Price is the intersection of supply and demand. A buyer will ask a seller to accept a lower price if they think the seller is willing to accept a lower price. A seller might accept a lower price if they don't think they can get a higher price.

You are paid $X because the buyer couldn't find someone willing to accept $X-1, and you accepted $X because you couldn't find someone to give you $X+1.

Just because it takes some time for the market to price the changes it doesn't mean it won't do that. Enjoy the initial boost in discretionary income but prepare for having to negotiate lower compensation down the line (or, more likely, not getting any increase in compensation for a long time).

If the buyer's prediction is true, then the seller will accept (maybe not in individual cases, but averaged over entire workforce). If the buyer's prediction is false, then sellers will opt to sell to other buyers offering more.

When there are 10 Million people living in dramatically cheaper COL centers they (a) can survive on much less, and (b) are all competing for 100 jobs, driving the supply curve way down.

>> restatement of economic generalities help

because this is a textbook example of why these generalities hold true, but only in really basic, aggregate cases.

Its very imprecise to base salary on location, but if remote were just as competitive as in-office, you wouldn't hear people asking to get paid the same when they go remote

It would only make sense if employers collude so that those employees can't get competitive offers. Otherwise, why wouldn't another company bid more since location doesn't change the value?

My buddy accepted $X -($X *.8) = $Y because the company offering $Y was doing something ethical. Point being there's far more variables at stake here to over simplify.

A classic example is the lack of perfect information in the labor market like you see in a commodities market. A more specific example is the wage-fixing scandal that hit tech companies [1]. In this case, the companies used their market power and unified to lower worker wages and stop them from crossing the street for more pay.

[1] https://www.cnet.com/news/google-adobe-apple-intel-settle-wa...

Employers colluded to reduce number of buyers, hence reducing demand, causing sellers to have fewer alternatives to sell their services to, causing them to sell at a lower price than they otherwise would.

There may be more effects due to lack of information or ability to move or issues of social signaling compared to a simple example of widgets, but in the grand scheme of thing, it still follows the same principle.

That said I work for below market because I value the work and enjoy it. Not sure what kind of bump I’d get but it wouldn’t be a 5x

Midwest salaries were notably lower.

Oddly enough it was more of a issue brought up by folks at HQ as they knew they were more expensive and a particular group was really paranoid about it... like constantly. It was a bad scene.

For whatever reason, market rate of pay in Bay Area for this field was similar to the market in Texas. However COL had a large variance. We were a pretty tight bunch that knew basic details of each other’s personal lives. It was crazy the amount of subtle strife this dynamic caused. When someone in Texas buys a large home and a new BMW or is traveling all the time. And their peer or even boss in Bay Area is struggling to split an apartment with a roommate well after “roommate appropriate age” by Texas standards.

Yes, it does; but it's not how much value you, as an individual, add, but how hard it would be to find someone else who could add the same value but would work for less money.

> If companies can pay less and get the same value, they totally will.

Yes, which means companies are aware of how much value an employee adds; they are just also aware of what the current market price is for that amount of value. Whereas, many employees are not aware of that.

In any case, the primary benefit of the observation that the more value you add, the more you get paid is long term, not short term: it tells you that, if you want to increase your total lifetime compensation, you need to become harder to replace. In other words, you need to add, not just value, but some particular kind of value that fewer other people could add if they were hired in your place. The scarcer the kind of value you add is, the higher the price you can get for it.

If given two "equal" canidates why pay more if you don't have to? (The actual equality given other complications like cultural, language barriers, and similiar is another topic.)

The "fairness" is also not mathematically viable as it assumes axiomatically that no action can be taken to earn profit that isn't "unfair" as the deserved value is based upon output and not input provided, which leaves no room for expansion nor buffer and no incentive to actually operate a business.

TL;DR - most popular understanding of economics is pretty damn confused.

The rest was expanding on that core point by computing the expected profit a company gains by hiring someone (value - salary [minus total costs, actually]) and that a company will seek to maximize its profits.

The part about the mathematical viability of fairness was particularly quite puzzling.

(It’s actually higher than what a sound company would pay, but if you switch salary out for “total cost to company”, it becomes correct again.)

Just like buying a house: there are 2 variables that contributes to the total value, the land (location) and the building.

