[kbos87]

Bingo. As a director of a team at a mid-sized tech company who had conversations with employees making decisions like this, I can tell you that it is standard practice to adjust salary for the cost of living and the availability of talent in a particular market.

I work for a very pro remote work company, but that’s still how we did things. You want to move to the Midwest and work remotely, or apply for a transfer to a different regional office? Happy to let you do it, but know that the market rate for your skills there is X, which means an adjustment in salary for a voluntary move. People usually weren’t jazzed about it but understood.

[SauciestGNU]

Just because it's standard practice doesn't make it right. Is the employee contributing less to the company based on their location in a cheaper market? I think not. So why should we as workers allow a company to extract more profit from our labor based solely on our physical location?

[nostrademons]

Markets never pay you what you contribute, they pay you some number between "what you contribute" and "what you can earn working elsewhere". Your contribution sets a ceiling on your compensation; your opportunity cost sets a floor. What you actually make is whatever you can negotiate in between.

When you work in an area with fewer jobs in your field, it's far less likely that you'll have a competing offer that'll jeopardize the company's ability to keep you. That means your opportunity cost is much less, which means that the floor on what they can pay you is less.

(A similar dynamic on the investor side is why startups end up starting in the Bay Area to begin with. In most other regions of the company, there are very few investors willing to invest in high-risk tech startups. That means that a prospective startup needs to take the only financing option they can get, which means that the investor ends up owning the majority of the company. The Bay Area has a liquid and competitive market for funding, which means that there's a real chance of a VC firm losing the deal, which is what allows startups to raise capital on fair terms.)

[dvtrn]

It does feel quite bizzaro doesn’t it? The manager here says

Happy to let you do it, but know that the market rate for your skills there is X, which means an adjustment in salary for a voluntary move.

my question is: in this hypothetical, did my skills somehow lose monetary value to the company because I left the west coast and bought a house in Indiana? What’s the calculation on that one? Let’s talk numbers.

I’d love to sit down to coffee with a hiring budget manager one day and get into the weeds on CoL against present value and just do all of the math until the cafe closes or one of us has to take the first coffee induced “bio break”.

Or at least, this is how it would go if my company tried to sell me on this. Hell, I might even be amenable to the pay cut if the company was otherwise doing right by our relationship as employer and employee and I felt sufficiently invested in continuing that relationship, but we’re going to get real mechanical and be VERY thorough about it.

[dogman144]

I mean CoL is a thing. There are some talent asymmetries in DevOps and InfoSec, that could command high salaries/remote work. Remote work in security vs. salaries support this.

But for your run of the mil developer -> senior developer, a large chunk of that $150k Bay Area pay for non-FAANG is COLA, no way around it.

[wtetzner]

> my question is: in this hypothetical, did my skills somehow lose monetary value to the company because I left the west coast and bought a house in Indiana? What’s the calculation on that one? Let’s talk numbers.

It doesn't have anything to do with your skills. It's just that they believe they can replace you in Indiana with a lower salary.

I'm not saying it makes a lot of sense, just that they're probably thinking about it in that way.

[aaronblohowiak]

Or that there is less demand for those skills in Indiana so the market for those skills in Indiana pays less than the market for those skills in a separate location. This raises the question of if "remote" is its own "virtual location" in terms of market. Unfortunately, there is not yet enough remote work for there to be an established "remote" market distinction.

For people where there is only a handful of people with those skills in the world, they command ny/sf pay wherever they live.

[dvtrn]

This is an interesting take. I am a remote worker (technically in Chicago), but my employer is headquartered elsewhere. We have offices in Chicago. But I live in Indiana.

What's my 'demand market', as it were? Is it Cali where my parent company lives? Is it Chicago where the subsidiary division I support operates? Or is it Indy?

How does one negotiate salary taking in all that when negotiating a permanent full remote transition?

(This is just for the sake of the hypothetical, I’m very satisfied with my current actual arrangement, but we’ve crossed into a new working world and consider me a career “prepper” or something)

[aaronblohowiak]

i think there are reasonable arguments for each permutation of answers!

Ultimately, every negotiation comes down to BATNA (best alternative to negotiated agreement.) You have to demand from the company you think can/will pay the most the amount of compensation you are confident (but perhaps not sure) that you can get from the second-expected-highest company. This is similar to a Vickery auction -- the winner is the person who is willing to pay the most but they pay the price the second-highest bidder put forward.

In tech labor, the distribution of compensation for the same work is much wider than almost any market participant realizes.

[lotsofpulp]

> I'm not saying it makes a lot of sense,

It makes all the sense. If you can get an apple for $1 from seller A and the same quality apple for $5 from seller B, why would you buy from seller B?

