My employer sure does. Unless you're telling me that devs in major US cities are actually 2x better than rural US coders, who in turn are multiple times better than devs in poorer countries.
Your employer couldn't care less about your costs of living. He is a buyer and will gladly pay exactly zero dollars for your services. Unfortunately for him, that's not something you and your friends will accept. The price is hiked until both parties can live with it.
People in different situations accept different levels of compensation. Cost of living only becomes a significant factor under competitive pressure. If you were the sole programmer for the region you would be paid millions. I'm sure you personally, being an upstanding citizen, would lower your fee to match your costs of living as to maximize your clients' profitability. But you are rare. Most will accept the highest bid.
All I'm saying is that nothing is fundamentally based on "cost" unless under pressure. If it earns you say 500 bucks, you take the 20 dollar hit. It doesn't matter to you if it costs them 1 cent to produce. Until a competitor comes and drops the prices.
Also note that this "value"-thing is complex. Programmers that live close by and are sufficiently adjusted to the culture of the company have more value than cheap, capable, but remote workers that don't "get" you. Rural programmmers are indeed no less capable than devs in major cities, but it never was just about being capable.
This is an easy take to have on the labor market when you have bargaining power. The fact that highly paid professionals buy so readily into the moneyed class discourse disturbs me.
Here's hoping you don't get displaced by automation and suddenly discover yourself providing zero marginal gains to them. I mean, would you then sit quietly and starve?
Yes you are missing the fact that work units are not fungible and it is not trivial for a company to calculate the marginal value of employees.
The discourse of "we are paid what we are worth in the labor market" is deeply flawed due to these reasons. So when people buy into that discourse, which advances the capital owning class interests (take what we give you that's your market value) it's both sad and harmful.
Collective bargaining and regulations play a big role in compensation levels and often political capital counts for more then some abstract and impossible to calculate market value of your skill set or work output. So please disabuse yourself of the notion that you have a fair market value as a worker and that you are paid that value. This is pure political fiction.
You've reversed the relationship. As the employee, you're the seller. You're selling your time. It seems that you've priced yourself based on cost of living, because that is what the market will bear.