[rahimnathwani]

Salaries don't differ because of cost of living. They differ because of supply and demand.

A software engineer in SF probably has a higher BATNA than one in Delhi. Not in every case, but in most cases. So the amount you'd need to pay her to accept is higher than the amount you'd need to pay the engineer in Delhi.

You could decide you'll pay them both the same. Or you could decide you're not willing to pay SF salaries and will only hire people outside the US.

But, even if you do this, would you be willing to pay every employee at each level the same amount as the highest paid employee at that level?

If the answer is 'yes', what's the most expensive city you've visited? How much was a typical restaurant meal there? Do you pay that amount at every restaurant you visit, wherever in the world you are? I mean, the value of each meal is the same, right?

[stavros]

> But, even if you do this, would you be willing to pay every employee at each level the same amount as the highest paid employee at that level?

No, I'd negotiate. I'd get the cheapest ones first, then raise my offered salary until I couldn't find anyone, then again, then again. Note how none of this has to do with their location, because the engineer in Delhi will get a higher salary just because all the cheap ones have been taken.

This indicates to me that location has nothing to do with salary, it's all market forces, and trying to insert COL adjustments into the mix is awkward and easily refuted.

[rahimnathwani]

"This indicates to me that location has nothing to do with salary, it's all market forces, and trying to insert COL adjustments into the mix is awkward and easily refuted."

That's exactly what I said at the start of my comment:

"Salaries don't differ because of cost of living. They differ because of supply and demand."

Your proposed method of setting compensation ("get the cheapest ones first, then raise my offered salary until I couldn't find anyone") will end up paying people in Delhi less, because their BATNA will tend to be lower. So, even if that's not your intention, you will end up with location-based pay. And if there are significant differences between different same-level employees in Delhi? The lower-paid one will ask why. So you'll institute some sort of pay band that only applies to Delhi or India overall. So you'll end up with location-based pay bands.

[stavros]

> Your proposed method of setting compensation will end up paying people in Delhi less, because their BATNA will tend to be lower

I disagree, the company will just avoid SF engineers. Then, because nobody artificially adjust your salary based on location, salaries will equalize, so someone in Delhi and someone in Madrid will make the same, regardless of their location.

We're talking remote, you can't mix remote and on-site in the same conversation. The BATNA of both is the same, because they're competing in the same global market.

[rahimnathwani]

> We're talking remote, you can't mix remote and on-site in the same conversation.

You must consider both because, for now at least, people's BATNA is affected by local opportunities as well as remote ones.

> The BATNA of both is the same, because they're competing in the same global market.

The BATNA is different. The SF-based engineer can choose from a remote job or one in SF. The Delhi-based engineer can choose from a remote job or one in Delhi.

If the BATNA for both were the same, then you wouldn't be able to hire an engineer in Delhi for less than 80k USD (or whatever today's entry level engineer salary is in SF). But you can. This proves the BATNA is not the same.

We might want the BATNA to be the same. But today it is not. As a result, market conditions don't require companies to use the same pay grades everywhere.

When I lived in China, I worked for two different FANG companies (in Beijing and Shanghai). In both cases, the compensation bands for folks in China wasn't the same as those in the US West Coast. My total compensation was lower than I would have accepted had I been based in the US. But it was reasonable compared with the other options available to me without needing to move out of China. So neither company had an incentive to pay me more.

[axiosgunnar]

> her

Why did you assume the gender of the software engineer?