I actually think that Option 1, where Ann has her salary lowered after moving out of the valley is the most reasonable way to handle remote compensation. In oth

I actually think that Option 1, where Ann has her salary lowered after moving out of the valley is the most reasonable way to handle remote compensation. In other words, as an employee you get compensated by the quality of life that you can afford (how many goats you can buy regardless of what city you live in) instead of by some metric of how many dollars you are worth to the company. The way I look at is that employment is a mutually beneficial agreement. Both parties should have the option to end the agreement when some part of the situation changes. When Ann moves and for some reason thinks that it's unfair that she won't be making an SF salary in Ohio, she can leave the company. Same goes for the employer when an employee moves from Ohio to SF. Saying "you're working remotely and we will pay you Ohio market rate but if you move to SF, we cannot afford that, so you will either have to accept Ohio market rate in SF or leave to find another company that will pay you SF market rate" sounds like the only fair option to me.