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by cottager2 1566 days ago
Have you heard of supply and demand? Suppliers have a price point at which their willing to supply a good. That price point is dependent on the input costs of producing the good. For knowledge workers, the input cost is your cost of living. It’s not so much that it “makes sense” to lower the salary of people in low cost of living areas, but it’s very likely the supply curve has shifted.
1 comments
thewakalix 1566 days ago
Paying employees more or less depending on where they live is an instance of price discrimination, in a sense. This isn’t necessarily good or bad, but it does mean that it’s not inevitable. Laws against certain forms of price discrimination already exist.
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lotsofpulp 1566 days ago
The typical use of price discrimination (or price segmentation) is when a seller of goods or services sells the same goods/services to entities that can afford to pay more at a higher price than to entities that can only afford to pay a lower price.

The objective is to maximize sales by getting more money from people who want to spend more money, while also getting some money from people who want to spend less money.

Offering people less money because you think they will accept less money because they are not likely to get a higher offer due to where they live is more accurately described as arbitrage.

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thewakalix 1564 days ago
No, it’s not more accurately described as arbitrage. Arbitrage involves buying something and then selling it for a higher price in a different market. That might describe something like a temp agency, which buys labor from employees and then essentially sells it to other companies. It does not describe most businesses, which directly use the labor provided by their employees rather than reselling it.

I agree that “price discrimination” isn’t quite right; it’s more of a metaphor. It works if you imagine that companies are selling money that is bought for the price of labor. In different markets, people will accept more or less money for the same labor, or equivalently spend less or more labor for the same money, which allows for price discrimination.

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