Also yes, if Facebook starts to hire remote workers, then your value will drop because they now have the access to a pool of workers who don't want to drag their asses to San Francisco and can pretty easily settle for less since their rent doesn't require them to bleed money.
Indeed, presumably you are worth more than that to them. It's a pretty naked cash grab to cut salary in response to a location move, and somewhat illogical considering they moved their HQ to the bay area in the first place. If it's objectively bad and expensive, why not move your HQ to Austin or San Antonio or Portland?
> if Facebook starts to hire remote workers, then your value will drop because they now have the access to a pool of workers who don't want to drag their asses to San Francisco and can pretty easily settle for less since their rent doesn't require them to bleed money.
For now. It remains to be seen if bay area rents are high because of tech salaries, or if tech salaries are high because of rents. Likely they feed back into each other. And as a worker in SF, you have access to all the same remote opportunities.
And this pay-cut policy is bullshit. If employees are allowed to work offsite, then that site should not be dictated. It's a win/win, because although the employee saves money, so does the company. And thanks to Trump and Republicans, employees can't even deduct the money they spend on electricity, office equipment, and rent.
Socially speaking it could be a very good thing. Many of the big challenges we are facing (wealth disparity, political polarization, housing crunch) can be tied to the gross disparity in economic opportunity between places like SF, Austin, NYC, vs everywhere else.
Sure, they have to "import" employees, but importing 10% of the workforce in the Bay Area at X cost is apparently more appealing than importing 98% of employees to Tulsa at Y cost.
(Relatedly; Tulsa's not exactly a small place, but if you think the influence of "big tech" is bad in a larger metro like the Bay Area, I'd HATE to see what it would look like to bring a deluge of 'outsiders' into a much less populous region)
A tech firm in Boise might not be able to hire and Elixir developer at any price.
In SF, there will be employees as long as you have cash. Not so elsewhere.
I think the timescale matters. If it became known over a period of years that some company was paying $1mm for Elixir devs in Boise, loads of folks would consider learning Elixir and moving to Boise.
There are plenty of businesses that don't need to be on fancy infrastructure or use the coolest new language for their backend.
- There are already a ton of existing technology companies in the Bay Area, and also a ton of employees.
- Students from schools around the country who are interested in tech might plan to move to the Bay Area due to the number of companies there.
- If your company doesn't hire in the Bay Area, it may miss out on the chance to hire the employees in the groups above.
The end result is an abnormally high supply of technology workers in the Bay Area. I'm not saying that's something intrinsic to the location, it seems to me it's more a result of recent circumstances.
I wouldn't be surprised to find out that 90% of the reason FANG companies operate in large metropolitan areas has almost nothing to do with employees and everything to do with global image.
When Intel acquired the AI startup I worked for a couple years ago, they built us a downtown office, much bigger than our team currently needed. Why? Because there are lots of AI people in Seattle who will not move to California, and Intel wants a chance to hire them. But it's still a very small office compared to Intel's global footprint; it does not affect their "image" at all. It's just a practical way of gaining access to Seattle's engineering talent.
It is a simple virtuous cycle. The presence of good jobs draws people who want to work in the field, and the presence of people with experience draws the companies who want to hire them. Geographic concentration is efficient.
If Stanford or another incubator of tech innovators was in podunk MT, then we would be discussing that location instead.
capital on the aggregate always tries to get labor to work for the lowest possible price that they can. that's why negotiations go on between workers and employers. that's why if you don't negotiate, you get bowled over.
software engineers seem to think that they are this ultra elite labor class whose "value" is somehow tied completely to their intrinsic skills. that all goes out the window when software engineers begrudgingly accept massive pay cuts to take their insanely comfortable salary and lifestyle to a low COL area. that ought to tell you everything you need to know about your intrinsic "value": you lose immense power when you don't live in a place where you can quickly and easily get a job with a competitor.
if software engineers learn anything from this, it's that they are being paid a premium to essentially not change companies.
