What is being described here is supply/demand economics. If you think you’re being underpaid, quit, find something else that pays you more. The reason why you won’t quit is the reason why the company doesn’t pay you more. You don’t have other options, and if you quit, they know there will be 10 other people ready to take you place for those wages.

Part of the reason why wages in places like the Bay Area are high is because companies are competing with each other for talent and if you don’t pay people, they are ready to quit and replacements aren’t easy at lower wages.

I'm just imagining this dude quitting and his manager suddenly realizing that no one else knows anything about the parts he worked on and how fucked they are now. Just because a bunch of people could take your job doesn't mean they'll give a shit about the job. Good, well motivated, employees are extremely hard to find. Understand your value and don't let some dude in a button down shirt who has never written a line of code trick you into thinking you aren't valuable.

I would bet its rarely a case. We like to think that we are irreplacable, but after our quit company/project is still moving on.

I agree that life goes on, but it's not rare at all. It happens all the time. People leave and things are f-d up for a while.

The thing is, it's not a permanent condition. People adapt, new hires are eventually found to fill the gap, or others who were thought of as not up to the task take the opportunity left by someone's absence to step up in their career.

One person leaving won't sink a company that is large enough. That doesn't mean it won't hurt, however. And how the company handles things after the departure is very critical.

Perhaps more important (and dangerous) is the morale hit that the others will feel as their peers start leaving. There very much can be a "rats-leaving-the-sinking-ship" effect that can be precipitated by a key person leaving.

Oh, yes. One person does not sink a ship, but I've seen cases where whole teams leaving destroyed companies.

And while I was under no illusion of my importance and did not expect any breakdown of the team or anything like that, I did think I would get at least ONE question after I left from my previous teammates about some obscure thing that I thought only I knew.

Nada. No one asked me anything - they had no issues for which they had to reach out to me. Team did a re-org and things just kept moving. It was a humbling realization to say the least.

More likely no one cared.

It also depends how regimented the team is, places like Amazon have large numbers of coders on the same project, watching over each other. But they also compensate their employees well.

Over the decades this has proven itself to be true so many times. I've been part of big enterprise organisations as well as smaller startups that had some "vital" proces which relied on that one person. When they left however, it didn't really change anything in the big picture, sometimes it let to the entire guts of a company getting ripped out and replaced by something different, but in the big picture it just became another thing to solve.

I think it's a good thing to learn, both as a manager but also as an employee. Because at the big picture, what "irreplaceable" really means is "liability", and that's not a great thing to be at a company.

Good managers will work with you on how to reduce your importance, and great employees will know how to do so themselves. In the world of work, a good work relationship is one where the organisation you work for give you opportunity to grow, and sometimes that means, outgrow the organisation itself. But it goes both ways, and you should try to respect that, even if you're the rockstar employee because it'll make you even more valuable.

they are fine with throwing their money around until a problem is solved. and would much rather hire someone with 1.5x your pay than to give a 10% raise. its just a political / power thing...

internal politics and preserving imbalances in distribution of power is much more valuable than adding a little inefficiency to worker output

In the rare occasion that a single person is valuable enough that if they leave, the company would shut down, the person is well compensated.

Only in an imaginary world of perfect information and labor liquidity, which is about as far from what we have (and could have) as can be.

Location-adjusted pay for remote US workers is indeed a social norm, proposed by some firms and accepted by enough of labor for it to work for them. It persists mostly because it exists and because there’s no organized effort to disrupt it.

Nonetheless, their are still many firms that don’t do that, many employees that don’t settle for it, and some firms that initially negotiate from it while accepting counteroffers that reject it.

Reducing an extremely complicated market to an oversimplified post hoc theory, just because it exists a certain way, is neither correct nor helpful to the issue at hand. It does nothing but shut down richer discussion and reinforce an incidental status quo.

OP is also correct in that the following is how HR at almost every large company thinks about comp:

1. Comp is usually not set by a Hiring Manager and is specifically based on "comparable" which is based on job type and location.