[geodel]

Since we are here, people not only will buy for $1 from seller A they will also show a faux outrage about bad treatment of workers at Seller A.

[TigeriusKirk]

They can now, because top tier companies aren't competing for employees in small town Indiana.

But if this becomes widespread, they will be.

[dvtrn]

Question, to build on your second line there. Does tech hiring becomes more or less competitive if this becomes widespread, in your opinion?

[thorwasdfasdf]

yes, your skills did loose monetary value. That's because it costs X less to hire in that location. The reason people are will to accept X less is because there's a lower COL.

But, the crucial thing to remember is that people's calculation of ROI of compensation to COL is way off. And so they're being under compensated in places like the bay area relative to other areas. Bay area is 50% more than the rest of the country but the COL is x4 to x8 (heck even day care is x4 more in SF than houston).

i've posted this before: https://skilldime.com/blog/see-which-cities-pay-the-highest-...

As you can see, you're way better off anywhere outside the bay area even if the salaries are less.

[itsspring]

> yes, your skills did loose monetary value. That's because it costs X less to hire in that location.

I disagree. Your skills didn’t drop. Your value didn’t drop. They weren’t going to hire anyone in <location> anyways, they’ll hire <local> if you quit. So you’re negotiating between them wasting time & money hiring for someone of equal value locally

[beefalo]

That chart is completely ridiculous. I moved from one of the cities at the top of that list to SF. My pay went up by 3x, my living expenses went up by 4x and my overall savings increased by 3x.

[thorwasdfasdf]

the compensation numbers I put up are averages based on Stackoverflow salary postings.

You're pay going up by x3 could have many reasons. If you're in the early part of your career, that's very much possible but it's not typical of an average SE in SF vs an average SE in the rest of the nation.

[bradleyjg]

> my question is: in this hypothetical, did my skills somehow lose monetary value to the company because I left the west coast and bought a house in Indiana? What’s the calculation on that one? Let’s talk numbers.

It’s a bad idea for a company to pay you significantly more than you could earn at a different job. Because then you’ll never quit even if you’re miserable. You’ll stick around and be a toxic presence.

[BeetleB]

This framing is merely convenient. I work in a company that has workers in several countries, and an equally valid framing is "Those in poorer countries are as productive as the Bay Area folks, it is unfair they get paid less. Therefore we will pay everyone equally".

The outcome is that Bay Area folks will get paid less than their current pay, and those in India get paid more than their current pay. Because there's no way my company can afford to pay all their developers Bay Area rates.

That would be using exactly the same rationale as your comment: Equal pay for equal productivity.

[SauciestGNU]

I agree that workers in other countries deserve to get paid the same high wages I get paid for doing the same labor I do. If a company can afford to pay me those wages just because of the passport I carry then they can afford to pay, for instance, my Indian colleagues the same fair wage.

Let's not pretend that all companies are cash-strapped startups. The FAANGs of the world and the Fortune $x companies and the multinationals can absolutely afford to pay their global workforce uniform wages, but they choose not to because it's not maximally profitable to do so.

[BeetleB]

> Let's not pretend that all companies are cash-strapped startups. The FAANGs of the world and the Fortune $x companies and the multinationals can absolutely afford to pay their global workforce uniform wages,

I'll contest that. FAANGs are extreme outliers. I can assure you my company, while it certainly can pay everyone an extra, say, 10%, definitely cannot pay all its SW engineers Bay Area salaries. And then Non-SW engineering companies - even the top ones - rarely have that much money. Their operating expenses and capital costs are a lot more than a SW company's is.

[zajio1am]

> Those in poorer countries are as productive as the Bay Area folks, it is unfair they get paid less.

That does not really make sense. Work does not have some inherent value, its value is based on market situation, and different markets have different price equilibriums.

[rootusrootus]

Tell that to the developers in India.

Honestly, if you go 100% remote, you are now competing with a much, much larger pool of developers. You are not going to command Silicon Valley prices.

[maximente]

i don't think morality is really useful here: right or wrong, it doesn't matter. labor is labor; that software engineers are a talented, "woke" (or at least perceived as such) group of labor doesn't change anything. you trade your time for money, which you use to buy stuff and then continue to trade your time for money. that's the game.

software engineers have it pretty good, anyway. this manager's example is perfect: sure, people grumble, but they typically eventually accept a reduced salary. why is that? even at a reduced salary, most laborers will be OK with a non-physically-straining, intellectually decent job that lets them live where they want to live and largely earn enough to not worry too much.

[whack]

Prices aren't set (solely) by value provided. If that were the case, toilet paper and other essentials would cost 10-100x more than it does today.

