while ticket prices increase above inflation every year.
The best thing that happened from covid is skipping the commute and saving the £300 a month it took to get to the office and back.
Perhaps it is local familiary. Living in Oakland and working in San Francisco I made $175k and was able to save $4,500 per month after all of my living and familial expenses. When I’ve spoken to companies in London they seemed to max out around $100k.
Whenever I looked at apartments online trying to find an equivalent lifestyle (30 minutes door to door commute, nearby parks and restauranta, 1 br 85 m^2 with good amenities) the rent always came out about the same as what I was paying ($1,840/month).
The difference being home in Oakland My hood was mostly single family homes with yards (and a few yuppy apartment complexes like mine). In London everything within that commute range seemed to be a concrete jungle, and I couldnt figure out how to find an equivalent neighborhood withot really going far away from the tech companies.
Whenever I visit london my dollar never seemed to stretch far and food / groceries / transit felt reallly spendy.
London pubtrans is clearly better than anywhere in the USA, that goes without sayyng, but was also more expensive (if I went to the office I think I paid $4 each way for the transbay bus, with a 5-10 minute walk on each end of my commute).
It’s a great city (except for the traffic. I would be terrified to ride a bicycle there), and one of my favorite things to do in life is smoke a spliff and walk down the camden locks trail.
I was recently called by a Facebook internal recruiter that claimed (I wasn't interested, so can't verify - he might have been telling bullshit) that the relatively low level developer job he was hiring for in London had a budget of around USD $165k/year. But the London developer market has very broad salary range. It's not that many years ago I worked at companies where we hired senior developers around the GBP 40k/USD 55k mark.
The 30 minutes door to door commute is the problem if comparing, as London is huge. A 1 hour commute is closer to the norm. But a 1 hour commute on a train is very different to the same 1 hour if you're driving and can't spend a good chunk of it with your face in a book or watching Netflix or whatever.
In terms of housing, my current mortgage for a 3 bedroom terraced house with a garden in London is about USD $2k/month, but that does mean living further out from the centre than what you want.
For anyone moving to London, my tip is Croydon. It has an awful reputation which is mostly unearned (it's a very large borough, and very diverse, and it's reputation is pretty much down to scale and some small pockets of the most deprived parts of the borough), and so it's unreasonably cheap for how good transport links it has in to the centre. There are places in London I might prefer if money was no object, but money really would need to be no object, as up until maybe the 3-4 million pound range you'll get more for your money here than ost other places in town.
> But the London developer market has very broad salary range. It's not that many years ago I worked at companies where we hired senior developers around the GBP 40k/USD 55k mark.
Working in London in 2007/8 it was common for senior developers to switch to contract work since it was fairly easy to at least double your salary that way (GBP 500/600 a day was about the going rate then IIRC.) At the time I remember traveling to the US and everything seeming very cheap at the 1.90 GBP/USD exchange rates pre Brexit and financial crash...
The vast majority of SF's population don't make anything close to tech salaries either. Working at a FAANG or adjacent company in the Bay Area is roughly equivalent to working in finance in London.
But even outside of the big tech companies, wages for software engineers are relatively higher in the US than the UK (90th percentile vs 75th) and the higher paid are paid more (2.6x the median at 90th percentile vs 2.0x the median.) If you compare median salaries / rents on pre Brexit and 2008 financial crash exchange rates SF and the Bay Area come out pretty similar.
Tech workers exist outside of Big Tech and well funded SaaS companies. I've worked as a person working on the internal bulletin board, planograms and point of sales devices at a retail company. I've worked writing reports at a small logistics company that specialized in getting auto parts to garages. I'm currently working in the public sector.
In none of these have I made six figures.
Part of this is locale. Part of it is I'm not seeking out those Big Tech jobs. Part of it is the industries I've been working in.
Lumping the public sector in the midwest into "US tech workers" and claiming the entire pool is overpaid is the reality for a small set of industries in (what has been) a few geographic bubbles.
> remote work trend might end up being terrible for wealthy countries
I don't think so. Most wealthy countries don't have jobs paying anything close to what Americans make. When you're talking about tech, the division is really just between America and everyone else. This is going to be really great for Canadians who don't want to immigrate to the states since there's almost no difference in talent, culture, or time zone compared to the USA but wages are about half as much at the top end.
There are lots of good reasons not to outsource to a third world country, but not many reasons to hire a remote American over a remote Canadian if a company already has a presence in Canada.
Location based pay adjustments will stop being a thing when competition for remote workers will justify it. Companies want location-based pay because they can get away with it: either they think office-first will return, or they think more workers from cheaper areas will be available, so no need to pay more. Whether this will happen remains to be seen. Personally, I think location-based pay will fail to attract top talent, so it'll diminish in prevalence over time. But my conjecture is as good as yours.
What's missing from these debates is optionality. A company pays you not only what it takes for you to do the job, but also their perceptions of your options. Two people working the same job on-site at the same company can have a substantial pay difference even without negotiation because one is self-taught and has only high school while another has a master's degree from Stanford. Yes, the former's competent and shows drive and ambition and that's nice. The company just scored a dark horse. But the company also knows the former employee (likely) isn't as aggressively courted by other companies which can pay well, so they feel they can pay that person less.
If you're the only person in the world who can do what Facebook really needs done, they'll pay you $1M+ to do it from anywhere in the world.
I agree with you. It will take a while for the adjustment of remote to re-settle to a new norm.
