All (most?) big companies already set pay based on local market conditions. This is actually based on what pay levels are in the market, not cost of living.

Yup, at least one FANG pays more in SF than Seattle for the same job and same work.

Amazon does this, but everywhere else save New York (including Detroit, Austin, Boston+, Arizona offices) is on the same scale as Seattle.

I'm sure most of them do. This is standard practice for companies that operate offices in multiple regions, not just tech, but any company over the past century at least.

Do you know how much more? I.e. is a couple thousand or more significant?

More, %10-20 for Amazon in bay area vs seattle

Doesn’t make it any easier to swallow. Your value as an employee is not coupled to your physical location.

I think the attempt is to tie you value as an employee to you disposable income instead of your housing and basics income.

I find them usually often inaccurate, though.

For companies that don't pay at the top of the scale, the people in the high-cost areas are comparatively screwed (software engineers having to resort to living with roommates!?), whereas for the companies paying more, sometimes it tips the other way (like failing to account for how most costs don't scale with area the way housing does, so you could end up with a $500+ disadvantage in disposable income in one of the cheaper areas).

This is an extremely self-limiting and myopic viewpoint on employment.

For instance, the only person who can classify income as disposable or not is me. No one else is allowed to make that decision, or is even deserving of knowing the information at all.

If your hiring manager is giving you the song and dance about calculations on your cost of housing and milk, you need to turn around and go elsewhere.

If you think you’re a cog in a machine, yes, you can determine your value this way.

If you feel you have inherent value in and of yourself, your attitude will change about work and employment.

The value I provide to a company has absolutely nothing to do with where I live. If I’m a good hire, I’m a good hire.

Did you notice the "I think the attempt is..." part of my post, which positioned it as an attempt to understand the employer negotiation position, not as my own views?

It's a view on negotiation, not on employment.

But I think feelings like yours get in the way, regardless.

"Determining your value" is internalizing things way too much. Failing to convince the opposite side in a negotiation is very different from "your value".[0]

Being a cog in a machine - or, more directly in this situation, being seen as replaceable by the next candidate who would accept the offer you don't like - isn't about how you feel or think of yourself, it's about what you can do and what you demonstrate. That holds true for far more than just the initial interview and offer negotiation, too.

[0] I'm tempted to suggest the person who's happy to be a "cog" - show up, do some work, get paid, and define their life and their value in non-work terms - may value themselves more than us maximizers!

If the company can get an equally good hire at half the cost, it can and should replace you. As a shareholder I would not only expect this, I would demand it.

Cost of living is higher if you live in a major metropolitan area. That higher SF salary gets you the same amount of goods and services as a lower salary in Utah. This is a pretty basic concept.

If you want to get paid the big salary, move to the big city. Don't complain about higher rent and cost of food. Or live frugally.

But there is value in living in those higher CoL areas (hence them being higher CoL) that you sacrifice living in a lower CoL area. You sacrifice on space to live in SF, but you get all the other benefits which is why people do it. If I sacrifice the SF benefits, why do I then also have to sacrifice my CoL/pay ratio without any additional gain?

Is it any different from say a kg of rice, will feed the same still would cost diff in a village of Vietnam then Whole Foods in silicon valley. Price is by demand / supply.

You’re comparing a human being to a commodity like rice. Unbelievable.

Surely you realize that your current compensation is already decided based on market forces and not some inherent "value".

I work for myself and dictate the cost of my services. There’s a market involved, sure, but it’s not a race to the bottom like the commodity markets.

I dictate my value, not my zipcode or employer.

The market dictates your price for the value you provide. You can't charge $1B/hour and get away with it. There is an optimal profit-maximizing price for your services, regardless of whether or not you acknowledge that fact. Yes, you can change more than this amount, but you will get fewer clients and be making less total profit as a result.

That could be totally fine and rational since there are other utility-maximizing considerations for you like how much you want to work, the kind of work you do, the kind of clients you're willing to take on, etc., but that doesn't change the fact that you can't arbitrarily set your price and not expect a change in the amount of business you can conduct.

