[gjulianm]

Salaries based on cost of living are always a mistery to me. If the company wants to have an honest relationship with the worker, the salary should be based on the value the employee is bringing, and that does not depend on where they live. Tying the salary to the cost of living looks like a way to cheat a worker out of the value they generate.

[cyborgx7]

>Tying the salary to the cost of living looks like a way to cheat a worker out of the value they generate.

Where do you think profits come from? Profit is the difference between what you pay your workers and the value of their work.

[oAlbe]

That's not the point though. Having an honest relationship with your employees and treating everybody fairly doesn't prevent you from profiting.

It think this point is explained really well in the article: why should someone who lives in a city with a high cost of living be paid more than someone who lives in a low cost of living one? Effectively, what you are doing is giving the person in, say, SF, more money to be able to afford a better lifestyle than the person in rural Ohio (to use the same example of the article). Why is that fair? And also, if that is fair, then is me moving to live on a yacht in Montecarlo a reason for the company to pay me 500k a year to afford that lifestyle?

Workers should be paid fairly. And to do that you have to pay everybody the highest salary you are paying for that position. I think Stackoverflow does that now, I remember reading an article on their blog about it.

[tdfx]

Workers should not be expected to be paid "fairly" or according to some broader social expectation. The company is not your friend and you are not the company's friend. They are paying you for sacrificing your time for their benefit. You are worth exactly the minimum that you're willing to accept in payment based on your individual circumstances.

[gjulianm]

"Expecting" is not the same as hoping that things would change.

> You are worth exactly the minimum that you're willing to accept in payment based on your individual circumstances

This is what I would like to change. There's an asymmetry of power in employment (if you lose an employee it's just a nuisance, if a person loses employment it can destroy their life) that is exploited by business and it can lead to terrible situations, such as people that are generating value for a company that posts heavy benefits but in return they don't even get a living wage.

[tdfx]

> such as people that are generating value for a company

Attempting to quantify this is exactly why we're in the situation that we are. If it was easy to quantify a person's "value" to the company relative to other workers, perhaps we would live in a different world. But it's not as simple as "salesman X received Y sales this month, 20% of that is Z". Who determines the hidden value of the marketing effort? How much of that should be allocated to the engineers who build and maintain the product? What about the people who find the talent to hire? Who would want to clean the toilets if the janitor wasn't here?

After that kind of thought experiment it becomes abundantly clear that there's no meaningfully objective way to quantify a worker's value as a percentage of company profit. Each person's perspective will color their estimation of a particular worker's value. An objectively bad solution.

The present way of doing things is not a result of any attempt at fairness or idealogical belief in the equality of man, it's really just the simplest working solution to the problem that anyone has been able to demonstrate.

[gjulianm]

I agree that quantifying value brought by someone is extremely hard. I think market rate (when the demand of employees is high enough) works as the consensus of how much does a worker generate.

> it's really just the simplest working solution to the problem that anyone has been able to demonstrate.

'Working solution' is a stretch. There is a lot of people working below a living wage in companies that still post significant profits, where top executives receive salaries several orders of magnitude higher than those employees. That does not seem adjusted to me.

And don't get me wrong, solutions to this problem are hard and I know it, the system is complex. But situations like paying less to remote workers when they do the same work are incredibly clear and easy to solve, and they show that it's not only that it's difficult, it is that those business do not care at all about making things fair for their employees.

[jdnenej]

A reason I was told is that if you pay the same rate everywhere then someone in a 3rd world country could hate the job and be not very motivated but won't quit because it pays more than any other job.

[spurdoman77]

I can tell you these unhappy unmotivated overpaid people are everywhere. It is fairly easy to overcompensate and it can be quite a problem.

[spurdoman77]

But as an employer, why I should strive for honestness? Does it bring me more profit? To me it sounds like paying too much. I pay market rates which doesnt consider cost of living or value produced, but the the average salary for the skillset/experience.

[oAlbe]

> But as an employer, why I should strive for honestness?

In an ideal world, you would because you would care for people. If not everybody, at least the people around you. As an employer, you are hiring people who will spend the majority of their waking hours working for you, with you, at your company. In theory, you would care if they are happy or not, motivated or not, paid fairly or not. You would care if they can afford that visit to the doctor they need, if they are taking enough breaks, enough time off. Ideally, you would keep an eye on your employees to make sure nobody is overdoing, to watch out for for employees whose performance is going down and figure out if they are getting burnt out or what's actually going on. All those things would pay back in the end. Happy employees do better works. Burnt out employees don't. Recovering from that is hard, and even though you can say "who cares, I'll fire them and hire someone else", there's still the fact that the hiring process is expensive.

In an idea world though. But I guess I do understand that for many people the only thing that matters is squeezing as much money for their business out of society as they can get away with. Though, this becomes a somewhat philosophical discussion at this point, and I think that's beside the point.

[cyborgx7]

If people were driven because they care about other/all people rather than about their own material benefit, we wouldn't have designed a system based on the profit motive in the first place. Because it wouldn't have motivated people.

