Right but it's sold to employees as based on cost of living, quite a few remote companies do this for example to have flat rate salary bands but still pay less based on location. For example:

https://about.gitlab.com/handbook/total-rewards/compensation...

We could of course quibble about market rate and so on but that shouldn't be locally based in a global marketplace. The fact that a software shop down the road from me pays peanuts when I'm looking for work with companies in other countries that otherwise pay their staff very well isn't important IMO and IME.

> The fact that a software shop down the road from me pays peanuts when I'm looking for work with companies in other countries that otherwise pay their staff very well isn't important IMO and IME.

Of course it's important. It means you will, all other things being equal, go for the employer that pays the best rate. And that will drag your local wage up, or it might cause the local shop to close down because they can't pay well enough.

In general I keep seeing people very much like being paid a good salary, but not understanding the one thing that puts their salary high (or low): competition from other employers, and from other employees. Other employees lower it; other employers raise it. The fact that employers think they don't have to pay SF salaries globally is the same mechanism that created SF salaries in the first place.

I understand the words, but not the meaning, sorry! Can you elaborate on what you mean? Like for example, companies outsource to third world countries all the time due to lower pay, how is that not based on location?

If you could pay someone in CapitalCity as much as SmallTown, a business would. It doesnt pay more because of some middle-manager's sense of fairness.

Rather, no one would work for you in CapitalCity at SmallTown salaries.

(One of the reasons is the higher cost of living, but that isnt what keeps the salary high, it's that there's no labour supply at SmallTown salaries.)

This is all a distinction without a difference. Salaries follow the labor market, which follows the cost of living. The cost of living is different in different places, because of differences in the labor market (demand side) or because of geographical reasons (supply side).

It's not, because "location-based" pay will change if the market price of labour at that location changes. Location is a proxy variable; a distinction which makes all the difference, see for example, Detroit

Right, okay. That makes more sense now. Thanks!

Salaries don't just (or even) follow the labour market or the cost of living. They are upper bounded by the value an employer assigns a role, and lower bounded by the price an employee is willing to accept to do a role.

Within those two bounds, labour markets can play, but the cost of living going up doesn't automatically make more salary money available.