There is one other thing that is a small factor in all of this. I'm not saying it is unsurmountable or anything but local/state/country taxes are a factor. We hired someone remote recently who was in Canada. We had to create a new company in CA just so we could pay this individual. For salaried/W2 style employment, there can be a non-trivial amount of extra legal/finance work for the company. Hiring local-ish avoids this. Obviously, having everyone on a 1099/Contractor style employment would avoid this too but most people want salary plus provided benefits. Again, a larger company may easily be able to absorb these costs but they aren't zero.
There are SaaS services now that handle this problem, but honestly I am glad you did that. Most US company just hire as contractor in Canada even if it is not legal per Canadian law and it will get workers in trouble pretty soon I think. The CRA will crack down on that loophole and employees will be in trouble.
A worker sells their labor and a company purchases it.
When everyone lived in SF, a worker wouldn't accept a job paying below $100k because they wouldn't be able to afford to live. That same person in a cheaper state could negotiate a lower price, but most of the talent was saturated in SF. Now that everyone has left SF, there's no point in paying those prices if they can still retain you for a lower wage.
> But the company also knows the former employee (likely) isn't as aggressively courted by other companies which can pay well, so they feel they can pay that person less.
The corollary is that if you can reliably find and hire such people you’ll have a massive competitive advantage.
If you're that one person who can do that one Facebook thing I'm sure you can get way more that $1M and I think that's good.
But I don't think that's about optionality. That's about the actual value of your skill, and its scarcity.
Optionality is more like: Google would probably hire you do CRUD apps because you went to Stanford and passed our Google-like interview when we hired you to do CRUD apps, so we will pay you what we think it costs for you to not go do that at Google. Dave over here went to SF State and was hired before the algo-interview craze; no chance Google will hire him, so we can and will pay him less even if he makes better CRUD apps than you do.
If I, your hiring manager, also went to Stanford I will pay you even more because I sure think I have high optionality! And if my manager went to Stanford then all the better because he will immediately understand why you need more than Dave. Which, in the end, is true: Dave's still here, right?
Someone else alluded to it as well, you could just as easily view pay as a measure of how much it will take to get you to work for them, rather than a measurement of how much value you will provide the company. From that lens, location based pay almost makes sense.
But it's still a stupid and arbitrary mechanism, and if you're negotiating you should treat it that way. It sounds very systematic and regulatory, but it's not. Just ask them for what you think they're willing to pay you, just like any other negotiation.
Company doesn't pay based on the "value of your work" - it pays based on what other companies would pay you.
Local candidates are scarcer than remote.
Personally, I hate the resulting dynamic. Move to SF and the company basically subsidizes a million dollar mortgage. Move to Manila and your subsidized mansion could be $10k, 100 times less (maybe I'm exaggerating, I have no idea about real estate in the Philippines - but you get the idea). That's insane!
The worst part is that landlords get a huge cut of this, and I don't think they add a fraction of that value to society.
I hope that in the end, with the pandemic, it all balances out to two tiers: on-site and remote. I get that many companies still value attendance, whatever. I just hope that all remote positions balance out globally. It doesn't make sense to pay some guy in Utah twice as much as some guy from Honduras, if neither come into the office.
> I just hope that all remote positions balance out globally.
I've been working remotely since 2015 and the market has been gradually moving in this direction(at least in eastern Europe where I come from) - COVID-19 only speeded things up.
> It doesn't make sense to pay some guy in Utah twice as much as some guy from Honduras, if neither come into the office.
This assumes equal education, skill level, cultural norms and infrastructure. But these are often not equal. If your clients are in the US, hiring developers US side greatly reduces the chance of cultural misunderstanding and communication problems. Also timezone issues here too, for clients based on North America.
US higher education system is fairly strong, and not all countries are equal on that front. India for example, is known for degree mills and ways to "cheat" the system. Which is why US masters degrees are required for the most part. That is not to say there aren't incredibly smart people in every country, but it's not an even playing field and some countries have risks associated with hiring.
Another good example is infrastructure. I'm not sure how many times a developing world coworker has been blocked because of shoddy internet or inconsistent utilities.
These asymmetries will persist, remote or otherwise.
And cost of living is only one factor feeding into cost of labor. Tech companies tend to pay more in the Bay Area because, if they didn't, they'd have trouble hiring people. But they're probably not going to pay the same amount because someone chooses to live in Aspen.
I honestly don't expect big changes--20% adjustments don't really qualify as "big." All the data I've seen suggests that most people will likely remain within at least a 1-2 day/week commute into an office.
Companies will pay as little as they can, employees will charge as much as they can. Everything else is an excuse or window dressing. What someone is paid is not connected to what they are worth or their value. Nor is it "fair" because fair isn't a real thing. Your company is not your family. Unless you own a significant share, it's purely your adversary.
I wish people would just honestly admit this. Pretending otherwise almost always leads to workers misunderstanding what is happening and getting underpaid.
Why does it sometimes seem like there is a willful disregard for what actually drives companies (profit)?
As a consequence of US laws and the way the economy runs (US capitalism), companies are incentivized to seek cheap labor. They will pay the lowest price they can.
If person A and person B produce the exact same work but A will accept a lower wage, obviously the company will hire A.
If people are upset/perplexed/confused by this, I think the crux of it is: why do some people accept a lower wage? In this case it's ostensibly because some people live in lower cost of living areas.