Forced analogy time: It's like if I decide I'll only buy peaches from the organic farm down the road. They charge $20/lb. I calculate that I get $21/lb worth of utility. The Farmer is happy.
A few years later I decide that purchasing organic peaches online for $15/lb fits the bill, and utility dropped slightly to $19/lb but still better in comparison. The farmer is no longer happy.
Tech companies typically do increase your salary if you move to a higher CoL area.
The buyer (Facebook) may not be playing all their cards. They may very well intend to reduce SF employee headcount, but want to experiment, and so saying otherwise will allow them to do it in a slow, controlled manner.
I personally have no problem with it and did just that at least once, but after returning I asked around and most if not all of my friends and family would not do the same even for - and this was especially shocking to me - 4x the salary.
Apparently flexibility is rare and sought after.
I got an offer for an on-site job in London the other day, that would technically be ~1.5x salary boost - and ~5x the salary I had the last time I worked for a local company. But after subtracting out the costs of living, it turned out it would be effectively a 3x salary decrease, and at the same time a significant degradation in the standards of living. Turns out, London isn't a particularly friendly place for a couple with a toddler to move to.
In terms of what I could nominally save every month the difference was enormous.
But yeah, with a child on board I would definitely have to get something larger paying somewhere in the order of 25-35% of my salary. But that's just CHF = PLN again, so no increase here.
What do you mean by 3x decrease? X/3 ?
From my calculations, London works out quite well if you're single and willing to sacrifice heavily on the living space. It also works out a-OKish for two-income families with children at kindergarten age. Not so well with a toddler; I was shocked to discover that daycare costs more than rent on a two-bedroom flat west-side.
My friends in Warsaw are pulling anywhere in the range of $55-65k per annum before taxes - that's at corona rates, which knocked close to 8% off our currency's value.
Later I asked one of them if they wanted to know the salary range difference preferred not to think about it
Employment is no different. There is a struggle between buyers of your employment, and you (the seller) of your time/expertise. If those prices overlap, then there is a spectrum of possible transaction prices that can occur.
As you can imagine, if there are many buyers, and few sellers, then the price is driven to an auction level where buyers must compete with one another for the employee. If there are more sellers than buyers, then the price is driven down towards the cost of that employee (and associated education).
Typically we exist in the middle where negotiation tactics dominate where within that range the price settles. That's why there are policies such as "don't share your salary" - to create information asymmetry favoring the employer. ...and why people with poor negotiating skills typically earn significantly less than those who demand more.
Generally, when demand for employees is high, companies try to make the market less efficient by creating hurdles to employees leaving (like the agreements between tech companies not to "poach" employees from one another), and bonus programs that vest over multi-year periods.
This is relevant today because allowing employees to work from home greatly increases the supply of potential employees (both domestically as well as internationally), thereby forcing employees to accept closer and closer to their cost-basis. By microeconomic principles alone, it would be surprising if this didn't significantly drive down tech wages.
There's no universal rule of "fairness" saying how much a company should pay you. It's not dictated by COL calculations and logical questions of value.
The company looks at you and your competitors (alternative candidates), and puts forward a number they think is high enough for you to accept, but not so high that they could snag an "equivalent" candidate for a lower price.
You win that battle not by whinging about COL adjustments, but by eliminating your alternatives (metaphorically speaking, of course). If the company truly needs what you do, and you're the only one who can do it, then you set the terms.
That said: this is the reality and, as unfair as it sounds from the employee's perspective, it makes perfect sense. Facebook does not pay Bay Area compensation to its employees in other parts of the world. It should be no different for those in different COL areas around the US.
Not only does this suck for current employees, but new hiring will be a nasty wake-up call. If a candidate in a different city thinks they'll cross their arms and demand Bay Area pay, there will be multiple other qualified candidates in that city & around the country more than happy to accept a competitive offer tied to their COL.
