the problem is that offering remote work as an isolated option isn't feasible, because the cost of living when remote is lower (presumably), and thus, either they must be paid lower, or the office-working colleagues must be paid more to adjust for said cost of living.

I feel there would be social friction caused by this market-force mechanism.

It shouldn't matter where in the United States you live, NYC, Puerto Rico, Hawaii, Guam, or some forsaken place like Indiana, etc.. If you get your work done, you should have the same responsibilities and benefits.

Salaries are mostly controlled by market forces, opening up to remote work will result in a larger supply of potential employees, to include those who were previously not considered, but are good enough, and are willing to accept less than current Bay Area/coastal salaries.