Well, in the case of Toronto, I make a better salary relative to the cost of living (all things considered -- rent, health care, insurance) than I could make in SF or NY at the moment. Taxes in Cali aren't that different from Ontario, but the cost of living is nuts (and for the most part astonishingly suburban). Even if I could get slightly more money, I'd lose a lot of quality of life because my entire network is here. Personally, the idea of dropping my entire life for a pay cheque would necessitate a substantial increase in pay.

I think companies pay what the market will bear, and enough people feel the same way I do.