*Spelling
Edit: And if I moved to the bay area I would absolutely expect a COL increase
In a location-agnostic situation, this would mean "how much it would cost to replace you with an equally qualified worker anywhere in the United States?" (Or world, really, but let's stick to US for now)
What Facebook is probably signaling with this location-based cut is that this is the direction they are headed. They can't afford to immediately cut their Bay Area workers' salaries to this US-average-number (because they would lose their current workers faster than they can replace them) but they are not going to give preference in the future to Bay Area workers and will not pay new Bay Area workers higher salaries unless their physical presence in the Bay Area is explicitly needed.
You may be worth $150k, any one individual engineer could be worth multiples of that!
Look at your entire engineering team, from best to worst. Is not there some inflation of salaries in the SF Bay area? The bootcamper that is making $110k out of bootcamp? Are they really 73% as effective as you?
The marketing person down the hall? Do you contribute more then that person today? Yeah, probably. Without marketing to get the word out and sales to actually bring in the cash, how much would your contribution be worth?
You have to look at the whole system as a manager. And yes we pay the bootcamper $110k because we hope they'll grow into be a great engineer like you.
Pay is determined by the labor market.
Substitute wizzle for “senior engineer”, and wozzle for “bootcampers” or “marketing”.
Facebook pays $150k for wizzles because that’s what it costs to get good ones. It pays $110k for wozzles because that’s what it costs to get good ones.
People (reasonably) want a specific combination of wizzles and wozzles, for growth, different roles, etc.
At no point does Facebook assign a price for wizzles based on their expected individual contribution. Maybe there are some “market makers” in some industries, but I don’t think it applies in tech.
Tangent, but did I miss some trend here? Over the recent months, I've started to see the phrase "individual contributor" being used pejoratively, at times almost like a swear word. Is it now a label that's assigned to bad employees or something?
The real point is it's not about what you are "worth" but about your market value. If you are away from Silicone Valley where you could find a similarly paid job, your options are more limited. That's a loss of bargaining power and Facebook thinks they can get away with paying you less.
As someone who's run two remote companies now, I have struggled with this dilemma as an employer. Because I agree with you, if a person is worth $x to the company, their location doesn't change that.
The flip side, though, is that I also want people to be on relatively equal footing. Not everyone can move to optimize their relative adjusted income, and the problem with a salary number is that it doesn't reflect status. An entry level SF salary will get you a house + a lake house in Oklahoma. A person who owns a vacation home is living an entirely different life than someone with a roommate in Oakland.
If you _don't_ adjust salaries for cost of living it makes that even worse, because suddenly you're probably paying less than someone in SF or NYC needs, more than what most people need in other states, and paying a crazy high localized salary to someone in Vietnam.
All that said, we're doing the same salaries regardless of location. And I'm still not sure that's the right choice.
Yes and not everyone can get married, and have a partner to share the load with either. So does that mean a bachelor and a married man should be paid different salaries?
Not everyone can find the time to run a side business. So should those who can be penalized?
You pay your employees what they are worth to the company and forget entirely about what they are and are not capable of doing outside of the company because it's really none of your business. If that means you can't find employees because you aren't willing to value an employee correctly than your company will fail, end of story.
You've sort of dismissed my point, though. The dilemma is that salary choices create friction within companies. It's not as simple as "pay what it takes to get someone" and "it's none of your business" because it does, in fact, have repercussions on how well a company works.
They get paid differently, or they cost their employer differently?
“Costs the company more” means they are both paid a salary of $100k, but the healthcare insurance for the employer with a family costs $50k extra.
Maybe another way to think about it is when some innovation drove the price of a car down by 10% (because production costs are lower, the car maker makes the same profit). Would you say "Hey I was happy paying the car full price for the value it provided me, so let me pay its old, full price, I'd be happy to do that"?
They know that not only does the company have a wider choice of employees - the employee has a wider choice of employers.
They also know SV companies pay more then $90K, and if they already have a decent gig they will not 'settle' for what they could get at a small company. They may not ask for the full $150K - but they are going to ask for say $120-125k. End result is salaries will start to homogenize around the country.
