7 ms·

Why do companies continue to pay out higher salaries to devs in high cost of living areas? In this case, their payscale pays out 30-50K more in high cost living

by hajile 9y ago

Why do companies continue to pay out higher salaries to devs in high cost of living areas? In this case, their payscale pays out 30-50K more in high cost living areas vs low cost areas. Rather than blow revenue rewarding bad life choices, offer to move them to an area with lower costs of living. Do that for only 10 employees and you have 300-500K EVERY SINGLE YEAR to re-invest into your company. In practically any other industry, this kind of saving would be obvious.

pimmen 9y ago
If your devs are located in a bigger city, you can have an office located in that bigger city. If you have an office in a bigger city, you can recruit easier since there's more devs in a bigger city. If your devs are in a bigger city, there's a good chance they went to the bigger university in that bigger city. If you have devs from a bigger university you can more easily recruit from that bigger university. If your office is in a bigger city, you can have more relevant personell in that bigger city such as sales and marketing. If you have sales and marketing in a bigger city, you can reach the customers in that bigger city. A bigger city has more customers than a smaller city. If you have your devs in a bigger city, you can recruit devs from different industries in that bigger city. Bigger cities have more industries present, meaning you can bring in devs with different skillsets. Basically, discouraging devs from living in big cities can be a very bad idea because. Opportunity costs are real costs.
- amyjess 9y ago
  Big city != HCOL The Dallas metro area is larger than the SF metro area (and so are the individual cities), but Dallas's COL is half as much as SF's. Edit: For that matter, just to ward off the (valid) point that the SF metro area doesn't include most of SV, the Dallas metro area is larger than the SF and SJ metro areas combined. San Francisco-Oakland-Hayward and San Jose-Sunnyvale-Santa Clara have 6,172,302 people combined as of the 2010 Census, while Dallas-Fort Worth-Arlington has 6,426,214 people.
jjeaff 9y ago
Most likely, they have found that some really good developers want to live in specific places with really high standards of living and since they are good, they could easily get a job somewhere else and stay in the city they want to. Not everyone is willing to just move for a job if not necessary.
- hajile 9y ago
  It takes quite a good dev to generate 50K more valuable than another dev in another area. There are cases where that is true, but it's not universally true. In this particular case, there's a baked-in assumption that a beginner dev in SF is worth more than a senior dev in a low-cost area.
  - falsedan 9y ago
    I feel like you are using salary to measure worth. A junior dev in SF isn't significantly better than junior devs elsewhere; but the salaries are higher in SF, so if you don't match the salaries, you can't hire any junior devs. > so, just hire in low-cost areas! The company execs might be based in a high-cost area (because of family ties, property ownership, etc.), and also might not be ready to eat the cost of running a remote organisation.
    - baby 9y ago
      I think this is the answer, if management is based in high-cost area, then the formula will include a bias for them. I don't think it's bad, it would be bad if they didn't have a better salary because of their location. Does that mean they will hire people from the bay? No it doesn't mean that either. The formula could actually force them to hire people from cheaper places.
  - hardwaresofton 9y ago
    I don't agree with this sentiment. There's something to be said for competition, closeness to hustle and bustle of an industry, and the sheer learning-by-osmosis that happens in an area densely populated by a certain industry. As much as I think that senior devs are needed in the industry (I've been in startups without the proper amount of them and it's terrible), there is a lot to be said for the benefits of being a young developer embedded in an industry hotspot. I've never lived in SV, nor do I want to -- there are areas of the US that pay SV prices with lower cost of living and progressive citizenship/policies, which I'd rather not name since then whoever's reading this would move there -- but the assumption that a "senior" dev in a low cost area is more valuable than a "beginner" dev in a high-cost area like the valley rests on a bunch of things that often are untrue/shaky at best. - How do you even determine senior vs. beginner? Years of experience? Successful projects? Breadth of technology knowledge? depth of technology knowledge? interaction/propensity to share knowledge with team members? - What has this senior dev in low-cost area been exposed to? What about the junior developer? If I asked them to solve a problem, which can imagine the widest breadth of possibilities? which can imagine the most stable/future-proof possibilities? This can come down to the person almost as much as the years of experience. - What frameworks/tools/language are you talking about? (this seems like it may not matter, but if you're measuring contributions to a codebase, a developer with 1-2 years of experience in purely golang is going to be better/likely faster at grunt work maintaining an API in golang where the design choices have mostly already been made). Higher level refactorings and architectural work will likely be out of their reach for months/years to come as they mature, but if what you really needed was someone to put out fires with code that isn't terrible, 1-2 years will often suffice. It wouldn't take the senior engineer very long at all to learn the new language but they'll also have to spend some time unlearning old habits -- of course they'll also be bringing good habits that you may not already have as well, but happily dealing with grunt work and over-working yourself because you're "super psyched" is usually not something senior engineers will do -- newcomers/greenhorn often do this, however.
aantix 9y ago
How about just pay them to the value they bring? Why did location ever play a part? If the dev works on a rarely used admin app, surprise, you pay them lower.
- falsedan 9y ago
  Surprise, they quit to move to SF and get paid 3x as much.
- joshuamorton 9y ago
  This creates perverse incentives among your employees. Now every employee is fighting to work on the "moneymaker" applications. And I don't really believe that a company will be able to accurately assess the value that every application used brings it.
  - sidlls 9y ago
    Employees already jostle to position themselves on the projects they think the leadership values more. That has nothing to do with whether leadership can accurately assess the value of the projects and applications that are developed in general (a point I agree with you on).