Prices are set by supply-and-demand. More to the point, companies will pay you the least amount of money they can, while still retaining you. Just like you pay the toilet paper company the least amount of money you can get away with, even if you get vastly more value out of it.

You're welcome to reject the above on principle. But then you'll have to settle for the next best alternative. And if the company's done its homework right, your next best alternative wouldn't be any better.

[HighPlainsDrftr]

This is something I've debated for quite sometime prior to the pandemic.

Why do janitors, and wait staff get paid so little? Two of the most important jobs in the world are to clean things and feed people.

I guess anyone can clean a toilet or cook a burger, but to what level?

What about teaching?

Our world is definitely out of balance. I don't know to what degree, or as to why.

[hessproject]

I mean really you already nailed it on the "anyone can clean a toilet or cook a burger". This is only from my own experience working in a chain restaurant kitchen, but to a pretty high level. You don't need to be a great chef or anything to be a standard line cook, even if you don't know how to cook they can teach you in one or two training days, everything is timed to the second and all the equipment beeps to let you know when it's done. I was 18 at the time with no experience, my interview was "what days can you work, and are you comfortable staying until the bar closes" and for every one of me there were 30 people ready to take over when someone quit, including high school kids and people fresh out of jail without many other options.

[lotsofpulp]

What is there to debate? As the person you responded to explained, people don't want to pay $10 for a roll of toilet paper because people can buy one for $0.50. People don't pay a janitor or cook $200 per hour because people can buy one at $15 per hour.

If UBI existed and no one "had" to work, then people would probably have to pay a janitor or a cook $200 per hour.

[s1artibartfast]

Employee compensation has very little to do with contribution. It has to do with labor competition. The only way to capture more compensation is shut out workers willing to work for less.

[adrianN]

Because software developers are reluctant to form unions and show solidarity with their coworkers.

[eitally]

People need to understand that salaries are set based on cost of labor, not cost of living. Companies will pay what it takes, but that value is preset by what employees are willing to accept in any given market.

[lukevdp]

Because the value you provide is more fungible than you think, and it becomes an equation of supply and demand.

[badfrog]

> You want to move to the Midwest and work remotely, or apply for a transfer to a different regional office? Happy to let you do it, but know that the market rate for your skills there is X, which means an adjustment in salary for a voluntary move.

It seems like nobody wins in this situation. If my goal is to maximize savings, I'd move to the Bay Area to get the maximum salary from you and find the cheapest housing in the area. I'd be miserable because I'm living in a place I don't like in a shitty apartment. On the other hand, if you offered to pay the same amount while I live in the midwest, I'd be happier with my living situation and be pocketing more cash. This would make me more productive and make me stay at the company longer, with no additional cost to you.

[bogomipz]

>"As a director of a team at a mid-sized tech company who had conversations with employees making decisions like this, I can tell you that it is standard practice to adjust salary for the cost of living and the availability of talent in a particular market."

It's standard practice for your company maybe. This hasn't been my experience at all. I have had three jobs where this was not the case. I've had colleagues who have experienced similar as well. People should be paid for their time. I can't even believe a company would want to engage in salary reduction negotiations with employees they value.

[OJFord]

That doesn't make sense though, 'the market' isn't wherever they decide to move to, it's 'remote'. And yes, that will be less than SF rates, but it may well be more than non-remote rates wherever the employee happens to live.

It's not paying less that's silly, it's paying an artificial amount less. The only way in which location should come into it is restricting candidates to those located in (or willing to work to) a particular time zone(s).

[vkou]

Doesn't this just create an incentive for people to work remotely from high-COL areas, while living frugally?

Does relocating from San Francisco to San Jose also come with a pay cut? What about to Stockton? Modesto? Further out?

[ghaff]

Generally speaking, CoL adjustments don't really make you whole. You may make more if you're in SF but housing is still going to take a significantly bigger chunk of your paycheck and you may or may not come out ahead at the end of the day.

Being on the periphery of a high cost area is probably the best deal. For most companies, for example, I imagine that Boston/Cambridge will be considered the same as Boston suburbs--even though within an hour drive you can get to vastly cheaper housing than in the city proper.

[godelski]

I wanted to add: If you live in SF and make $150k/yr and are able to put away 10% on investments that's $15k/yr. If you work somewhere else and take a move and make $75k/yr and are able to invest 20%, you haven't made a financial change. But a pay cut that big likely means you're somewhere that has less going on, less access to food, less for different types of activities, lower quality schools (that are funded less because property tax is lower), lower quality hospitals (big cities can afford all the fancy equipment and big time doctors), etc.