You may not be profit-maximizing, but companies certainly are, and as a result, they'll pay whatever rates the market allows them to.

If you're able to dictate your income, then why even worry? Go ahead and live somewhere else and dictate your income. It's a voluntary exchange and if someone takes the other end of the deal then good for you!

No, we're comparing human labour to rice. Let's be honest. If you're essential you'll negotiate your rates to be what you want.

It's obvious we're not comparing humans to rice here since we're not buying and selling humans. It's so obvious that I can only conclude you're acting in bad faith intentionally.

That's not the point. Why would I pay Bay Area salaries for someone living in bumfuck Iowa? It's all about supply and demand.

Deadlock. This comment thread won’t go anywhere.

What I don't get is why you would pay Bay Area salaries for someone living in Bay Area when you could get an equally good remote worker based in Iowa on the cheap. Like just don't hire in Bay Area at all.

While that may be true in the future, the talent pool in the Bay Area at present is undeniably better.

Add me to the pile of those who don't like my salary adjusted arbitrarily based on where I decide to live.

I don't think companies that want to attract upper-tier engineering talent will be able to get away with it either.

Good engineers:

A) Are outnumbered by job openings non-trivially

B) Return many multiples in value of their total compensation cost

C) Are well aware of A and B from a negotiating standpoint

If I'm operating in the same market orbitals as Facebook, I see this as an instant hiring advantage. Simply tell candidates:

"Not only have we shifted towards remote-focused teams, we won't arbitrarily grade your salary based on where you or your family choose to live"

The increased costs will be a pittance compared to the potential 8-9 figure market advantage gained in 18-36 months by having consistently won hiring battles.

The local market rates are correlated with, if not caused by, the cost of living in that market.

Most of the time, but with exceptions.

For example, for engineers in many big tech companies, pay vs COL in London is not very attractive.

And Moscow. Of course there are outliers but the trend, especially in the U.S., remains.

I'd say that's true within a country, but not between countries, due to the difficulty of moving across borders.

Ok, but if you're hiring 100% remote people, the "local market" is everywhere.

I get why management wants to do this, but I doubt it will stick with remote workers.

So if I get a remote job working from a high COL area and move, and then I move, do I get my pay reduced? If so, I might as well reduce my effort accordingly ;) you get what you pay for

EDIT: And odds are, the employer won't notice enough to fire me.

Here are your options, i think:

1) You're upfront about it and tell your manager, they update workday, HR schedules a meeting with you to explain the multiplier effect and how your salary is being reduced.

2) You're kind of sneaky, you update your state tax withholding, it updates workday and put you into the appropriate COL bucket for next year's performance review, your salary slowly falls in line with people in your COL area.

3) You keep it secret, allow the company to keep paying taxes to your original state, maybe pay estimated taxes or something to your new state? Don't develop any relationships with coworkers that'll eventually leak your true situation, get away with it?

But does that mean you would start working 2x the hours if you moved from somewhere else to SF? :)

Odds are I can meet the bar of employment without that, so no. You have _some_ leverage as an employee to make it work for you imo.

But if you reduce my pay, you're gonna make me take stock of what I'm giving you and shift the balance in my favor if I can easily get away with it.

I am watching it live and the way Mark said is, "We will be basing compensation on location like we always have and still paying top of market". I think that's fair right. If you can get a better quality of life with less pay, then thats fine. It's a choice that you are free to make.

This should really be the pinned comment, as it does tell you everything you need to know. You've always had to move somewhere more expensive/with a heavier tech center gravity to have your career take off whether it's in terms of clout or total compensation (both of which are inextricably intertwined).

Where this development fascinates me is that it vastly increases the pipeline into the FAANG BigCos. I'm sure that, not to be outdone by FB, other members of FAANG will be having serious conversations that are along the same lines as this. Even if your career at a certain company plateaus because of satellite syndrome, you at least have the door open to moving to where the action is if that's what you prioritize.