  - hajile 9y ago
    The weakest link in the chain. If a company's working on a bad project that will never contribute, it's good to kill it. If you work on a money-center, that's obviously good, but if you work on the thing that allows the money-center to continue to be a money-center, that's just as good even if not as obvious.
arthurgibson 9y ago
I'm going to target in on "bad life choice", most people end up where family are, especially if they have kids, schools are good, jobs are available. I don't think anyone who works remote starts in Nashville then goes to NYC on some thought they could get a salary increase to cover.
- ryanwaggoner 9y ago
  I don't think anyone who works remote starts in Nashville then goes to NYC on some thought they could get a salary increase to cover. I may be misunderstanding what you're saying, but people definitely move from places like Nashville (where I live now) to places like SF and NYC (where I'm moving next year) to increase their salary. No one pays devs mid-six-figures in Nashville, but you can make that in SF and NYC (not easily, but possible).
  - dceddia 9y ago
    That makes lots of sense if you're working onsite in those places. I think the parent was saying that if someone is already working remotely, it seems odd to move to a high CoL area to increase their remote salary vs. staying put and just finding a better-paying remote job.
simonw 9y ago
Because if you do that, they'll find another employer that doesn't force them to move. Living in a high cost area is not a "bad life choice".
- imsofuture 9y ago
  I moved out of a high CoL area to somewhere I actually enjoy living. And brought the salary band with me. No chance I'd work at Buffer, given they'd halve my salary because of my zip code. Other remote jobs don't. No brainier.
  - graton 9y ago
    They state they pay 85% for Average CoL area and 75% for Low CoL area. So they wouldn't halve a developer's salary who moved from San Francisco to somewhere else. Working in San Francisco gets 100%. Now I don't know how their SF salaries compare to other companies though.
    - pc86 9y ago
      @imsofuture said they'd halve their salary, which is likely true. Every remote salary calculator I've ever used, even being generous with my qualifications and the vague dropdowns like "below average or above average experience" gives me a rate 15-40% below what I'm making now, even for the next level up.
- deleted 9y ago
  [deleted]
- pc86 9y ago
  There are plenty of skilled software developers in rural and suburban parts of nearly every country. I find it hard to believe the folks in San Francisco are that much better than the folks in Atlanta that it warrants ~2-3x the salary (using the Gitlab calculator as I can't see the Buffers apps since Drive is blocked at work) for an identical role.
  - 9y ago
lordCarbonFiber 9y ago
You've got it backwards. They're paying people in low cost of living locations less not the other way around. If you frame it that way the economics make a lot more sense; one of the reasons places like SF and NYC are so expensive is because everyone wants to be there for all the jobs. Competition is high and salaries adjust accordingly. Also, speaking from experience (biased toward the financial side of things), you save money just on the talent differential alone hiring in tech hubs vs taking advantage of cheap real estate in a less trafficked area.
- hajile 9y ago
  Explain to a dev that "we don't pay SV devs more, we just think you're worth less". You don't have to be on-site, so the real market is nationwide (if not international). Companies simply pretend it's limited so they can pay less.
  - lordCarbonFiber 9y ago
    That's true in theory, but rarely in practice. Committing to enabling remote work is nontrivial and doesn't suite every team nor every employee. And that still doesn't solve the talent issues; highly skilled professionals congregate in areas with amenities (culture, like minded people, access to top notch medical care, access to schools, access to public transportation, etc) so even if you're remote you're still competing for the high CoL people at high CoL prices.
    - hajile 9y ago
      That may be true to some degree, but if a dev makes 150K in Tennessee, they'd have to make 450K+ in SF to keep the same standard of living. Are SF medicine or schools 3x better? Is public transportation 3x better? Is the culture 3x better? I think not. You can get comparable things in cities with a fraction of the living cost which self-evidently shows that people are paying too much for what they are getting. Finally, if I'd rather live somewhere without any of those perks and pocket the money instead, should I be told that I can't? Should my decision be held against me?
ThrustVectoring 9y ago
High-pay software developers aren't going to tolerate living in a place where there's exactly one employer willing to pay them what they're worth. They give up way too much negotiating power to do so. It's much more in their interest to live somewhere that they can walk out the door of Facebook on Friday and in the door of Google on Monday.
sidlls 9y ago
Why do people view it as "high CoL salary earners make too much" instead of, "Why do they pay low CoL workers so little?"
ensignavenger 9y ago
Why do companies continue to under pay employees in lower cost of living areas by not paying them as much as their counterparts in higher cost of living areas?
- hajile 9y ago
  The real key is to unify all the smaller markets into one big market. When everyone has to compete with everyone (rather than being the big company in the small market) salaries will go up everywhere except high-cost areas due to market pressure. Both negative (taking away) and positive (adding) responses are beneficial to devs. If if a company chooses to raise everyone's salary, Awesome! Now companies that lower salaries must compete. If a company chooses to lower everyone's salary, Awesome! Devs in high-cost areas will be forced to move which will unify the market at which point devs in traditionally lower-wage areas will now be able to compete in a larger market and negotiate for more pay.
r0m4n0 9y ago
I’ve learned that having a presence in the Bay Area has had a significant impact on the success of my company. We raised tens of millions of dollars in funding with ease, scaled from 10 to 150 employees (half of which being software engineers) in 3 years, and were acquired by a multi billion dollar company (the company was involved in the original rounds of funding). The acquisition involves most employees continuing to live in the bay and simply driving to a new office location one town over. All of these things just don’t seem possible if the company didn’t employ people in one of the most expensive areas in the country.
- fogetti 9y ago
  I don't see the causation in your argument. Can you elaborate? It looks like you are only implying that there is an impact, but I fail to see how.

