[kgin]

In the big picture, wages are set by how much it would cost to replace you with an equally-qualified worker.

In a location-agnostic situation, this would mean "how much it would cost to replace you with an equally qualified worker anywhere in the United States?" (Or world, really, but let's stick to US for now)

What Facebook is probably signaling with this location-based cut is that this is the direction they are headed. They can't afford to immediately cut their Bay Area workers' salaries to this US-average-number (because they would lose their current workers faster than they can replace them) but they are not going to give preference in the future to Bay Area workers and will not pay new Bay Area workers higher salaries unless their physical presence in the Bay Area is explicitly needed.