I’ve been getting paid a San Francisco salary for 7 years while living abroad working as a Sr DevOps Engineer (I have 25 years experience).
After the pandemic hit, my company slowly fired half the staff and replaced us with Russians & Belarussians for 1/5 the price.
Now it’s a buyer’s market and wealthy startups (including many ycombinator startups) are offering me 50-70% less than I made at my last job. Literally so little money I would have $800 leftover after child support and paying my dying mother’s mortgage.
I ask them, “do you understand that paying employees 60% less for the same work creates a toxic environment? You are already struggling with 18 month average turnover. If I take this job, I will quit in a month, without notice, if somebody offers me 5% more, since you view me as a commodity.”
It has disgusted me enough that I’ve left tech entirely and instead am about to buy an apartment building. I would rather be a rent seeking parasite than get paid less than interns and junior engineers with 2 years experience.
Two companies ago, I was tech lead for a small team of 3. I asked for a regularization of my pay check as I was getting 60% market value; 90% or I’m going to look elsewhere.
I told them they have 6 months to figure out what they want to do with me because I don’t like dropping projects just like that. They fought me the whole 6 months to keep my low pay.
In the last day of the 6 months, I went and offered my resignation and the manager smiled at me, with a lot of proud in his voice, informing me that they debated and my salary would go up to 80% market value.
It has disgusted me enough that even 200% would have made me leave.
> Let’s say you hire me for your company in San Francisco and pay me $150K. .. But now if I decide to move to Tulsa, OK, you want to cut my pay and reduce it to 90K, because of “cost of living”. Why? My value to the company hasn’t changed!
The average article/comment on HN is extremely confused about how compensation works. This is a huge problem because if you don't reason about comp well, you're guaranteed to make suboptimal moves for yourself.
In the example - does the author also expect to pay SF-level rent in Tulsa since "the value of housing to me hasn't changed?" Nope, because of the scarcity dynamic: if you HAVE to be in SF, you are forced to pay SF rent. If you can be anywhere, you can follow inexpensive supply.
If you understand that, you can understand the employer side. If I HAVE to have a SF programmer, I HAVE to pay them SF level rates. If I can have a programmer anywhere in the US, I can follow the supply. So I pay a Tulsa programmer a Tulsa salary. The fact that he once lived in SF is irrelevant to the equation.
I totally get why you don't want to hear that but that's how it is. It doesn't make sense to pay you more just because you were once in a pricier locale any more than you will pay more for rent just because you once did. I am making this clear because I find that it's important to understand reality you're operating in.
If you are with me so far on this argument, you can follow it to the natural conclusion of how you can make big bucks: don't be generic. If your biggest salary driver is your proximity to the office, it was always a matter of time. Instead, work on developing combinations of knowledge/skills/experience/network/etc that are valuable and unique.
That's always been my strategy and while I worry about many things in life, I don't worry about a Tulsa version of me driving my salary down (even if the version of me in Tulsa is me...)
If a company hires someone in Tulsa and then they move to San Francisco will the company pay more?
The end goal of location based compensation seems to be encouraging everyone to live in a low cost area, and take a lower wage thereby saving the company money.
I can see why it makes sense to the company, but as an employee I wouldn't support the idea.
We may not have a software union, but the least we can do is be critical of ideas that will directly lead to paycuts.
In reality though, for a given company, cost of living adjustments don't really compensate for the difference in actual cost for most people. If you're earning market rate in Tulsa and get a 20% bump in your base pay for moving to the Bay Area, you're almost certainly not coming out ahead.
(n=1) When I moved from MA to CA, my then employer increased my salary by 18% to ensure market competitiveness. My boss said HR told him it was needed otherwise I’d just leave when I saw other options.
From my experience working remote, there are two intertwining issues. Should geography factor into an employee's pay? And how much should pay differ in different geography?
My answer to the first is yes. The second however is a bit more nuanced.
The first case is when employers find the best and brightest talent from all around the world and expect these employees to work together and deliver similar value. In this case I think globally fixed base salary * a cost of living index multiplier capped at 10-15% difference makes the most sense. You don't want the pay discrepancy here to be too large as these people work together on the same level. For example, using local market rates, a Bay Area employee will likely earn double someone in the EU for the same role.
The second case is when employers want to outsource work to a cheaper labor market. In this case, expectation is that the workers will not be of equal skill and/or the work can be done with little training. Another way to look at this, the relationship is more hierarchal. The HQ is managing the remote worker for work for example. In this case I think a competitive pay relative to the location's market rate make sense.
The remote tech workers and manufacturing labourers compared in the article are both still subject to the same market forces.
Remuneration is the equilibrium of what a company is willing to buy at and what the worker is willing to sell at. A worker will want a higher price and a company will want a lower price. If they agree at an equilibrium then an employment contract is signed.
Manufacturers have leverage to lowball the salaries of workers because if a worker declines to sell their labour at a low price, then the company can likely find other sellers because there is a large supply of unskilled labour.
But if the supply of a specialised labourer is limited and the company really needs it, then the company has to consider more carefully if they want to pass on the deal or if they want to buy the labour at a higher price.
If Facebook now chooses to pay lower salaries based on the cost of living of a worker's location, then that is their risk to take as they'll open themselves up to more competition. It's up to the remote worker to decide if they want to sell their labour to Facebook at that price or if they're comfortable to decline and look at their other options, which depends on the demand for remote workers of their particular skill set.