But for me, so long as the real world reflects the asymmetry of capital allocation at central nodes, so too will salaries reflect that. I don't see any point in protesting that. I feel like it's more valuable to try and figure out a way to speed up the diffusion from central nodes outwards which already appears to be happening, and which this story is part and parcel of.

It's a market-clearing price. If Google is willing to pay more for remote workers in Pocatello, Idaho, then they'll be able to poach them. If not, wages will fall.

Tech companies have always paid less to staff in cheaper cities like Pittsburgh, but the ratio usually still favors the employee (i.e. they make 90% of the Bay Area base salary and their cost of living is 20% as high). Workers can also hack the system by getting irrevocable, long-term RSU grants and then getting transferred to cheaper markets.

The thing that really sucks is that higher base comp is usually always better, even with higher COL. If you consider things like 401ks, IRAs, out of pocket maximums - having higher base comp is just better. Even if in SF vs. Boise, you're taking home 50% of your paycheck (and spending 33% of that takehome on rent), you're still paying more into those things in SF than Boise.

This is just the reality of remote work which people are ignoring. Facebook (or any other company) has zero reason to pay Bay Area salaries if they can hire anywhere.

Salaries WILL be the same everywhere in the world. They will just be a lot lower than you are used to.

> This is just the reality of remote work which people are ignoring. Facebook (or any other company) has zero reason to pay Bay Area salaries if they can hire anywhere.

Are they paying "Bay Area" salaries, or "Skills With The Most Obvious Correlating Signal Of Living In The Bay Area" salaries?

> Salaries WILL be the same everywhere in the world.

Does a Mercedes and a Honda Civic cost the same?

No?

Well why not? They're both cars.

They're paying for the skillsets, and for salaries to be the "same everywhere in the world", the skillsets would have to be the same, and we're not at the point where they've been commoditized to that level(which is a different discussion versus geography anyways).

On the flip side, perhaps COL will go down as well.

They can get the absolute best talent in every market across the world WITHOUT paying Bay Area salaries - just pay double whatever the local average is!

This is THE reason driving all these companies to announce the shift to remote: it’ll be a massive cost saving. Access to talent that can’t live in a center where they have offices is nice, but hardly justifies the overhead of remote work

It actually works quite the opposite. You will be way better off financially moving from the SF/Seattle/NYC than to. The wage adjustments just don't come near handling the extra expenses.

I think if you are working for a Google / Facebook and getting a wage adjustment, the end result would be about even. If you drop from $400,000 to $300,000, but your rent goes down by $30,000 a year, and also your taxes go down from California rates then in the end things might even out give or take a few percent.

However, if the choice is between working for a local company and working for a high end bay area firm, then absolutely the best financial move is to move to SF/Seattle/NYC. Local companies here top out at $150,000 for a senior engineer, so if I can make $400,000 in a big city, then even with the higher cost of living, I still would come out way ahead living in SF.

Depends on how frugally you live. If you are young and ok with room-mates. You'll save more money with the higher cost of living in SF than other areas.

If you didn't live in SF your roommates could be paying you rent...

Not really. The majority of things cost the same regardless of where you live besides real estate, which is extraordinarily distorted from actual value.

Most companies have separate expense allowances for these cities because of what you said is certainly not true.

A car costs the same no matter where you live in the United States. A computer costs the same no matter where you live in the United States. A phone costs the same no matter where you live in the United States. A refrigerator costs the same no matter where you live in the United States.

I could go on, but you get the point I'm trying to make here right?

"A car costs the same no matter where you live in the United States." -- do you really believe that?

You seriously chose THAT as your hill to die on? lmao. You absolutely understand the point. High COL is better. Easier to max your 401k, easier to pay healthcare minimums, easier to save money in general since the only great cost is your rent. Besides that, perishable foods, electronics, damn near everything else will be a similar price. I moved from NC to SF and don't regret it. Entry level TC in NC is $70k, here it's $150k+. The max salary for a Senior IC is NC is about $120k, here it's fucking $500k. You people aren't thinking critically at all. The best bet is to suck it up and work in a high COL city, save up, and then go buy a mansion wherever you want outside of SF/NYC.