2. Job type and location is by far the easiest way to create a heuristic for pay rates because the data is public

It's basically impossible to individually value everyone's contribution consistently and without bias across hundreds or thousands of employees - plus I don't think people would want to actually be judged with any method that puts granular measurement on something as vague as "value"

So if you can come up with a better way to determine pay *at scale* other than the open market approach, I'm super interested.

The only way to do this in my mind is to never pass -- lets say -- 100 employees.

I would just like to add that I have found myself extremely happy working for a company of ~100 people (especially when compared with my previous company of ~30,000).

That's backwards, though. It's a social norm because it's the most workable solution. Firms that overpay salaries (defining overpay as paying far above the market rate in any given region) will not be able to afford as many employees / highest quality employees / as much marketing / as much downturn stability or runway / as much other investment as their competitors, so they will lose on average.

And this makes sense. The same forces that drive salaries up (competition from other employers willing to employ the same person) also drive it down. You can't only have upside.

Why the market rate in any given region? Why not just the market rate?

So salaries might go up in one region if people want to do business there, for the sole reason that there is competition amongst employers for the employees there. They'll go down (or stay the same) if there's competition amongst employers for employers.

How does your example raise salaries all over the world to the most expensive salaries, worded in a way that also explains how those expensive salaries came about?

Hell, I worked for a Canadian company that paid Canadian employees 30% less.

The question is, once the company has decided it wants you, what’s that going to take? Making national median offers to Bay Area candidates essentially swears off of ever hiring them. That could be a choice, but for now it remains a bench of talent and experience that companies want to draw from, even if not exclusively.

Making Bay Area offers to rural candidates is giving them 4-5x their next best option, which is characteristic of either a) the devil, or b) rich people making expressive displays rather than business transactions.

It’s like everything else, your leverage is your next best alternative, and until work goes fully remote location is a factor in that.

EDIT: I will add that if you think calibrating an offer based on the worker’s alternatives is crass, think for a second about what exactly your skills, education, and experience are for. Those work through the same mechanism. If that mechanism is wrong, you should be happy to work for the national median wage across all industries and all education levels. Even a mediocre SWE salary is way too high.

Companies that don't operate from the Bay Area, almost never hire Bay Area remote workers; and companies that are headquartered outside of the US, almost never hire US remote workers. Precisely because they cost too much, for a company that gets no advantage from doing so. (Source: we are a Canadian company; we hire from everywhere but the US.)

I don't follow. This isn't true at all in my experience, plenty of companies in Canada and the US hire across Canada and the US. It's practically the norm.

If you work for a Canadian company that doesn't hire in the US then you're comically underpaid. Wages are converging very fast. Many companies are paying parity and frankly folks are selling themselves short if they don't fight for parity.

(If you're not talking about software development, then ignore me)

Wages might be "converging" to the same numeric value — CAD$N in Canada vs USD$N in the US — but those are, and have always been, very different amounts of money. The two countries are still nowhere near the sort of economic equilibrium-state where Canadian companies are paying the prevailing US salary exchanged into Canadian dollars.

Also, there are a number of costs related to hiring US remote workers (as a company headquartered outside the US) that don't apply to hiring remote workers in most other countries. You're expected to provide some kind of private insurance plan, for example. Take-home pay may be converging, but the cost to the company of hiring a salaried US employee — or even a US contractor, as long as you care about being equitable / not building resentment when your employees talk amongst themselves about relative total compensation — is still higher than the cost to the company of hiring elsewhere.

And to be clear, the prevailing wage isn't even that relevant, as we're not really talking about "hiring the median American" vs "hiring the median [person living somewhere else]." We're talking about hiring people who apply for — and are considered top candidates for — remote tech jobs, among a global candidate pool. In the US, these people mostly happen to live in HCOL areas (like the Bay Area); which means their BATNA is to be paid far more than the US median wage for an SWE, because that's what the companies in HCOL areas have to offer to retain local talent there. To hire these people, you can't just offer "the going rate"; you have to offer FAANG money.

You may be surprised to learn that this is quickly changing.

> Take-home pay may be converging, but the cost to the company of hiring a salaried US employee — or even a US contractor, as long as you care about being equitable / not building resentment when your employees talk amongst themselves about relative total compensation — is still higher than the cost to the company of hiring elsewhere.