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[ 3.1 ms ] story [ 78.4 ms ] threadLike my father used to say in his own version of English, “you don’t get nothin’ for nothin’”.
"The reason for discontent and thoughts about unfairness is that people have very different ideas about what is fair. They base salary fairness on different things. Some think it’s fair to base salary on past performance, current performace, past performance and future potential, needs, equality, experience or current market demand."
https://svese.dev/fairness-in-salaries/
> If you hire engineers when the market for engineers is tight, you might overpay compared to your existing employees. A Junior developer might end up with a higher salary than your senior guys.
It's on you to know how much your competitors might offer to lure away your senior devs, and deter it. If you wait for them to negotiate, you might lose some of them.
One of my coworkers did this.
If you're working through another company you could give an address to your actual employer without being resident.
For instance, most people accept that for the same job and all things being equal you should pay a black/white person the same wage. If there was a job posting that said ‘we pay this skin colour X and this skin colour Y because according to our analysis people with darker skin tones are willing to accept a lower wage’ there would rightfully be outrage. It would be unfair, while being a voluntary transaction which is profit maximising and in which both parties benefit.
I know you aren’t arguing for that though - we accept as a society that we shouldn’t pay people different based on race, but lots of people do believe that we should pay people differently based on where they were born and what visa status they hold. I personally think this view will change over time as globalisation and remote working continues.
Simply put, “It's a voluntary transaction” can never be a sufficient argument for why something ought to be legal.
Eg. I'd rather be a slave than starving on the road, I'd rather be dead than in some particular irreversible painful medical condition.
The only actions which are ethically wrong in my book are hurting someone else or damaging / stealing their property. Incidentally the government breaks these rules legally everyday (eg. taxation, wars, spying on people).
And you would throw it all away because of some personal libertarian principle? This isn’t only about what you would like to be able to do in any given moment, it’s what this ability does to society as a whole. Your ability to someday be able to sell yourself into slavery has some value (for the principle of the thing, if nothing else), but it is certainly not worth the above-mentioned effects on society.
At the margin, they are all equal because trade continues until the gains from trade are exhausted.
In many countries and U.S. states, laws guarantee that the cost of an employee to an employer is almost twice as much as what the employee is paid. In those circumstances, the potential gains from bilateral trade are not exhausted and people engage in that trade outside of the dominion of the state.
But if you're just the average developer, like most of us really are - the higher competition will surely make it harder to negotiate higher pay.
This might be true at the lower end close to minimum wage, but payroll taxes are a specific % (usually around 15% at the federal level, and the employee pays about half that) and insurance and other benefits are typically a fixed cost per head (15k to 30k per year at most of the places I've worked). The only thing that might be variable are things like 401k match. Once you get to six figure salaries, the fully loaded cost per employee is 120-130% of their salary.
Value created is the driver for the demand side. Yes, the supply side will differ regionally, but for a service that isn't differentiated by the region it comes from, that doesn't matter—the law of one price should, in a competitive remote hiring market, prevail equalizing wages for remote work. Firms trying to normalize location based pay are trying to short-circuit the law of one price—or at least slow the development of equilibrium by introducing friction—by way of creating artificial market segmentation, which can only work so long as the market is not competitive because of either a monopsony or an explicit or tacit agreement not to compete for labor.
The public discussion that passes for transparency and explaining to prospective workers isn't just about that, it's most signalling to other employers to get them onboard.
Considering the firms lowering the prices are currently paying far above the median in global wages, they’re doing the exact opposite of short circuiting the “law of one price”.
The whole reason for paying higher than median wage was the friction of being geographically located in high demand areas.
It even says at the end, "I’m not here to make any grand pronouncements about globalisation… My only point is that, when it comes to “location-based pay”, maybe we should be careful what we wish for." I take that as a pretty explicit "hey, this is difficult and I don't have a good answer".
There simply isn't enough value to pay them more. Software is the opposite. Each worker produces a lot of value so companies can afford to pay them more.
A few decades ago western countries were worried that Japan would take over the electronics market because they could produce much cheaper there. In reality Japan went up the value chain and Japanese products are just as expensive as in any other western nation.
Why? If your answer is “Because a T-shirt isn’t valuable”, then that’s a circular argument.
A T-shirt manufacturing employee’s wage is capped as some fraction as the value of that shirt to an end consumer times the number of shirts they can make in a year.
If you were a peasant back then you might have owned two shirts: your regular one that you wore every day, and a 'fancy' one for church, weddings etc.. When your shirt got too ragged you cut it up and tailored it into clothes for your children, or used the material to patch up holes in other clothing. When even those got too decrepit you'd use them as kitchen rags etc. until they literally disintegrated. Cloth was too valuable to waste!
We truly do live in a world of abundant excess in the modern era, and we should appreciate it.
We do, as in you and I, sure. But isn't the point here that those making things like mass-market t-shirt for very low wages are not sharing in that world of excess. At least not in an equitable manner.
Why is it that these people should work for low wages so that you and I can enjoy cheap T-shirts, but I'm not expected to produce websites and computer programs for low wages so that people can enjoy cheap business tools?
This is in large part driven by most website development being semi or entirely custom. (People who use Shopify to make storefronts or Facebook to make company landing pages don’t make the same amount as Shopify or Facebook devs.)
And when you start looking at why that is you get pretty awkward answers like: because of selectively enforced free market ideals where capital is free to move across borders but labour isn't. Which are ultimately backed up by military power.
