If an employer has nothing to do with your lifestyle choices, then they won't pay for them. For a truly remote position, they won't pay extra if you life in NY/SF vs Nebraska.
However, I think the world hasn't adapted to that market economics yet, so in this time of transition people talk about location-based pay as a stopgap measure. Software development doesn't benefit from a centralized location, so in the future developers won't naturally live in big expensive cities and employers won't pay them wages that permit them to do so.
To be honest, I think the best thing would be for SW Devs to have a guild that aids in collective bargaining. Otherwise, the power balance will gradually tilt too far towards employers. Other professional jobs (e.g. medicine, law) have similar arrangements, and that's the only reason why pay can remain high in them.
It truly is. I may have a passion for Alizé and Cristal and to afford that passion I may want to live in a rural setting. That’s my business. Who are these people to try and tell me that whether I live in SF or Nebraska, they’re only going to let me drink André?