>> How many people are willing to pay an extra 1-2k per month to live closer to their job?

I dont think it is as simple as "willing to pay an extra 1-2k per month". It is with junior engineers w/o families. Once you have families, living closer to the job is way, way harder, esp for tech jobs concentrated in expensive cities. You cant just share a room with a friend when you have children. Also, things like schooling become considerations -- in NYC for example, you arent even guaranteed a seat in your local school (you're guaranteed a seat at "a" school.) It isnt surprising that SWE salaries ballooned in expensive metro areas and there are constantly "shortages" -- the huge premiums either go into super-expensive family housing near the city, private schools, a pied-e-tierre in the city, or some other acrobatics

Aye - I don’t think policy makers have internalized the degree to which wages have become coupled to housing costs. I strongly suspect the recent increase in interest rates may accelerate wage increases as individuals demand more salary to pay for mortgages or rent.

I don't think there's been a year where wage growth has actually outpaced cost of living.

Interest wage increases are going to decrease wage increases by softening the labor market

At some point, you either get a recession/depression where prices reset - or wage growth must match cost of living increases. People can’t allocate greater than 100% of income to cost of living indefinitely.