Companies do this because they are not hold liable for the environmental damage done locally and by the transport, not even mentioning the low safety standards etc.
At which point, SF and NYC would be low cost areas as well. This won't happen for various reasons but real estate is determined by demand of which employment opportunities are a big component outside of resort communities and similar.
I'm not surprised tho, remote work is still an embryo, I'm gonna keep pushing for what I want but we can't expect too much.
When I'm rich and successful I'm gonna pay a standard global rate for the each role. No bullshit country adjustments. The market will just have to eat it
You will be part of the market that’s eating it.
It’s no different than purchasing groceries from store A because they are cheaper than store B.
Paying people extra does not necessarily produce better product, at least not better enough to offset the extra costs.
If the goal is to give people a better life by giving them more money, that is better solved via wealth redistribution.
The latter can lead to “I’ll quit mentally but not actually” which is horrible for all parties. (I’m not saying that’s an excuse to underpay people “for their own good”, but I think anchoring pay to an employee’s actual market makes some non-zero amount of sense.)
The rebuttal to this argument is that if you’re selling a commodity product, then you’re going to get steamrolled when Walmart/Amazon/Aliexpress/Multinational company comes rolling through and offers a comparable option to your product at 50% less by arbitraging labor costs.
I don’t know anything about trapping people in a job they don’t like with a high wage.
Except for differences imposed by differential transaction costs, freely competitive markets have one price for a given good. If there's not a single, global rate for a nondifferentiated good, it means it's not a competitive market and a cartel or monopolist is imposing segmentation.
If there's some places where the supply (in the economic sense of the function relating price and quantity delivered) is restricted so nothing is delivered at the global market clearing rate, then that place just isn't a source of the good.
The benefit of segmentation for buyers isn't that they get to avoid being priced out of markets where you pay more for the same service, it's that imposing segmentation lets you reduce the price you pay to suppliers in low-cost regions to a level below the global market clearing price.
Much of the work of product development and marketing is creating differentiation (real and perceived). Is a Mercedes E-class different from Toyota Camry? Is 90% lean ground beef from Whole Foods different from 90% at Trader Joe’s?
Is economy class 21-day advance, Saturday night stay required travel different from a walk-up ticket out Tuesday back the same Thursday?
For this example, obviously they are different. The job of marketing is to justify the difference in price for whatever differences the Mercedes offers.
> Is economy class 21-day advance, Saturday night stay required travel different from a walk-up ticket out Tuesday back the same Thursday?
Yes, for the seller, guaranteed payment 21 days before is different than a volatile payment minutes before the goods expire.
Sure, and that's definitely an important phenomenon, but it is not really germane to hiring for a role and paying differently for the exact same role depending on where the successful applicant lives.
https://www.deirdremccloskey.com/docs/price.pdf
http://www.daviddfriedman.com/Academic/Price_Theory/Price%20...
I would say that software engineering labor is extremely differentiated?
Why not ask them to? Companies pay for people to get things like masters degrees all the time.
- you're making this up, and have no conception of what you'd do
- you won't be able to hire people from places where the cost of living is high, as your global rate will be lower than competitive salaries there
- you won't survive, as your competitors who do location-based salaries will be able to offer your customers more value for the same price, or same value for less price
You pick :)
Now, in practice, a fair number of companies probably don't have large systematic salary adjustments by US location, including remote generally. But they mostly do it by just not paying market rates in the highest paying markets like the Bay Area and, especially, not going toe-to-toe with the likes of Google and Facebook.
But there is another downside of pay cuts for remote workers: A remote worker does not have access to the same market as someone living in a hot cluster like The Valley.
A real-world example from Europe: If I take my Berlin salary and live just 50km out of the city, I am easily one of the top-earners in that area. Naturally, I lose easy access to many offerings of that city, but that's part of the deal, I think. Now if I ever wish to switch employers, I can look in Berlin, but I am at a disadvantage if many companies insist on on-site work. If they don't, I compete on a much larger market with many more would-be employees. This problem should be reflected in payment, I think.
So from my, completely egocentric, perspective it would be ideal if companies demand on-site one or two days a week, so I can choose the best spot for living in a larger area, but still only compete in a limited market.
Pretty much all the surveys I see suggest that this will be the most common outcome. Maybe roughly 20% fully remote and 20% mostly back in the office. Though doubtless not uniform across companies. (I expect my company will tilt more towards remote given that we were relatively heavily remote pre-pandemic.) Which implies that most will probably remain in the orbit of a larger metro; many of the jobs aren't in the city anyway. And many people will want to stay accessible to a metro for other reasons.
I had about a 45 mile commute most non-travel days at one point for a while. (I did take the train some days.) It was pretty doable 1-2 days per week but wasn't sustainable on a daily basis.
It's a bad time to own city-centre commercial real estate.
I bet a lot aren't being open about how remote they will be also, to avoid putting people off.
It's also notable that now being someone with longer experience in working remote - especially managing remote teams - has suddenly become a very valuable skill.
While intriguing as an employee, this seems very pricey as the employer. Office space is expensive. Is it worth the cost given the low utilization? Would you really miss out on an excellent employee who cannot come in the 20% of the days others come to the office? How intriguing is it gonna be to hire someone who works the same time zone, is equally qualified but only costs 30%?