This is not true in my experience. It's slightly cheaper to hire in the US than other markets, if you do not yet have any presence in those markets. It's a wash long term. Some firms offset the extra costs for US workers benefits by simply paying others more.

> To hire these people, you can't just offer "the going rate"; you have to offer FAANG money.

In the ballpark, but yes. The gap is rapidly closing. Plenty of seed or series As are paying near FAANG rates.

Probably only after they get to a certain scale and cannot find more talent in Canada? When did Shopify start hiring in the US - right from the beginning?

Example: Show me a startup in the YC job board based in Canada (there are many these days) that is hiring locally only for software engineers.

You're putting the cart before the horse. Investors live all over the place, and large funds have offices in markets where there is a signifcant number of possible high growth companies to invest in. And they'll invest where they don't have an office and always have.

The reason why so many investors are in silicon valley and san francisco is because of the companies. And the companies are here because of the environment. I've worked around the world but the reason I love working in the valley (specifically the peninsula) and not elsewhere, not even SF, is because of the extreme density of people, resources, markets, and just the sheer intensity of the place. I hire from all over the world, but really, just getting shit done is so much easier around here.

Ignore the bros. Those assholes get the press 'coz they're interesting to write about. I'm talking about nerds in true tech businesses like hardware, software, mechanical systems, pharma.

It's not for everyone, and even people who would like it may choose elsewhere for other reasons. Those decisions are all legit too.

DARPA made Silicon Valley, but Stanford and UC Berkeley — and nearby communities that evolved to become basically playgrounds for the students of them — kept it going. Entrepreneurs came (or stayed) to capture the supply of smart and bored college-aged intellectual labor; and VCs came (or stayed) because of all the entrepreneurs.

But that doesn't mean that seed-stage companies don't move to (or stay in) the Bay Area these days primarily because of the VCs, rather than because of the talent. Talent is free to move anywhere it likes — especially these days. An entrepreneur will find just as many potential employees for their startup in literally any college city.

But tech VCs (and especially ex-tech-entrepreneur angel investors) will, despite having a presence in many places, mostly still live and spend their free time in the Bay Area. And so you'll be much more likely to have your name on their lips if you're showing up at local events they attend, bumping into them at restaurants, meeting them on the golf course, etc.

Let me put it this way: every Canadian seed-stage startup I know of, has their CEO regularly fly to the Bay — even if they're located on the east coast of Canada! — to rub shoulders with the Sand Hill VCs, in hopes that they'll get more attention there.

No? If you budget to hire two employees at Bay Area salaries and don't care where they work, you should pay them Bay Area salaries regardless of where they work.

Plenty of companies do this. It's fine. I don't see anything devilish or expressive about paying all your staff the same wages.

> I will add that if you think calibrating an offer based on the worker’s alternatives is crass

I think you're foolish if you don't expect a worker's alternative might be in the Bay Area salary range in the year 2022.

> Even a mediocre SWE salary is way too high.

It's not. The dollar-value delivered by a mediocre SWE has been significantly high for a long time, often orders of magnitude the salary.

Making a Bay Area offer when you could just as well have closed the candidate with a locally competitive offer doesn't make business sense. It is exactly an expression of the company's values: that it thinks paying people the same is inherently, morally good. Which is not an uncommon set of values in tech! If you can find a company like that, more power to you. But whether it's sustainable to be paying more than necessary for some of the staff depends on the company's economic conditions. If the company ever needs to trim its sails, then reverting to location-based pay would be a natural step.

Yes, which is why I recommend not accepting location-based pay. It works!

> Making a Bay Area offer when you could just as well have closed the candidate with a locally competitive offer doesn't make business sense.

Sure it does. If your revenue isn't locale dependent then it makes perfect business sense. Obviously if you're selling local McRuralTown widgets for McRuralTown denizens and the cost of living in McRuralTown is peanuts then this won't work for you, but you're probably going to have a hard time hiring smart software people.

> If the company ever needs to trim its sails, then reverting to location-based pay would be a natural step.

Typically this is a non-reversible policy. Reverting to locale-based pay is a suicide pill unless you're churning your entire workforce, in which case the pill is likely already between your teeth.