[gjulianm]

Profits and caring about employees are not exclusive.

[fuzz4lyfe]

>But as an employer, why I should strive for honestness? To me it sounds like paying too much.

In my case honestness would have made several firms more profitable. I'm a high school drop out but lifelong programmer from a early age. As such I've had to work for well below market rates on my way up. Generally I do better than most of my college educated peers but since I lack the education I have been compensated much less. As a result I leave jobs every year or two, often around the time I'm really hitting my stride and providing significant value to the organization. As I tend to be above the median I end up on the projects that are critical to the company so what you end up with is someone building a quarter of your infrastructure and then leaving because "its corporate policy to max raises out at 5%" or some other nonsense. At that point you have to go back to the market (counter offers when you told me raises are warranted but impossible are an insult and I refuse to accept them) and likely pay at least market rate for a new employee then get him or her up to speed all as deadlines slip.

When I explain this to whomever I'm giving my notice to I am frequently asked "why would I pay you more than I need to" as a retort. I just shrug my shoulders and move on to the next job.

[idiocratic]

It brings value in the long run and makes retention easier. If I work for a company who pays differently based on location, I'll soon be searching for a company that pays the same based on level of seniority or other internal criteria.

[spurdoman77]

I dont really buy that argument. Local developers are not going to quit because you are paying remote developers less. Location is substantial factor in salary, and almost everyone seems to understand that. Onsite developers are paid generally substantially more.

[mnm1]

You should strive for honesty because otherwise you will not get the most out of your employees. If you don't pay them as described here or forgo raises, they will respond in kind by working less, taking more time, and doing lower quality work aka slacking off. You think you'll be able to tell, but you won't because from the outside it won't be obvious. So you'll get what you pay for instead of what you could get if you paid honestly.

[jacknews]

Why indeed.

It kind of illuminates the whole system.

The fact that business shouldn't need to pay a fair, or even a living wage (in fact, they're kind of obligated not to, if possible, because, competition).

It works as long as there are people desperate enough to take any offer at all - which will always be the case because people need to eat, so they can't opt out because wages are too low. So not really a "free market" at all.

[onion2k]

Where do you think profits come from? Profit is the difference between what you pay your workers and the value of their work.

I don't think the OP is refuting that. Paying someone 50% of the value they generate is fine. That's how businesses work. Paying someone 2% of the value they generate because they live in <place with a low cost of living> is much less easy to justify.

[cyborgx7]

It's trivial to justify. Companies exist to maximize profit. You make more profit by paying your employees less.

Also, plenty of people in my responses are denying that this is what profit is.

[AstralStorm]

It is still inhumane. There are other ways of running businesses, but rarely tried as they are typically squashed by bankers or VCs not providing financing.

Examples include directly hiring trade unions, cooperatives, associations...

[cyborgx7]

Yes, a society organized around the profit motive is inhumane. That is the point I was making.

[gjulianm]

I am not that naive, thanks. One can understand that you generate X value in part due to your own skill and time, in part due to the company environment. You get a percentage of that value as a salary, the other part goes to the company as profit in a more or less fair partition. But if another developer receives less for the same work you're definitely making it unfair and taking advantage of the fact that the business has more negotiating power than the employee. That's why I say it's cheating and dishonest.

[dustinmoris]

No value comes from many different reasons and one of those is a new value generated from the combination of efforts of many individual contributors. The individual value which someone brings doesn't equal the end value which is being delivered to a customer. The essence of a business is generating new value to end consumers which an individual couldn't do on their own.

[cyborgx7]

The extra value generated from the combination of efforts is still generated by the workers who combined their effort to generate it. Why are the owners more deserving of that "extra value" than the workers?

[spurdoman77]

The owners started the business, took the risk, etc. If an employee isnt happy with the salary, he can always ask for more, change employer, or start his own business. It is a fair game IMO.

[cyborgx7]

So he can start his own business, with no capital of their own, so at an inherent disadvantage, or sell their work under value to someone else. This world view only works if you only see people as atomized units and have no sense of a concept of class. And even then it barely works.

[claudiawerner]

>The owners started the business, took the risk, etc.

This does not seem like any kind of justification for continual reward, not to mention it doesn't apply at all in situations where the workers themselves take on a lot of risk day to day (e.g. construction). Furthermore, this would only work as a justification for when the owner really did take a risk, and companies where the current owner is the same as the person who started the business (i.e it's not clear that future CEOs shoulder the same risk). And of course, all of this is based on the idea that risk is an inherent good and worthy of reward and praise - I can see many cases where it's not, especially in very exploitative businesses.

>he can always ask for more

He can ask for it, but with the weakened power of collective bargaining it's unlikely he'll get it. It also depends on how replaceable the worker is. Did you see the article on HN today about how Kickstarter fired two union organizers?

>change employer

From the point of view of the worker this doesn't help much at all, since there would be no reason they'd necessarily get a better wage at other places.

>or start his own business

With what capital? Even if he had capital, why would a worker who is so disillusioned with the nature of wage work feel compelled to start a business? Unless he doesn't care for the plight of others against what he experienced while he was himself a wage worker.

