Right, so then location does affect the quality of the work provided. Although it then still is weird to base differentiated pay on cost of living / local market rates; surely those don't all correlate with the quality of the work delivered? If you can get an engineer with the same skills from Spain for less money than you'd pay for the equivalent in Germany, why would you hire the latter?
Because they probably want someone from the area working in the company. If they pay a flat rate globally, they only have to pay average or lower and get great people in LCOL areas. But then you have a company with no people in CA or NY, which means you dont have contact with local trends or contacts in the big tech companies.