It’s not another downside, it’s the very reason the employer can reduce pay. They are betting your supply and demand curves are moving in such a way that you will be willing to accept a lower price, because you won’t have a better option.
A world of resort-town skilled works chained to their hegemon isn't just terrible for workers. It's a terribly inefficient market: a "sharded monopsony". The very unplanned interactions that allow hot-spot workers to change jobs is also a big reason cities are such dynamic economies in the first place.
The company may use it as an excuse, but you can choose to walk. When enough top level people refuse pay cut, the company will drop the charade quick. Even if just 10% of high performance engineers decide to walk, that would cause major disruptions in the roadmap and cost millions in development costs.
Simply demand higher salary and negotiate. The company will make adjustments to fill the in demand positions. Be prepared to walk away and find the company that will pay the higher salary.
If a customer started paying me less than our previously agreed rate, I would stop working for them, and find a different customer.
Employment is no different. Don't get screwed every single time your employer tries to screw you.
In this light, the idea of a location-based pay can be seen as a simple hack to neutralize this de-facto union. If people otherwise aren’t unionized, this hack gives employers back the sole power in the employer-employee relationship, which was what employers wanted from the start.
If the contract says "we can renegotiate if you relocate", that's not a contract I'd sign, but it's up to the company and employee to decide if that's an acceptable clause in the contract.
A contract which says "we'll pay you less if you move somewhere cheaper" must also say "we'll pay you more if you move somewhere more expensive" but then suddenly my employment incentivises my location. I wouldn't move from Warsaw to Bangladesh but it might make economic sense to move to Zurich. If it's in the contract that the employer must honour the movement, then they have unexpected cost recalculations to do. If it's not, and you're just hoping for a "good faith" agreement, again that's not a contract I'd sign, but others might.
I believe this is a key point in the argument. Currently, I see only one party having an upside but no downside.
A seller of labor that has multiple buyers can negotiate for more pay in places where they have lots of buyers for their labors (and their buyers can afford to pay).
A buyer of labor will not explicitly state this for obvious reasons, just like a seller of labor will not explicitly state they will accept lower pay if their situation changes, but every transaction in life is possible to be subject to negotiation.
I definitely agree that it's strange that the same labour is worth different amounts depending on point of origin, when the goods sold is essentially information. I don't like it, either. But employers are not beholden to the relocations of their employees, it's the responsibility of the employees to negotiate the agreement.
If you’re working 100% remotely in the US, is there really no one in India who couldn’t do your job just as well? Are you sure? There’s a lot of people in India, and they all have a much lower cost of living.
(I don’t mean to single out India, it’s one of many countries.)
India has the raw materials to be super-competitive in a remote-primarily software development environment. You might single then out as they’re a place with one the best combinations of these raw materials and still a relatively low cost for daily living.
(My company is remote-forced right now and intends to go remote-first/primarily when COVID’s acute phase is behind us. I don’t think remote will be as terrible for wealthy countries if COVID is contained in 2021. Remote is hard and comes with its own set of drags. Once companies can get back together, I think you’ll see “remote but with monthly travel to HQ” or “1-2 days in office” dominate over “I never have a lunch with any colleague” modes of working.)
Their engineer/other salary being the same as places further away. I assume there is a cost of residency allowance for other UK cities that have a premium.
If you move away, that residency allowance is adjusted to where you work from. Thus the technical salary is ~~flat.
After all this allowance is a pass through to the landlords. Those whose parents onw London center digs do very well.
I am not sure how property taxes are levied in the UK, but one would anticipare the Lords would have long since levelled that via head taxes that are levelled in some manner?
Any UK people care to weigh in here? "
Reformatting for readability, sorry aurizon my brain was struggling.
Other cities don't usually get similar supplements, even places like Cambridge where housing costs can be really high.
Property taxes are called "Council tax" here, they're probably the most regressive tax in England (the rest of the UK have slightly different rules). The amount of tax depends upon both the local area and the value of the property in 1991. Everyone who's house was work more than £320k in 1991 pays the same rate. This means in Kensington, London someone in a swanky 250 sq.m. £8million house pays £2473 per year...as does someone in a £million apartment on the next street. The person a few streets over in a grotty 20sq.m £300k studio will be paying £962 per year.
As a Londoner, I find that hard to believe. London is a huge, diverse city with many industries other than tech, and the vast majority of London's population don't make anything close to an SF tech salary. If London was as expensive as SF then I know I wouldn't be able to afford to live here.
The reason we call it shit is because (before COVID) they're pretty much all pushed beyond capacity during the commuting hours, or practically all the time between the main tourist spots. Commuting in London is a truly hellish experience.
And that includes the commuter trains that are frequently delayed or cancelled while ticket prices increase above inflation every year.
The best thing that happened from covid is skipping the commute and saving the £300 a month it took to get to the office and back.
Whenever I looked at apartments online trying to find an equivalent lifestyle (30 minutes door to door commute, nearby parks and restauranta, 1 br 85 m^2 with good amenities) the rent always came out about the same as what I was paying ($1,840/month).
The difference being home in Oakland My hood was mostly single family homes with yards (and a few yuppy apartment complexes like mine). In London everything within that commute range seemed to be a concrete jungle, and I couldnt figure out how to find an equivalent neighborhood withot really going far away from the tech companies.
Whenever I visit london my dollar never seemed to stretch far and food / groceries / transit felt reallly spendy.