So to be honest, moving to a cheaper area with the exact same COL might not be better because of other factors involved.

[shuckles]

Price, as it turns out, is a signal of value. Some of the value might be access to jobs which you may now be able to access from elsewhere, but certainly not all of it.

How many places in the United States have the immigrant communities of the Bay Area, for example? And how do you recreate such communities in cheap places without making them expensive?

[vkou]

> Generally speaking, CoL adjustments don't really make you whole.

Only if you don't live frugally, or if you aren't a senior engineer.

If you do, a lot of the high costs of a high-CoL area can be avoided.

If you are a senior engineer, that XY% raise over a junior is free money... Applied to a larger starting salary.

Oddly enough, high-CoL areas have the same, or higher % raises, when you are promoted, than low-CoL areas. In the mid-west, the wage difference between a senior and a junior may be $30,000. In the bay area, it can be $150,000. Your CoL doesn't go up just because you have a better job title.

[logfromblammo]

It creates an incentive to establish legal domicile in a high-rent neighborhood and then always be somewhere else, "traveling", and taking care of all your business over the network.

So you can own/lease a broom closet or pied-a-terre in Expensiveton, maybe rent it out intermittently or to a "roommate", and actually work and sleep in Cheapsville.

If home address has an impact on take-home pay, it will be gamed just as hard as all the other metrics.

[fredophile]

Do you pay them more if they want to work remotely and move to an expensive market like New York or London?

[kbos87]

Yes, on the flipside, it works exactly the same way in reverse if someone is moving to a higher cost market. We benchmark against data from Radford & Comtrix (salary/pricing data providers) and adjust upwards on a regular basis too.

[supergarfield]

I'm a little confused by this.

To simplify, it seems like either you want developers that are physically present in London, in which case you have to find some and pay them London rates, or you don't particularly care if they are physically present, in which case I don't understand why you would pay someone working remotely from London differently from someone working remotely from Llanfairpwllgwyngyllgogerychwyrndrobwllllantysiliogogogoch.

Presumably in both cases your company is getting the same value out of the employee. So why not hire only people working out of the Welsh countryside and refuse raises to anyone who wants to move to a higher COL area?

In other words, it seems like if I decide to work remote and lie about where I physically spend most of my time, it would make no difference to the company but might make one to my compensation, which, ignoring any moral judgement, just seems strange for the company.

[ghaff]

>So why not hire only people working out of the Welsh countryside and refuse raises to anyone who wants to move to a higher COL area?

Companies do this to a certain degree. My anecdotal observation is that a lot of tech companies that aren't in the Bay Area or only have a small presence there don't in fact try particularly hard to be competitive with the big Bay Area employers--unless there's someone they really really want. People may still join for various reasons.

[bcrosby95]

Because not everyone wants to work out of the Welsh countryside and the number of developers available there is limited. Which is a factor because developers still have some power. Because the market isn't completely flooded with developers.

[eecc]

Exploitative crap you can only pull because of lack of unions and power asymmetry. Bleh

[refurb]

If you're in a union, you're usually stuck in pay bands based on seniority.

[ulfw]

Market rates are such a weird idea. The whole concept is.

You should pay for how GOOD an engineer is. Not for where (s)he lives.

[stuxnet79]

This is a simplistic view of the situation.

Define "GOOD".

For a business a "GOOD" engineer is one who is able to deliver business value at minimal cost. If by "GOOD" you mean talented then you have to realize that the US doesn't have a monopoly on talented coders.

The greenback goes far in many places within your timezone. If borders are opened up via remote work companies will be forced to re-evalute the axes by which they quantify "GOOD" (talent, cost).

[rubidium]

As an employee it is. As an employer it’s not.

[vsareto]

>Happy to let you do it, but know that the market rate for your skills there is X

This seems logical, but determining X is still in your authority, so let's not pretend this is fair. It's usually not a granular break down of skills either, or worse, it's calculated by job title plus a single primary skill, e.g. "Senior C#/.NET Developer".

[jjeaff]

Doesn't seem logical to me. Unless they are also offering to increase salaries if you decide to move to a higher col area.

[a_imho]

Make remote protected. Substitute your argument for any protected class and see how silly it becomes[1]. Just because the market (actually people) [2] can discriminate against group X it does not make it right.

[1] https://en.wikipedia.org/wiki/Equal_employment_opportunity

[2] https://elsajohansson.wordpress.com/2017/09/13/what-does-a-w...

[ketamine__]

Do these transitions actually work? I can't imagine taking a massive pay cut because I need to be closer to ailing parents. That is going to generate a lot of bitterness. What is the turnover like at your company?