P.S. We've seen this in AZ as more tech comes in, salaries have been getting closer and closer to SF.
Glassdoor is obviously not reliable.
I did do a few interviews with AWS for a TAM/Engineering type role earlier this year. They had no quibbles with $175K. I actually lost interest when I found out it was a 25% on-premise role at client facilities. If I had known everyone would be working remotely now, it might have been different.
TMSC dumping $12B into the phoenix economy over the next 9 years would only make things sweeter...
You are in for some surprises then. Companies don't pay you just in relation to the value you deliver. Most companies pay the least amount required to get the value you deliver. Now if you are competing against engineers who are willing to accept lower salary due to low CoL in another area, the company would offer less.
Offcourse, that is not how things should be.
Why shouldn't it be? The market uses prices to signal things you should and shouldn't do. This particular price signal is saying, "move away!" If you don't have another, stronger signal that overrides it, it is not an efficient use of resources, and society suffers a dead-weight loss.
Why should all the software engineers all have to cram into Silicon Valley, pay California income taxes, and bid up the prices on a housing supply which remains wholly inadequate for the region? If tech stopped paying the California premium, the companies would see higher profit, their customers would see lower prices, their engineers more disposable income.
I would love for programming jobs to be available in every major city in the nation. Sure, the Mission is pretty cool, but there's hundreds of other cities in the US that have some pretty cool stuff too.
Let say I shop for a gadget. I pay for that gadget not because the value it deliver but the least amount required to get the value it deliver.
And human beings are not being treated as disposable gadgets. Their labour is behaving like any other good in the market. There are some specifics but for the most part it is true.
There's no should to this. It's merely observational truth.
In a business relationship both parties need to find a price point that is mutually satisfying. If there is no agreement that doesn't mean that either party is treating the other like "disposable gadgets".
And the system is not static, value from both parties perspective changes over time, which means the mutually satisfactory price point can also change or even evaporate.
As an owner, your work is valued by the income it brings to the business. As an employee, your work is valued by the amount it cost to replace you with another qualified worker.
If you do work as an employee, the only thing that matters is the market value of your labor, regardless of the result. It doesn't matter how much business value you add.
But if the company needs you in SF, then they'll need to pay what it takes to hire someone in SF, regardless of where you lived before.
It's only a cost of living adjustment to you. To the company, it's what they have to pay to get an SF worker. It just happens to be higher than what you were making before.
If all their employees work from home, that's going to tend to equalize the salary levels across regions, and the number they settle to likely isn't going to be the SF Bay Area number.
If you move to Tulsa, you're minimum goes down because they know there are fewer opportunities for you to work in Tulsa.
As remote work becomes more prominent, then your salary would probably go back up as there will be more jobs for you in Tulsa. But it probably won't go back up to SF levels because everyone else has that opportunity too.
one could argue this is how you make your own purchasing decisions.
now, with remote workers, this becomes interesting and not as clear cut.
i'm not making a judgement on whether this is fair or not (that's a whole other topic), but rather just pointing out how the calculus is generally made today.
Do we have stats about he difference of hours between remote and non remote employers? I thought the main goal to have those big tech campus is to have dev stay longer at work.
If you are remote you will work less and then your value decrease
Part of that value calculus was that you are willing to relocate (or already reside in) the Bay Area. In other words, if the company offered only $90K and still required you to live in the Bay Area, you and most other qualified candidates would balk at the offer.
> The only thing that changed is where I choose to reside. What difference is that to the company?
Clearly the company is betting that if you walk away instead of accepting the pay cut, they will be able to find another qualified candidate among the now much larger talent pool they are able to court with remote work.
Now, if you really go all in with distributed workforce, the problem becomes "why pay $300k for the guy in SF while I can hire the 'same' guy in Tulsa for $90k?"
Instead of the guy in Tulsa being upset that they're not being paid as much as their buddy in SF, it's the one in SF who should wonder if they'll be able to keep their salary at $300k for long.
Now change the second "is" in that sentence, to "was".