The delta between the wage needed to get & keep the candidate vs. the wage you're actually paying them is essentially a charitable donation here. Of course businesses regularly do philanthropy, nothing wrong with that. Their own upper-middle-class employees are a weird choice of beneficiary though.

Business sense would be to keep the money and put it towards its most productive use, like hiring another employee or procuring labor-saving technology.

If you are doing location-based pay, the difference between the wage you are paying in inflated regions and the wage for a similar candidate in the least expensive region from which a candidate is available is a charitable donation.

Location-based pay means systematically overpaying for labor unless you are taking your own location-based pay schedule into account when hiring and preferentially selecting candidates from low xost regions unless the quality of the candidates from the high cost region makes up for it. But that's just a roundabout way to get to the equivalent of location-neutral value-based pay.

Right, if you can find them. But the distribution of talent isn't random: bright ambitious people were responding to incentives to migrate to tech hubs at least up until the pandemic. People grew from intern to senior working in the industry's most respected engineering shops there, learning from the best. And that includes global talent: H1Bs are everywhere. There's a case to be made that this cohort is overrated or overpriced and you don't need them - fine. But if you want to hire them in numbers, you're going to have to pay wages that are competitive where they live.

I agree you wouldn't want to hire very junior or unimpressive candidates from the Bay Area/New York/Seattle for remote work, when you can get similar candidates for much cheaper in LCOL regions or countries. But if you're looking to hire from the top end, and your offers aren't competitive there, you're going to miss a lot of great options.

Right, so pay-by-value will probably end up paying higher wages, on average, in tech hubs, without any resort to pay-by-location.

That's not necessarily true. Many fully remote companies hire from anywhere and pay location-adjusted wages. So it's a roll of the dice whether the replacement makes more or less than you.

I'm not saying they should give more/better offers to people in 'cheap' locations, I'm saying location shouldn't influence the offer at all.

Once you get past that basic hurdle, you might find that the company is willing to pay more because they want a given skilled worker to be co-located with the team they will be joining to increase productivity which might come at a higher price than hiring into a different location but potentially trading off worker and/or team efficiency.

That's making a big assumption — that the team is in an HCOL area, such that "colocated with the team" is synoymous to "costs more."

There are a lot of companies who are headquartered in LCOL areas of the world; but still do location-adjusted pay, such that they might be paying someone working remotely from an HCOL area more than they pay the local team.

So you either: a) write off every candidate who is still in talent hubs, b) pay way above everyone else's competing offers so that your universal salary is also competitive in talent hubs, or c) pay based on location.

I don't think the OP would feel demotivated after learning their company pays competent employees more.

That's not quite true.

The cost of hiring your replacement is only the maximum they'll accept to pay you. But they will pay you only slightly above what they think you'll find elsewhere. So your pay is the MIN(cost of your replacement, what they think you can get elsewhere).

That explains location-based pay for remote jobs. Because they take into account that your alternatives are mostly local, so they only have to compete with local rates. The only way out of this is to be willing to relocate, or convince them you're getting enough good remote offers that they have to compete with that.

MIN(cost of your replacement, what they think you can get elsewhere, your value to the company)

But should location based pay be just accepted because that's the norm? There are variables that can't be used to do discriminate like age, gender, race, sexual orientation etc. We've accepted equal pay for equal work in these cases. Is it that far fetched that even location should be treated the same?

It’s got nothing to do with discrimination, it’s purely about hiring for the lowest cost. They have to pay more in EU and US to get employees, and less wherever you live.

The opportunity cost of not having that senior dev on board for more than 3 months is damaging for rest of the team and company goals/time lines. In the current market, my guess is that this person would be replaced with someone NOT in that location unless for some reason it is business critical to have someone in that area, which is almost never for software developers.

I work with HR team who sets compensations for our global workforce. If you think that HR and leadership does not take this opportunity cost in consideration when setting policies, you are badly mistaken. They are very rational in their decision making.

This is the point that doesn't make any sense. If it costs them X in OP's locale and 2X in EU, the company should kick them out if they decided to move and replace them with someone in the original locale, or maybe someplace even cheaper.

