That's not the way it works out in practice though. I've been a hiring manager and have had to see the impact these geo-based policies have on the salary of those in my teams. I work remotely and know how much it's hit me relative to my peers. Melbourne & Sydney are regularly listed in the list of most expensive cities in the world, yet Australia is almost always treated as one big market at the bottom end of the scale. I've had team members in Canada who are paid significant 6-figure amounts less than direct peers, if they moved ~1hr south they'd earn significantly more.

This is rarely about avoiding paying a FAANG engineer $500K and letting them work from Bali. They're weaponised in ways to give a plausible defence to why two people with the same role and experience are paid vastly different amounts for doing the same job.