No it's not? If this were true, then economic hubs wouldn't exist. If someone is talented in field it's likely they will move to an economic hub that has jobs for their talents. If I wanted to open a trading firm I'd likely find the most capable candidates in Chicago, because thats where most of the jobs are today. There are certainly capable hires in Idaho, but how much time should a company spend looking for a needles in haystacks?
You are looking for stability-based economics and wondering why your conclusions don't appear in reality. Well, it's because your economics are wrong.
They pay more there exactly because there is larger competition. And they hire there because that's where their money come from and where they started hiring before going global. If they reseted their hiring choices and had to do all of them again now with the current company, they would be better off hiring at cheaper places and not having anybody on the more expensive ones, of course. But the sheer absurdity of that conditional should be enough reason for you to see it won't happen.
It doesn't always bring an economic benefit to the company, which is why there are debates over companies calling employees back into the offices. That is almost always based on gut feeling and herd-mentality, than on any concrete data.
However, companies have to recruit from labor markets, and as such, they are bound by its vicissitudes. Despite the pandemic scattering many software people all over the country, the vast majority of competent software developers with cutting-edge work experience are still to be found in the Bay Area. Therefore, it makes sense for the company to insist that other hires also live in the Bay Area. Perfectly understandable. If the company is able to compete effectively for talent in the remote market and able to make it work (timezones and cultural differences do matter, even if it were possible to recruit remote workers easily), then it would do it, sooner or later.
Is it? Are you better off if you earn more but live in a high cost of living area? I hear about people working in SF for the big tech companies but living from a car because they can't afford to live there.
1. GitLab (as with most other companies with geo-dependent comp) pays based on Cost of Labor--not Cost of Living. So if a market has crazy-expensive real estate but salaries haven't caught up (somewhere like Vancouver), you're out of luck.
2. GitLab is NOT encouraging team members to relocate to HCOL areas at all. In fact, while they encourage hiring in LCOL areas (there are target "location factors" for teams, so there's a bias toward hiring in lower-cost areas), the Handbook ( https://handbook.gitlab.com/handbook/people-group/relocation... ) states that "Relocations resulting in an increase in compensation must be approved by the team member’s direct manager, and location factor changes that are >.2 will require direct manager, VP as well as an eGroup Member approval."
TL;DR -- don't get hired in Iowa an expect to bounce to SF right away.
Because as we all know the laws of economics are fair and just. Truly a business man who strictly follows the laws of economics would always compensate people fairly for their value delivered to the company.
In all seriousness, how does this make economic sense? The company is incentivizing that people move to areas with a high cost of living, but why exactly? What economic benefit does that bring to the company?
The only reason that's ever been explained to me is that the cost of competing for talent is higher in those areas than others. However someone's location is a poor indicator for talent potential, so why would you compete in high cost areas?