London pubtrans is clearly better than anywhere in the USA, that goes without sayyng, but was also more expensive (if I went to the office I think I paid $4 each way for the transbay bus, with a 5-10 minute walk on each end of my commute).
It’s a great city (except for the traffic. I would be terrified to ride a bicycle there), and one of my favorite things to do in life is smoke a spliff and walk down the camden locks trail.
The 30 minutes door to door commute is the problem if comparing, as London is huge. A 1 hour commute is closer to the norm. But a 1 hour commute on a train is very different to the same 1 hour if you're driving and can't spend a good chunk of it with your face in a book or watching Netflix or whatever.
In terms of housing, my current mortgage for a 3 bedroom terraced house with a garden in London is about USD $2k/month, but that does mean living further out from the centre than what you want.
For anyone moving to London, my tip is Croydon. It has an awful reputation which is mostly unearned (it's a very large borough, and very diverse, and it's reputation is pretty much down to scale and some small pockets of the most deprived parts of the borough), and so it's unreasonably cheap for how good transport links it has in to the centre. There are places in London I might prefer if money was no object, but money really would need to be no object, as up until maybe the 3-4 million pound range you'll get more for your money here than ost other places in town.
Working in London in 2007/8 it was common for senior developers to switch to contract work since it was fairly easy to at least double your salary that way (GBP 500/600 a day was about the going rate then IIRC.) At the time I remember traveling to the US and everything seeming very cheap at the 1.90 GBP/USD exchange rates pre Brexit and financial crash...
But even outside of the big tech companies, wages for software engineers are relatively higher in the US than the UK (90th percentile vs 75th) and the higher paid are paid more (2.6x the median at 90th percentile vs 2.0x the median.) If you compare median salaries / rents on pre Brexit and 2008 financial crash exchange rates SF and the Bay Area come out pretty similar.
In none of these have I made six figures.
Part of this is locale. Part of it is I'm not seeking out those Big Tech jobs. Part of it is the industries I've been working in.
Lumping the public sector in the midwest into "US tech workers" and claiming the entire pool is overpaid is the reality for a small set of industries in (what has been) a few geographic bubbles.
I don't think so. Most wealthy countries don't have jobs paying anything close to what Americans make. When you're talking about tech, the division is really just between America and everyone else. This is going to be really great for Canadians who don't want to immigrate to the states since there's almost no difference in talent, culture, or time zone compared to the USA but wages are about half as much at the top end.
If you're the only person in the world who can do what Facebook really needs done, they'll pay you $1M+ to do it from anywhere in the world.
There is one other thing that is a small factor in all of this. I'm not saying it is unsurmountable or anything but local/state/country taxes are a factor. We hired someone remote recently who was in Canada. We had to create a new company in CA just so we could pay this individual. For salaried/W2 style employment, there can be a non-trivial amount of extra legal/finance work for the company. Hiring local-ish avoids this. Obviously, having everyone on a 1099/Contractor style employment would avoid this too but most people want salary plus provided benefits. Again, a larger company may easily be able to absorb these costs but they aren't zero.
A worker sells their labor and a company purchases it.
When everyone lived in SF, a worker wouldn't accept a job paying below $100k because they wouldn't be able to afford to live. That same person in a cheaper state could negotiate a lower price, but most of the talent was saturated in SF. Now that everyone has left SF, there's no point in paying those prices if they can still retain you for a lower wage.
The corollary is that if you can reliably find and hire such people you’ll have a massive competitive advantage.
This is the same thing as:
>but also their perceptions of your options.
But I don't think that's about optionality. That's about the actual value of your skill, and its scarcity.
Optionality is more like: Google would probably hire you do CRUD apps because you went to Stanford and passed our Google-like interview when we hired you to do CRUD apps, so we will pay you what we think it costs for you to not go do that at Google. Dave over here went to SF State and was hired before the algo-interview craze; no chance Google will hire him, so we can and will pay him less even if he makes better CRUD apps than you do.
If I, your hiring manager, also went to Stanford I will pay you even more because I sure think I have high optionality! And if my manager went to Stanford then all the better because he will immediately understand why you need more than Dave. Which, in the end, is true: Dave's still here, right?
But it's still a stupid and arbitrary mechanism, and if you're negotiating you should treat it that way. It sounds very systematic and regulatory, but it's not. Just ask them for what you think they're willing to pay you, just like any other negotiation.
Local candidates are scarcer than remote.
Personally, I hate the resulting dynamic. Move to SF and the company basically subsidizes a million dollar mortgage. Move to Manila and your subsidized mansion could be $10k, 100 times less (maybe I'm exaggerating, I have no idea about real estate in the Philippines - but you get the idea). That's insane!
The worst part is that landlords get a huge cut of this, and I don't think they add a fraction of that value to society.
I hope that in the end, with the pandemic, it all balances out to two tiers: on-site and remote. I get that many companies still value attendance, whatever. I just hope that all remote positions balance out globally. It doesn't make sense to pay some guy in Utah twice as much as some guy from Honduras, if neither come into the office.
I've been working remotely since 2015 and the market has been gradually moving in this direction(at least in eastern Europe where I come from) - COVID-19 only speeded things up.
This assumes equal education, skill level, cultural norms and infrastructure. But these are often not equal. If your clients are in the US, hiring developers US side greatly reduces the chance of cultural misunderstanding and communication problems. Also timezone issues here too, for clients based on North America.
