[Leherenn]

It's not about the value you produce, that part is your compensation ceiling; it's about supply and demand. Cost of living is directly correlated with average pay in an area. If you are aiming as an employer to be in the top 10% of compensations, then that value will change based on whether the area average compensation is 50k or 150k (assuming a roughly similar distribution). Sure, you could pay the people from the low compensation area the same as the people from the high compensation area, but why would you? It would cost you a lot more while not meaningfully changing your recrutement pool since you are already at the top.

So, they pay less based on location because they can, your alternatives to a 70k salary are 50k salaries, and they know that. On the other hand, in the high paying area, the alternatives to that same 70k salary are at 150k, so you would never hire anyone. I think the more interesting question is why companies hire people at 150k when people at 50k exist (but this is a different question which has already been discussed plenty of times around here).