by hajile 9y ago

pimmen 9y ago

If your devs are located in a bigger city, you can have an office located in that bigger city. If you have an office in a bigger city, you can recruit easier since there's more devs in a bigger city. If your devs are in a bigger city, there's a good chance they went to the bigger university in that bigger city. If you have devs from a bigger university you can more easily recruit from that bigger university. If your office is in a bigger city, you can have more relevant personell in that bigger city such as sales and marketing. If you have sales and marketing in a bigger city, you can reach the customers in that bigger city. A bigger city has more customers than a smaller city. If you have your devs in a bigger city, you can recruit devs from different industries in that bigger city. Bigger cities have more industries present, meaning you can bring in devs with different skillsets. Basically, discouraging devs from living in big cities can be a very bad idea because. Opportunity costs are real costs.

amyjess 9y ago
Big city != HCOL The Dallas metro area is larger than the SF metro area (and so are the individual cities), but Dallas's COL is half as much as SF's. Edit: For that matter, just to ward off the (valid) point that the SF metro area doesn't include most of SV, the Dallas metro area is larger than the SF and SJ metro areas combined. San Francisco-Oakland-Hayward and San Jose-Sunnyvale-Santa Clara have 6,172,302 people combined as of the 2010 Census, while Dallas-Fort Worth-Arlington has 6,426,214 people.

jjeaff 9y ago

Most likely, they have found that some really good developers want to live in specific places with really high standards of living and since they are good, they could easily get a job somewhere else and stay in the city they want to. Not everyone is willing to just move for a job if not necessary.