Because of that, the rare employee who does move can be paid the new location wage without increasing the costs of the people who don’t move. Companies don’t care about the costs of the <5% of people who move. They care about the costs of the >95% who don’t.

(Side note: There are companies who budget in headcount and work like GP suggests. I think most companies budget in money and work like you suggest.)

If we don't accept location based pay and start paying a uniform global salary, the wages will sync to Asian job market level rather than rising to SV level. Any company doing so will not be able to hire anyone in SV.

OTOH any company paying SV level wages to everyone will do so only for a short while before they realize that they can increase the profit by reducing pay elsewhere. Why would they not do that?

Plus I don't work. I'm disabled I collect SSI I get like $10,000 a year. That's it! I can't have more than $2k in my bank account. I can't invest. So uh, have fun making tons of money I could only imagine.

Sadly some careers pay more then others but that’s life. It’s why I worry about the education system eventually crumbling, since teaching and in some countries even healthcare professionals are woefully underpaid. I wish it wasn’t the case but some people get lucky and others successfully follow the money, whilst society allows governments and or private industries to milk human kindness for as much as it can get away with.

So do you advocate uniform global salaries across different locations in different countries?

And then obviously from the capitalist perspective, your employment only exists to the extent that the employer derives more value from your work than they pay you.

You're experiencing alienation from the fruits of your labor. Your labor being exploited to maximize profit. Unfortunately, the comments here are right. It "makes sense" in the sense these experiences are characteristic of life within capitalism as a laborer.

Functionally, your location is being "colonized," so to speak, by capital. I don't know if there's a real phrase for it, but I suppose it could be described as "telecolonization." Management has found a resource (your labor) that can be cheaply extracted by alienating you, the "telecolonized," from the value your labor creates.

It is bullshit. If you want solutions, your recourse is either collective action/unionization or finding a new job. You're being exploited by capital more than your coworkers. That is the context from which this sense of unfairness arises, I believe.

The USD exchange rate is just too good for exporation of goods and services. They simply offer more, despite the wage arbitrage. More money, more benefits. The typical US software developer salary is a truly ridiculous amount of money here due to the 5x multiplier, and even a fraction of it outcompetes every local enterprise I've ever seen.

I know exactly how it feels to see people in developed countries making 10 times what people here make on average.

You really think they won’t just stop hiring people from that country if they “took action”? Or if they could get another job at a higher rate they wouldn’t?

My take on the subject is they are providing the OP with an opportunity which they otherwise wouldn’t have due to the current job market in their country in exchange for a rate of pay that is relative to said job market.

Maybe it sucks, maybe it’s unfair (it isn’t) but it is preferable to the alternative which is to not have a good paying job.

To put it another way: Yes, zero exploitation of OP's labor is less than "some" exploitation of OP's labor.

It clarifies things for me to replace "cheaper labor" with "more profitable labor". Why would a company refuse to hire more profitable labor? How could the company not having any relationship with OP exploit his labor more than hiring him as more profitable labor?

Sure, because the foreign company exercises their access to capital to compete at a wage level that local companies can't compete with, but is still as low as possible to extract maximum value from the investment made by purchasing the worker's labor. Why do you think there's such inequality in economic opportunity, such that exploiting labor in this fashion is possible, in the first place?

> Is that exploitation any more than the US employee not getting paid 2x or 5 or 100 their current rate?

I'm not making any comparative assertions here. You seem to be making the case (by implication of your question) that in your opinion it's good for OP he's getting the opportunity to be exploited. And I'm just saying, it's exploitation. It is what it is.

> If the company is willing to pay me that amount in a different location, why can't it pay me the same here?

And my effort is also based on the cost to hire my replacement.

Having said that, I am not really buying it. There are significant pay differences based on location even in the same time zone for the same remote work.

Sorry, but this logic needs to stop. If a company is selling a product online for a fixed cost to an entire region then the people who contribute to that product that do the same thing should be paid the same amount. That is, indeed, a moral failing.

If a company wants to pay workers less based on where they live then their product should be similarly cheaper. We just don't see this though.