But, if it ultimately turns out on-site employees provide no real advantages over remote employees, the end result is going to be a grand leveling more weighted toward a downward adjustment in Bay Area wages than an upward adjustment in within-the-US wages.

Companies will certainly try to pay you less for any number of reasons. But there's no reason you as the employee (with nearly all the leverage in this market) need to let that happen.

I mean sure, it's clear that there's a cost difference between my house here in rural France and its equivalent in the Bay Area. But personally I'd prefer that difference be captured by me rather than my employer, so I don't tend to budge from my "Bay Area" rate.

Here's hoping the rest of us fleeing the bay right now choose to stand up for themselves too.

No, the real economic force at work for here is the halo effect. If you're in SV you must be good! You went to Stanford and worked at Google? You must be good! Then competition for that group takes over driving up prices. Housing costs are just an excuse people give themselves / investors.

No, you actually should be. If you work in manufacturing and you're any good at your job, you analyze what it actually cost to make a product. If for example, the price of a commodity heavily used in your product bottoms out from a previously very high price, you should make a call to your supplier demanding some kind of price adjustment (either future or retroactively).

SV paid high prices because the explosive growth and geographic constraints made housing prices very high, therefore salaries had to go up to entice people to come. Rising salaries were not based on competition for talent alone.

I get that a lot of companies are posturing that they wont localize pay, but eventually they'll wise up since their talent pool has grown very significantly. Salaries use to go because pool of applicants who were willing to move to SV was a lot smaller. Now that limitation has all but evaporated. These companies aren't stupid, they'll find cost savings just like those people moving to the boonies.

You can only do this if you have an alternative, such as another supplier willing to provide you the product at a lower price. But my COGS going down has only partial bearing on what my customer pays me. I charge my customers the maximum I can get them to pay me, and my suppliers do the same to me.

>SV paid high prices because the explosive growth and geographic constraints made housing prices very high, therefore salaries had to go up to entice people to come. Rising salaries were not based on competition for talent alone.

SV paid high prices because they wanted to hire people in a specific geographic area, thereby lowering the supply of labor they had to choose from. If SV expands their supply of labor, and SV thinks it can get the same output from different supplier willing to accept less, then they will choose to do that.

Salaries were/are so high because of the limited supply of qualified labour. If they now accept workers from everywhere the supply side constraint just got blown wide open.

In other words, I would be very surprised if you were correct, as not everyone has the capability (or desire) to move to large and expensive cities, and the likelihood is that there are lots of very very good people working in the rest of the country due to family situations/age/personal choice.

However, regardless of if the worker is taking a lower salary they should be maximizing purchasing power in whatever location they're working. If you can move somewhere rural, have a better quality of life, and have a higher savings rate while taking a pay cut you're still better off than your counterparts in [HCOL area] making double your salary.

Your salary only matters when compared to your peers in similar living situations.

No, there could be a long tail of meagerly paid folks, just like baristas who aspire to be professional singers. But some folks (allegedly the best of the best somehow) will be getting top dollar.

Software developers don't really have that. Maybe if you're John Romero people buy your games without looking too closely, but it's pretty rare in comparison.

While you'd think the worker would benefit from being more globally employable the companies conversely have a larger pool of candidates now to choose from, which means they can afford to pay less for talent.

however, standard crud jobs that most programmers can do, yeah that will go down as rural employees are willing to work for less out of Utah or something.

I would guess John Carmack would get paid the same whether he lived in a small hut in Estonia or if he lived in SF. I don't think thats true for the person building a web app for a local company to sell knitted socks.

Some more distributed companies like Salesforce have been adjusting compensation for years when employees move from the Bay Area to other office locations.

I have been shouting this into the wind for years (as a remote/WFH) employee. I agree with you, 98% of companies out there don't.

your perspective on value is wrong. you aren't paid for the value you bring. in capitalistic society you are paid at replacement cost. this is why unions are so important in some industries (mostly semi-skilled), to stop the next guy for agreeing to work at a lower standard.

now, if you have a lower cost of living, having moved "away", 1/ your net purchasing power is the same, so why would you complain, and 2/ your equivalent replacement cost is lower.

i don't understand your last bit about increasing housing prices. if you are paid less when you move away, how are housing prices pushed up? isn't it the opposite? if you bring your high salary with you, that pushes up housing prices.