US higher education system is fairly strong, and not all countries are equal on that front. India for example, is known for degree mills and ways to "cheat" the system. Which is why US masters degrees are required for the most part. That is not to say there aren't incredibly smart people in every country, but it's not an even playing field and some countries have risks associated with hiring.
Another good example is infrastructure. I'm not sure how many times a developing world coworker has been blocked because of shoddy internet or inconsistent utilities.
These asymmetries will persist, remote or otherwise.
Amazon is quite upfront about this, they pay based on cost of labor. I.e they pay what they need to get the staff they want in that area.
I honestly don't expect big changes--20% adjustments don't really qualify as "big." All the data I've seen suggests that most people will likely remain within at least a 1-2 day/week commute into an office.
I wish people would just honestly admit this. Pretending otherwise almost always leads to workers misunderstanding what is happening and getting underpaid.
As a consequence of US laws and the way the economy runs (US capitalism), companies are incentivized to seek cheap labor. They will pay the lowest price they can.
If person A and person B produce the exact same work but A will accept a lower wage, obviously the company will hire A.
If people are upset/perplexed/confused by this, I think the crux of it is: why do some people accept a lower wage? In this case it's ostensibly because some people live in lower cost of living areas.
After the pandemic hit, my company slowly fired half the staff and replaced us with Russians & Belarussians for 1/5 the price.
Now it’s a buyer’s market and wealthy startups (including many ycombinator startups) are offering me 50-70% less than I made at my last job. Literally so little money I would have $800 leftover after child support and paying my dying mother’s mortgage.
I ask them, “do you understand that paying employees 60% less for the same work creates a toxic environment? You are already struggling with 18 month average turnover. If I take this job, I will quit in a month, without notice, if somebody offers me 5% more, since you view me as a commodity.”
It has disgusted me enough that I’ve left tech entirely and instead am about to buy an apartment building. I would rather be a rent seeking parasite than get paid less than interns and junior engineers with 2 years experience.
I told them they have 6 months to figure out what they want to do with me because I don’t like dropping projects just like that. They fought me the whole 6 months to keep my low pay.
In the last day of the 6 months, I went and offered my resignation and the manager smiled at me, with a lot of proud in his voice, informing me that they debated and my salary would go up to 80% market value.
It has disgusted me enough that even 200% would have made me leave.
The average article/comment on HN is extremely confused about how compensation works. This is a huge problem because if you don't reason about comp well, you're guaranteed to make suboptimal moves for yourself.
In the example - does the author also expect to pay SF-level rent in Tulsa since "the value of housing to me hasn't changed?" Nope, because of the scarcity dynamic: if you HAVE to be in SF, you are forced to pay SF rent. If you can be anywhere, you can follow inexpensive supply.
If you understand that, you can understand the employer side. If I HAVE to have a SF programmer, I HAVE to pay them SF level rates. If I can have a programmer anywhere in the US, I can follow the supply. So I pay a Tulsa programmer a Tulsa salary. The fact that he once lived in SF is irrelevant to the equation.
I totally get why you don't want to hear that but that's how it is. It doesn't make sense to pay you more just because you were once in a pricier locale any more than you will pay more for rent just because you once did. I am making this clear because I find that it's important to understand reality you're operating in.
If you are with me so far on this argument, you can follow it to the natural conclusion of how you can make big bucks: don't be generic. If your biggest salary driver is your proximity to the office, it was always a matter of time. Instead, work on developing combinations of knowledge/skills/experience/network/etc that are valuable and unique.
That's always been my strategy and while I worry about many things in life, I don't worry about a Tulsa version of me driving my salary down (even if the version of me in Tulsa is me...)
The end goal of location based compensation seems to be encouraging everyone to live in a low cost area, and take a lower wage thereby saving the company money.
I can see why it makes sense to the company, but as an employee I wouldn't support the idea.
We may not have a software union, but the least we can do is be critical of ideas that will directly lead to paycuts.
I am not debating that part, just the reality part.
My answer to the first is yes. The second however is a bit more nuanced.
The first case is when employers find the best and brightest talent from all around the world and expect these employees to work together and deliver similar value. In this case I think globally fixed base salary * a cost of living index multiplier capped at 10-15% difference makes the most sense. You don't want the pay discrepancy here to be too large as these people work together on the same level. For example, using local market rates, a Bay Area employee will likely earn double someone in the EU for the same role.
The second case is when employers want to outsource work to a cheaper labor market. In this case, expectation is that the workers will not be of equal skill and/or the work can be done with little training. Another way to look at this, the relationship is more hierarchal. The HQ is managing the remote worker for work for example. In this case I think a competitive pay relative to the location's market rate make sense.
Remuneration is the equilibrium of what a company is willing to buy at and what the worker is willing to sell at. A worker will want a higher price and a company will want a lower price. If they agree at an equilibrium then an employment contract is signed.
Manufacturers have leverage to lowball the salaries of workers because if a worker declines to sell their labour at a low price, then the company can likely find other sellers because there is a large supply of unskilled labour.
But if the supply of a specialised labourer is limited and the company really needs it, then the company has to consider more carefully if they want to pass on the deal or if they want to buy the labour at a higher price.
If Facebook now chooses to pay lower salaries based on the cost of living of a worker's location, then that is their risk to take as they'll open themselves up to more competition. It's up to the remote worker to decide if they want to sell their labour to Facebook at that price or if they're comfortable to decline and look at their other options, which depends on the demand for remote workers of their particular skill set.