Yes, as with all the other things I listed, car prices are commoditized.

> Why not keep salaries the same and get the absolute best talent in every market across the world?

Because people living in those other markets will be more than happy to take a "reduced pay" for SF standards, since that's way higher than any other local wage.

They want to have their cake and eat it too. The interesting thing is that I know of several smaller companies that don’t do this, so it’ll be interesting to see how this decision impacts their attrition.

It's a bit more complicated than "paid less for doing the same amount of work". Compensation isn't purely based on amount of work done, there are other market factors involved like supply of talent.

If a company suddenly allows working remotely full time, they've suddenly increased their supply of talent, as moving to another city will no longer be a roadblock when they consider Facebook.

At the same time, if more and more companies go with a remote friendly approach, the supply of job openings that applicants have access to will also increase.

Theoretically, this will lead to some sort of equilibrium where compensation is actually based more on the value/output of your work than other factors.

To make an analogy, an apartment building in SF serves the same purpose as an apartment building in Ohio, yet they charge vastly different rents. You're paying less in Ohio for something that provides the same utility (shelter), because of factors outside of the direct utility of the apartment.

Agree. Living in an urban core is a luxury good. Why should you be compensated extra for choosing to consume it?

There is 'not getting paid less for the same amount of work', only market can set the rate.

Facebook pays Bay Area salary only because they have to, to get the talents they want.

I don’t know why this opinion is so widespread. The only reason why salaries are so high in the Bay Area is because of the high cost of living. If companies didn’t factor COL into salaries, it’s likely that they’d be lower across the board.

In fact, developers everywhere benefit from the high salaries of the Bay Area, as it sets the general expectation for the profession.

That's not how companies see it. They are not responding to high COL. They are responding to competition for talent from other companies.

Competition -> high pay

high pay + zoning rules -> high COL

The baseline salary is still based on the cost of living, which is my point. Competition doesn’t drive salaries into the stratosphere entirely by itself, especially in a market with a fairly large supply of workers.

high pay -> solve all your big problems -> biggest problem is your neighbor -> zoning rules -> high col -> only wealthy people can live there -> companies that hire wealthy people set up shop nearby -> competition for workers increases pay -> goto(1)

I suspect as this scales within and across companies, "location fraud" will become common, where employees claim to live in a more expensive location in order to collect a higher salary. There's probably a b2b opportunity for a company to enforce honesty with respect to something like this.

Then negotiate for the higher salary, but keep in mind you'll be competing with people willing to take a lot less than you because they can afford to.

I think I agree with you on the surface, but at the same time I wonder what impact Bay Area salaries would have in low cost-of-living areas. What about gentrification? Isn't one of the biggest complaints about tech workers (and especially people moving from CA) that their high income is making life less affordable for those native to a particular area?

This is already the case, regardless of WFH. Managers are blatantly told that they could either hire one engineer in US or 4 in India.

The variation won’t be as dramatic within a region but it’ll be there.

Companies set prices in accordance to labor market supply and the marginal salary they need to offer to get someone. Not some specific idea of egalitarian fairness.

Is this quote from the WSJ article? I cannot find it.

They are having a live company conference right now

Also, what if people move every year? are they going to readjust after every move?

Who in this modern housing market is able to move every year?

Renters.

Ignoring the 'morality' of it (there isn't any, its just business), reducing pay would be difficult if there is any employment contract?

I've never had a software engineering position in the US that had a contract. For me it's always been we'll pay you X, we reserve the right to change X at any time for any/no reason, there might be bonuses but who can say, and we can fire you without notice at any time for any/no reason.

Hm. I've been an independent consultant for too long I guess. Back in the day, we signed a dozen forms to get hired including one indicating pay and duties.

But if they lower your wages, you can generally qualify for unemployment.

That sounds like a contract. An oral contract is still one.

These are written, not oral. The point is it's written in the agreement that the company can unilaterally change the compensation without notice or reason.

Employment contracts basically don't exist in the US software industry.

the pay increase is quite frequent and ubiquitous, so contracts are re negotiated, most employment contracts don't come with time limits.