True, but the fact of the matter is that even if you had no idea where your employees lived, the location adjustment would likely come out in a competitive mark

True, but the fact of the matter is that even if you had no idea where your employees lived, the location adjustment would likely come out in a competitive market because people from other low-cost areas can bid down the price, and you'll only drop out of the bidding when it reaches below your cost-of-living adjusted salary. The only reason the expensive markets can compete at all is because a lot of the top talent is concentrated there.