So as long as we're covering expenses, I'd prefer they cover mine at that second place. The fact that I might actually be living cheaper is none of their concern.
I have met Indian developers living in India making just about as much as they would in the US and they were always busy.
If my living expenses were far below my rate, I'd save my money happily against the possibility my living expenses would go up or my income would go down in the future, and would not lower my rates.
If I occasionally lost a bid but still got enough work, I would not lower my rates.
As a worker, lowering your rates unnecessarily screws other workers, and future-you is another worker getting screwed.
Given a situation with two developers working remotely with exactly the same skills, experience and knowledge on the same project, but one works in India, the other one works in the Bay area.
Can you give me one valid reason why the developer in India should get a penny less than the developer in the Bay area?
And that the cost of living is less in India than in SF is not, in my opinion, a valid reason.
You pay your developers, or any staff come to that, what they're worth to you.
You can reverse that question to help answer it.
Can you give me one valid reason why the developer in the Bay area should get a penny more than the developer in India?
One of the reasons the Bay area developer is paid more is because it costs so much to live there that they need to make more to pay their bills. If they won't work for less because of the cost of living, then it's a factor in how much they get paid. As such, it's not just the employer that's factoring employee location into the amount they get paid.
Salary levels aside I have been part of a company based in sf that had money issues so the indian side took over with local financing and closed all worldwide offices and moved r&d to india. Which made sense because the future customer base was in india.
Location and connection to customer base matter. I guess less so for developers compared to the product manager.
It's not that easy. What they are worth to you is your upper limit. What they are willing to work for is the lower bound. It's composed of many things, mostly supply and demand, but not an insignificant portion is living expenses. Most employers would gravitate towards the lower bound. And for a dev in India, it might be reasonable to pay them less. If there's another company willing to pay Bay rate, that's great for the dev, but the expectation that everyone (let's stay in remote developers category) around the globe should be paid the same is not based in reality.
Developers in India are generally paid less because employers can, which is clearly why companies look to employ staff in India.
As a developer living in the UK, while I don't work remotely (often), if I was in a position to do so and decided I was going to move to India, I certainly wouldn't expect my employer to cut my salary as a result. If they did, I'd be out of the door and looking for a new employer promptly.
From the company's perspective, the conditions are not equal, try as we might (and do) to make them so. They are working on the other side of the clock from much of their peers and technical leadership. They are 18 hours of flight away when it comes time to visit on-site. They spend more time, on average, commuting to/from work. They face weather conditions that preclude reliable commuting several weeks per year.
They face disadvantages inherent to their location and related to the fact that their location isn't the HQ. It's not their fault, but to make the economics make sense for the company, they are paid well for the local market, but less than the Bay area market. If wages in India were Bay area wages, we wouldn't have started new dev teams in India.
The condition of one experienced dev moving away to a different location (I don't care whether higher or lower cost) is different from trying to build a de novo team in a different location. You take with you the experience and relationships you developed and that makes you different from your hypothetical identical twin who is applying to work remotely from wherever you are contemplating moving.
We, like most for-profit companies, generally try to do things that increase profits.
We don't enforce that, as a condition of employment, you must accept share-based compensation. Employees are mostly [1] paid in cash and we let employees decide how much of that cash they want to invest in the company.
[1]-some executives are "forced" to accept share-based compensation as part of their comp.
If you pay less than 25%, the employee is very likely to find a better deal somewhere else. If you pay more than 33%, you might have occasional difficulty operating your business or giving raises.
There are plenty of potential employees willing to work for less than 25%, and a few more that will demand more than 33%. You should leave them to other employers, that will have other means of monetizing their work.
Candidates are perfectly able to self-sort themselves into a pay range appropriate for them, especially those that know their own worth versus the companies that routinely try to lowball.
This is why one of my stock interview questions is "how do you measure the value to the company of work done by this position?" For me, whether the response is honest or evasive is often more telling than any details given. In my view, the value an employer should bring to the table is the ability to monetize my work to a far greater extent than I could manage on my own. I might be able to provide $2X in value and charge $X for it as a freelancer, so an employer should at least be able to magnify my work into providing $3X or $4X and then pay me more than $X for it. Ideally, the employer squeezes $5X or more of value out of my work, and then pays me $1.6X or more to do it for them.
So what I'm willing to work for is not my lower bound. That bound comes from what I could get working the same job for someone else, or for myself, and that comes from how well different companies can convert my work into cash, and how greedy they are about capturing that additional value for themselves.
I would likely be willing to work for $40/hr. That amount keeps the bills paid. But it won't ever keep me from looking elsewhere for better work.
So my expectation is that employers that comb the globe looking for bargain employees are crap at monetizing the work of their employees. And to some extent, I think that Silicon Valley salaries are way above that 33% threshold, and are dooming those employers to future cash flow problems, unless they actually are able to bring in an extra $1M per developer--which I suppose could really happen with the right unicorn magic. It's really hard to judge, unless you can look at how the company makes money from their developers' work.
So, theoretically, in case of remote work and a global pool of talent, it is a less optimal use of your dollars to adjust salaries to the cost of living (all other things being equal, e.g. skill set level, culture).
Now with more competitors, salaries will probably end up rising close to SF ones--which are likely near to the upper bound, marginal value produced by the employee.
Because they are willing to take less.
The work is not worth more just because you happen to live in the bay area.
But the "bay pay" isn't for your work. It's so you can work - i.e. cover your expenses associated with working at that particular place.