> The cost of paying someone too much over local market rate incurs obscene tax costs.

This is fascinating to me, do you have any examples of jurisdictions where this is the case?

Here in Germany the “taxes” (they’re technically mandatory insurances) than an employer will have to pay on top of the gross salary all have a salary cap, the largest one being around €85k. After that any increase in gross pay has no additional cost. Of course my personal tax rate might take a hike but that’s not the concern of my employer.

For slovenia taxes are progressive, above 10k a month is the highest bracket and taxes are 61%. If you want your employee to make 10k a month, your company pays 24k. If you want your employee to make 5k a month, the company pays almost 12k.

I think that’s a foolish comparison. When talking about these super high SF salaries, folks are talking about _gross_ salaries. Nobody will reject a higher salary because they’ll have to pay more taxes.

A lot of the conversation is about the value of the developers work being high enough to warrant higher salaries. With that argument we should look at gross salaries + taxes/fees paid by the employer on top of the gross salary.

Your personal tax rate is between you and the state.

I was not talking about a personal tax rate. My point was that employers can not pay anywhere near SF salaries because some places tax high salaries so severely. It is not a matter of employers being unwilling. A rich company can't just decide to pay people at SF levels and expect to create a local silicon valley.

One key part of the suggestion that might have been overlooked was to hire fewer engineers than you would have otherwise.

This could mean hiring 1 really amazing engineer instead of 2 or even 3 average ones depending on the realities of your local market, and pay them based on what it would have cost you to pay the 2 or 3 engineers combined.

This is always a choice you have available, unless you're bootstrapping and can't even afford to make the first hire at those rates, at which point you're probably not looking to compete on the global stage to begin with, so this suggestion doesn't really apply.

If a company knows that it'd actually cost 300k to hire the local kind of engineer that could make 150k in the Bay Area, that company is either going to move to the Bay Area or hire Bay Area-like engineers as remote contractors to get their 150k worth of engineer for 150k.

In Romania I'm paying about 45% of the gross salary to the state, and about 55% to my employee. The higher the salary, the worse that ratio gets.

Of course, the employee then has to pay VAT (19%) on everything they spend those 55% on.

The "able to pay" part will resolve itself if you manage to start a sufficiently successful startup. Eventually through high enough profits, since the startups that turn into global leaders in their field are more profitable per employee than anything a local non-tech company can compete with.

Getting to that point is a bit of a chicken-and-egg problem, though. And firing policies is a political barrier that's hard to avoid. I suppose you could keep everyone on as contractors, paying them standard rates but going to them directly, not through an agency. That would land the salaries in the region suggested, and you'd still have the ability to fire without cause.

Lack of VC money makes starting a sufficiently successful startup a bit difficult. There is a reason there is only one silicon valley.

There are more silicon valleys, like Tel-Aviv or Shenzen, but arguably the Bay Area is the only one merit-based. Good luck getting funded at the other two as a foreigner.