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.
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.