[deegles]

If I deliver enough value to receive salary X, I don't see how my personal living arrangements factor in. There are stories of Google engineers vandwelling in company parking, by that standard they should have their salaries reduced.

I'm sure that if one of your directs asked for a raise because they moved in to a more expensive apartment you would politely refuse.

[0](https://www.businessinsider.com/google-employee-lives-in-tru...)

[simmons]

CoL adjustments have always seemed like a bit of a foreign idea to me, as someone who has been a freelancer for 20 years (WfH for 15). I'm not sure I would be able to sell my customers on the idea that I should get paid more because I live in X county. (Since my value proposition would be the same, assuming the customer wasn't in/near X.) On the other hand, if I lived in an area with a weaker tech scene, maybe my ability to negotiate would be weakened if they knew I didn't have a wealth of local options to fall back on?

[jjeaff]

So, as a director of a big team, you also offer to increase the salary of employees who want to move to higher col areas like, say London or Tokyo right? I mean, it's only fair. You pay what the market rate for the talent in that area is.

[ryandrake]

All places I've worked that have multiple locations adjust salary both up and down when employees move to different markets. It's all about the prevailing rate for labor where you are located, and not some measurement of the "value you provide".

[jjeaff]

Yes, but I assume these are all markets where these companies have physical presence. I doubt many are adjusting up because you want to move to London because you like the fog.

[OJFord]

Sure, but 'remote' is the 'location', not home town.

You don't pay a non-London salary because the employee lives outside, or a Euro-denominated one because they commute from Paris.

[city41]

If Twitter’s move is a sign of things to come, the “potential market” you’re talking about can become quite large.

[soulnothing]

I'm mixed on the cost of living to salary argument. If I provide X value to a company. Say I complete a project that generates Y revenue. Why am I now docked on pay, because I'm choosing to live in a lower cost of area. Have I contributed less to compete this business item that now generates revenue. I find I'm more productive working remotely. So I'm doing more to drive that revenue line for the company.

I think this comes down, we're not paid based on revenue we generate. But to keep us out of the talent pool. Or how much an adjacent firm may be willing to pay us. I don't believe it's based on what I can offer.

The next argument is on market salary demand. I live locally in a market that makes no use of my technical skill set. If I need to keep cash flowing I find any three month contract to keep the lights on. But then I go back to being remote, and compete on a remote pool.

Now we're on a remote pool set. America, or another cheaper to live country. If it's an external firm, do we have a middle company that can handle that tax implications. So we can hire a developer in Southern Asia or Europe. That role can now be filled for a drastic monetary reduction. But at the cost of management over head. Time zone difference, communication lag, better remote processes / documentation, etc. I've helped a few teams acclimate to these off shore changes.

As an aside I always found it odd companies that outsource a majority of their development to an off shore firm. That will never be on site. But if a full time, on site, employee asked for a wfh to watch a sick kid, they had to burn a PTO day.

Compared to an off shore developer there is one thing a country local developer may offer. Better communication with stake holders. Working in the same time zone. Communication especially remote is a big deal. I've seen a number of teams not be able to adapt to the time zone difference or communication differences.

I went to work for a FAANG company several years ago. I took a 35% pay cut off my last local job, while my rent increased by about 60%. I did it for the experience. I've never seen the high FAANG salaries people talk about, but that's just me. I'm also horrible at leet code / hacker rank so there's that, and I studied for over a year on hacker rank to get that job.

As to my experience with cost of living adjustment frankly they've been border line insulting. Locally, on site, if I find a role that uses most of my skills I'm looking 150/180(full time / w2 contract). I had a fully remote contract role, that used all my skills and challenged me. That paid me 245. I always look at my rate as what is the given task and job duties, because I generally work medium to long term contracts. Senior Software, vs Dev Ops, vs SRE, vs Product manager all have different salary bands. I don't have a blanket salary, it's always what's the role you're asking me to do.

When I first got a COL adjustment rate, I laughed. Then I became frustrated, and then I ignored COL adjusted salaries. Coming off a local contract role at 165, I was in talks for a more senior position, full time remote. A company out of a high cost of living area no less, started at 95. I'm not against being paid a bit less, but that drastic of a pay cut is insulting to senior staff. If you're going to pay me less, I want to know why.

Regardless of locale, I'm incurring more costs. I pay for better internet, stocking of coffee/pantry, electricity, and the big expense space. I still live in a city. Getting a second bed room can help a lot ensure a better work from home environment.

Globalization is going to become very interesting. I moved from New York for about a 10% salary reduction, while halving my rent. The determining factor is politics, and how people can adapt to working remotely.