[filleokus]

> You are supposed to pay an employee based on his/her abilities, not her location.

I don't think this make any sense on so many levels. First, "abilities" are not a good way to think about wages. If you hire a neurosurgeon to do your gardening, you won't pay them more than a run of the mill gardener.

Rather, you as the employer compete against other employers on different markets in a fairly classical supply and demand situation. The "abilities" of an compliance expert with tech skills did not change much when GDPR was introduced, but as all EU companies scrambled to figure out the regulation (and the DPO role was popularised by fiat), the compensation went way up.

If the employee can participate in e.g the SF labour market, you have to pay a competitive salary in that market, if not you don't have to. As long as there are barriers, e.g a on-location worker in SF has more opportunities for whatever reason, the location premium makes sense.

To take your example in the opposite direction. Let's say a east-european company want to expand into the US and open up a sales engineering office in SF, and want their best sales engineers to go work their, it would be completely insane to not raise their wage. "We pay people after ability here you have 40k USD, have fun finding housing".