hajile 9y ago
It takes quite a good dev to generate 50K more valuable than another dev in another area. There are cases where that is true, but it's not universally true. In this particular case, there's a baked-in assumption that a beginner dev in SF is worth more than a senior dev in a low-cost area.
- falsedan 9y ago
  I feel like you are using salary to measure worth. A junior dev in SF isn't significantly better than junior devs elsewhere; but the salaries are higher in SF, so if you don't match the salaries, you can't hire any junior devs. > so, just hire in low-cost areas! The company execs might be based in a high-cost area (because of family ties, property ownership, etc.), and also might not be ready to eat the cost of running a remote organisation.
  - baby 9y ago
    I think this is the answer, if management is based in high-cost area, then the formula will include a bias for them. I don't think it's bad, it would be bad if they didn't have a better salary because of their location. Does that mean they will hire people from the bay? No it doesn't mean that either. The formula could actually force them to hire people from cheaper places.
- hardwaresofton 9y ago
  I don't agree with this sentiment. There's something to be said for competition, closeness to hustle and bustle of an industry, and the sheer learning-by-osmosis that happens in an area densely populated by a certain industry. As much as I think that senior devs are needed in the industry (I've been in startups without the proper amount of them and it's terrible), there is a lot to be said for the benefits of being a young developer embedded in an industry hotspot. I've never lived in SV, nor do I want to -- there are areas of the US that pay SV prices with lower cost of living and progressive citizenship/policies, which I'd rather not name since then whoever's reading this would move there -- but the assumption that a "senior" dev in a low cost area is more valuable than a "beginner" dev in a high-cost area like the valley rests on a bunch of things that often are untrue/shaky at best. - How do you even determine senior vs. beginner? Years of experience? Successful projects? Breadth of technology knowledge? depth of technology knowledge? interaction/propensity to share knowledge with team members? - What has this senior dev in low-cost area been exposed to? What about the junior developer? If I asked them to solve a problem, which can imagine the widest breadth of possibilities? which can imagine the most stable/future-proof possibilities? This can come down to the person almost as much as the years of experience. - What frameworks/tools/language are you talking about? (this seems like it may not matter, but if you're measuring contributions to a codebase, a developer with 1-2 years of experience in purely golang is going to be better/likely faster at grunt work maintaining an API in golang where the design choices have mostly already been made). Higher level refactorings and architectural work will likely be out of their reach for months/years to come as they mature, but if what you really needed was someone to put out fires with code that isn't terrible, 1-2 years will often suffice. It wouldn't take the senior engineer very long at all to learn the new language but they'll also have to spend some time unlearning old habits -- of course they'll also be bringing good habits that you may not already have as well, but happily dealing with grunt work and over-working yourself because you're "super psyched" is usually not something senior engineers will do -- newcomers/greenhorn often do this, however.

aantix 9y ago

How about just pay them to the value they bring? Why did location ever play a part? If the dev works on a rarely used admin app, surprise, you pay them lower.

falsedan 9y ago
Surprise, they quit to move to SF and get paid 3x as much.
joshuamorton 9y ago
This creates perverse incentives among your employees. Now every employee is fighting to work on the "moneymaker" applications. And I don't really believe that a company will be able to accurately assess the value that every application used brings it.
- sidlls 9y ago
  Employees already jostle to position themselves on the projects they think the leadership values more. That has nothing to do with whether leadership can accurately assess the value of the projects and applications that are developed in general (a point I agree with you on).
- hajile 9y ago
  The weakest link in the chain. If a company's working on a bad project that will never contribute, it's good to kill it. If you work on a money-center, that's obviously good, but if you work on the thing that allows the money-center to continue to be a money-center, that's just as good even if not as obvious.

arthurgibson 9y ago

I'm going to target in on "bad life choice", most people end up where family are, especially if they have kids, schools are good, jobs are available. I don't think anyone who works remote starts in Nashville then goes to NYC on some thought they could get a salary increase to cover.

ryanwaggoner 9y ago
I don't think anyone who works remote starts in Nashville then goes to NYC on some thought they could get a salary increase to cover. I may be misunderstanding what you're saying, but people definitely move from places like Nashville (where I live now) to places like SF and NYC (where I'm moving next year) to increase their salary. No one pays devs mid-six-figures in Nashville, but you can make that in SF and NYC (not easily, but possible).
- dceddia 9y ago
  That makes lots of sense if you're working onsite in those places. I think the parent was saying that if someone is already working remotely, it seems odd to move to a high CoL area to increase their remote salary vs. staying put and just finding a better-paying remote job.

simonw 9y ago

Because if you do that, they'll find another employer that doesn't force them to move. Living in a high cost area is not a "bad life choice".