Offer and demand are (largely) what determine your salary. The value you create is what sets a ceiling to that price.
It's that simple. FB becomes willing to hire people who live anywhere, and stops believing that candidates in SF or other expensive locations provide more value. They will have a way larger pool of candidates, and they will likely find people who provide just as much value for FB (sorry to burst any bubbles here) but are willing to do so for less money than currently happens.
Opening remote might make market more competitive. Speaking for myself, living outside US: I am able only to command 1/3 of SF salary(top in my market) although I could easily replace many people working in FB, earning much more than I do. Only if they were hiring in my city. (Pretty sure as had offers from Amazon, Gooogle etc. but they would require moving or local projects weren't interesting).
Also, the value you deliver to your employer will change whenever there’s a substantial shift in your working relationship. To the extent that your job requires collaboration, working in the same timezone as your peers has obvious benefits, for example.
If they demanded you to be in SF, one can guess a part of your comp was to adjust for crazy costs of living there. If you move away, that is adjusted.
Having been an expat, there are purchasing parity tables that are used in these relocations.
Imagine you were hired on Tulsa money and then forced to move to SF on the same amount...
On the other hand if I worked for Facebook I would strongly consider taking a payout if it meant I didn’t have to work in their open floor plan from hell environment.
The fixed portion covers basic needs: Shelter, food, transportation, healthcare, etc...
The variable portion is typically performance based. Usually RSUs or stock. Could also be a cash bonus.
Moving to OK will reduce basic needs and fixed comp, but variable comp could remain unchanged.
More employees living in OK could mean more profit, hence more cash bonus.
Remember how Adobe, Apple, Google, Intel, Intuit, Pixar, Lucasfilm, and eBay colluded to suppress wages of Software Engineers?
https://en.wikipedia.org/wiki/High-Tech_Employee_Antitrust_L...
True, unless the company thinks you're more valuable by having you on-site.
It's more about competition than value you're providing. In SF, you'll find another 6 figures very easily not so much in the middle of nowhere.
You might be worth 90k in the SF market, but in a global market, competing against cheap labor and other regional bureaucratic regulations, your value will be less.
If I'm relocating to SF from middle of nowhere where I got paid 80k, without a cost of adjustment increas I can't afford SF.
You pay the Administration that owns that real estate a large portion of your salary.
Companies exist to extract the highest amount of profit from their employees.
> Likewise, Twitter and Facebook will be competing against each other in the lower COL areas like Oklahoma!
The market should recover when this new reality matures. Lots of engineers are currently willing to relocate and the current market is still incredibly competitive. Good talent is hard to find and easy to lose. That will not change.
10 years of working in SF and saving frugally, and you can go to the aforementioned places in Eastern Europe to retire for life. The engineer in Eastern Europe cannot do the same.
See if it makes more sense going the other direction. Imagine you started in Tulsa making $90K. After a few years facebook wants you to move to SF. Would you still be happy with $90K in SF since that's what your worth to facebook? Of course not, you'd want cost of living adjustments.
its literally just supply and demand like everything else.
Let's say you hire me for your company in San Francisco and pay me $150K. You've made a calculation: my value to the company is greater than $150K, and $150K is a price you're willing to pay to leverage that value. In other words, the company will (eventually) make more than $150K per year off my contributions to the company.
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! I am still worth the same amount as I was before! The only thing that changed is where I choose to reside. What difference is that to the company?
As remote working becomes more and more acceptable, we're going to start to see companies like Twitter and Facebook competing nationwide, not just in Silicon Valley. An engineer in Oklahoma will now be in a market that includes all of the big giants, and not just the local banks or whatever. Likewise, Twitter and Facebook will be competing against each other in the lower COL areas like Oklahoma! And not just SF startups, but competing against NYC and London startups as well.
This whole area is really fascinating to me, but the "you get paid differently depending on where you live" thing has always struck me as bizarre and one-sided in favor of the businesses and not the people in high demand, like good software engineers.