[jacknews]

indeed, in some ways 'profit' is tantamount to 'cheating the people who made that profit (employees) out of their fair share' - certainly when it comes to many big tech companies.

[pfisch]

"the salary should be based on the value the employee is bringing"

This is really so vague as to be meaningless. A McDonalds can't operate without someone at the drive through. So isn't the value of the drive through worker incredibly high since they are essential to the operation of the business?

No. Labor Economics tells us that an employee will be paid at the market rate. They are paid based on how many other people are willing and capable of doing the job and what rate they will accept.

[gjulianm]

Not necessarily. The drive through employee is essential, but the cook is also essential, and the restaurant manager is also essential probably... The value is shared among them.

Also, Labor Economics tells us what happens, and I do not argue with that. I am saying that we should take more into account actual value and avoid extreme profit-driven views, such as reducing someone's salary for the exact same job just because they live in X country instead of Y.

[pfisch]

What you are describing isn't how the free market works though. It is just a fantasy of yours.

In an efficient market your theoretical business would be driven into bankruptcy or bought out by the competition that is properly allocating capital.

Also the ceo answers to the shareholders who hired him with the job of maximizing returns. Unless this is a coop there is no reason for it to operate the way you are talking about.

[gjulianm]

I know that's not how the free market works now, precisely I'm arguing for changing that.

> In an efficient market your theoretical business would be driven into bankruptcy or bought out by the competition that is properly allocating capital.

And as a good theoretical exercise it's pretty useless. In reality most of the markets are not efficient, changing salaries is not 'free' (i.e., employees work differently depending on how you treat them, and replacing unhappy employees has a cost), and there's more to companies and employees than pure economics.

> Also the ceo answers to the shareholders who hired him with the job of maximizing returns

This is what I am criticising, the 'maximize returns over everything' philosophy. Any company already has a lot of power over any employee, and they abuse that position to the point of cheating people out of their fair share of what they produce just because they live in a different place. And in this case we're talking about a relatively benign situation, but the same philosophy pushes companies to lower wages below a living level, condemning people to poverty so that the company "maximizes profits".

[em-bee]

not only that, the cost-of-living estimates are often wrong. sure, it is cheaper to live in some places, but then you spend a lot more traveling to other places to get things that your local place doesn't have. in some places the cost-of-living also depends on your life-style.

if i live in a country where the average cost-of-living is low, i find that it's because of a generally poorer living standard and i have to spend a lot more compared to the local average to get the same standard that i'd have elsewhere.

[spurdoman77]

So, how do you calculate value for developer?

[gjulianm]

That's a whole different question and I don't think nobody has a definitive answer. Market rate seems to be a "consensus" of how much does a developer add to a company. But paying less to a developer just because they live in a different country throws that out of the window completely.

[malux85]

There isn't a deterministic formula that you can code, but the market generally does this.

A good backend python developer working for a London company here can get 80-100k GBP, if company X wont pay this, then company Y will. The developer goes to company Y.

If the job can be done remotely, and everyone is happy, then who the hell cares that this developer lives in an area with low cost of living? He's fulfilling the contract (quality work in exchange for money) and where they are physically located is irrelevant in determining their compensation.

[spurdoman77]

You are talking about ongoing market rate, not the value output. Sometimes even skilled developer can produce negative value because of accident or smth.

Why would I pay remote worker the same as for local developer, if I can find remote developers willing to work for much less?

[romanovcode]

> Tying the salary to the cost of living looks like a way to cheat a worker out of the value they generate.

Seems like you solved your mistery after all! As abusiness you want to spend as little as possible.

[biblytens]

Salaries are based on supply and demand. Think this one through with that in mind and it'll make more sense.

[ehnto]

It still doesn't make sense, because the remote worker pool is global. If that were supposed to make sense then we would all be getting paid third world rates and cost of living would still have nothing to do with it.

[goatinaboat]

then we would all be getting paid third world rates

That’s the end goal of large corporations, yes. Why are we so eager to help them? Developers already undermine their own value by crowing to everyone who will listen “anyone can be a developer and do what we do”.

What do you think your boss thinks when he or she hears you say all these things?

(Not you in particular, devs in general)

[buboard]

Not just large corporations, also small ones. I think it's a good thing - paying high wages in countries that need it most.

> their own value by crowing to everyone who will listen “anyone can be a developer and do what we do

I sincerely doubt developers believe that, or at least not experienced developers. Software is cutthroat: anything that can be automated is already automated. People who can't work beyond that are useless.

[spurdoman77]

Well being onsite adds value to buyers. If you dont think so, the only way to proce that is by starting your own company with remote-only. Remote devs are cheap so you should be rich very quickly, if they provide the same value as locals.

[onion2k]

There are some very big remote-only companies. Canonical and Trello are and they're unicorns. There's also Automaticc, Digital Ocean, Basecamp, etc..

[t34543]

Remote work is a skill like anything else. Your litmus test is a gross over simplification of workplace dynamics.

[buboard]

Then it makes even less sense, for a remote company.