imsofuture 9y ago
I moved out of a high CoL area to somewhere I actually enjoy living. And brought the salary band with me. No chance I'd work at Buffer, given they'd halve my salary because of my zip code. Other remote jobs don't. No brainier.
- graton 9y ago
  They state they pay 85% for Average CoL area and 75% for Low CoL area. So they wouldn't halve a developer's salary who moved from San Francisco to somewhere else. Working in San Francisco gets 100%. Now I don't know how their SF salaries compare to other companies though.
  - pc86 9y ago
    @imsofuture said they'd halve their salary, which is likely true. Every remote salary calculator I've ever used, even being generous with my qualifications and the vague dropdowns like "below average or above average experience" gives me a rate 15-40% below what I'm making now, even for the next level up.
deleted 9y ago
[deleted]
pc86 9y ago
There are plenty of skilled software developers in rural and suburban parts of nearly every country. I find it hard to believe the folks in San Francisco are that much better than the folks in Atlanta that it warrants ~2-3x the salary (using the Gitlab calculator as I can't see the Buffers apps since Drive is blocked at work) for an identical role.
- 9y ago

lordCarbonFiber 9y ago

You've got it backwards. They're paying people in low cost of living locations less not the other way around. If you frame it that way the economics make a lot more sense; one of the reasons places like SF and NYC are so expensive is because everyone wants to be there for all the jobs. Competition is high and salaries adjust accordingly. Also, speaking from experience (biased toward the financial side of things), you save money just on the talent differential alone hiring in tech hubs vs taking advantage of cheap real estate in a less trafficked area.

hajile 9y ago
Explain to a dev that "we don't pay SV devs more, we just think you're worth less". You don't have to be on-site, so the real market is nationwide (if not international). Companies simply pretend it's limited so they can pay less.
- lordCarbonFiber 9y ago
  That's true in theory, but rarely in practice. Committing to enabling remote work is nontrivial and doesn't suite every team nor every employee. And that still doesn't solve the talent issues; highly skilled professionals congregate in areas with amenities (culture, like minded people, access to top notch medical care, access to schools, access to public transportation, etc) so even if you're remote you're still competing for the high CoL people at high CoL prices.
  - hajile 9y ago
    That may be true to some degree, but if a dev makes 150K in Tennessee, they'd have to make 450K+ in SF to keep the same standard of living. Are SF medicine or schools 3x better? Is public transportation 3x better? Is the culture 3x better? I think not. You can get comparable things in cities with a fraction of the living cost which self-evidently shows that people are paying too much for what they are getting. Finally, if I'd rather live somewhere without any of those perks and pocket the money instead, should I be told that I can't? Should my decision be held against me?

ThrustVectoring 9y ago

High-pay software developers aren't going to tolerate living in a place where there's exactly one employer willing to pay them what they're worth. They give up way too much negotiating power to do so. It's much more in their interest to live somewhere that they can walk out the door of Facebook on Friday and in the door of Google on Monday.

sidlls 9y ago

Why do people view it as "high CoL salary earners make too much" instead of, "Why do they pay low CoL workers so little?"

ensignavenger 9y ago

Why do companies continue to under pay employees in lower cost of living areas by not paying them as much as their counterparts in higher cost of living areas?

hajile 9y ago
The real key is to unify all the smaller markets into one big market. When everyone has to compete with everyone (rather than being the big company in the small market) salaries will go up everywhere except high-cost areas due to market pressure. Both negative (taking away) and positive (adding) responses are beneficial to devs. If if a company chooses to raise everyone's salary, Awesome! Now companies that lower salaries must compete. If a company chooses to lower everyone's salary, Awesome! Devs in high-cost areas will be forced to move which will unify the market at which point devs in traditionally lower-wage areas will now be able to compete in a larger market and negotiate for more pay.

r0m4n0 9y ago

I’ve learned that having a presence in the Bay Area has had a significant impact on the success of my company. We raised tens of millions of dollars in funding with ease, scaled from 10 to 150 employees (half of which being software engineers) in 3 years, and were acquired by a multi billion dollar company (the company was involved in the original rounds of funding). The acquisition involves most employees continuing to live in the bay and simply driving to a new office location one town over. All of these things just don’t seem possible if the company didn’t employ people in one of the most expensive areas in the country.

fogetti 9y ago
I don't see the causation in your argument. Can you elaborate? It looks like you are only implying that there is an impact, but I fail to see how.