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Pay is never never never about value. It's about supply and demand. If the only way to hire that SF engineer is to offer competitive salaries, then you have no

Pay is never never never about value. It's about supply and demand. If the only way to hire that SF engineer is to offer competitive salaries, then you have no choice.

amorphid 9y ago
My visualization of supply & demand. Somewhere in rural America... "Will you work for 80K?" "Yes." Meanwhile in San Francisco... "Will you work for 80K?" "No." "Will you work for 120K?" "No." "Will you work for 160K?" "Yes."
- jonny_eh 9y ago
  And that difference can be called whatever you want, e.g. 'Cost of Living Stipend".
dragonwriter 9y ago
> Pay is never never never about value. Pay is 100% about value. > It's about supply and demand. The supply function is a reflection of value perspective of potential suppliers. The demand function is a reflection of value to potential purchasers.
- pfisch 9y ago
  You are both getting into a weird sort of definition fight here. Pay is a reflection of market demand, not the monetary value you bring to a company which is not easily quantifiable. Walmart wouldn't function without someone at the register, but how much "value" that person at the register brings doesn't dictate their salary. The supply of people who could do the same job does.
  - evrydayhustling 9y ago
    What you're saying is true at the bottom end of the job market, where labor is highly exchangeable. At the other side -- say a one of a kind performer, like Beyonce -- price gets set by an auction of gigs, where she accepts those that keep her busy and leave her with the highest margins. In between, where most of us live, neither candidates nor jobs are fully exchangeable, so both value to company and appeal to candidate (however imperfectly estimated) come into play. A hiring manager's job is to pay an employee less than the value they generate, but as much or more than they would get at a job they like just as much. Paying a Utah programmer 80 cents for what a SoMa dev gets a buck for sends the message that (a) you could pay either of them more than a dollar but (b) you could replace either of them for less than .80. Yet (c) for some reason you want them both to have the same left over after paying for their very different apartments.
  - dragonwriter 9y ago
    > Pay is a reflection of market demand, not the monetary value you bring to a company Market demand is itself based on the perception of the hiring parties of the value you would supply. Companies hire people [0] only when they expect that that the cost of doing so will be justified by the return. But, yes, I agree that supply and demand set price, but I just disagree with the idea that those are somehow unrelated to value. > Walmart wouldn't function without someone at the register, but how much "value" that person at the register brings doesn't dictate their salary. The value sets an upper limit to what WalMart will pay, just as the perceived opportunity cost to the worker of taking the job sets the lower limit of pay they’ll accept. The former is demand, the latter supply. [0] outside of hires where a decision maker is funnelling business resources to the hired party as a kind of personal gift, which do happen, sure.
    - pathseeker 9y ago
      Value only sets a maximum. It's meaningless when you are talking about giving paycuts to people you know are in cheaper locations.
      - dragonwriter 9y ago
        > Value only sets a maximum. That sounds very much like what said about setting an upper limit, yes. > It's meaningless when you are talking about giving paycuts to people you know are in cheaper locations. Sure, each side is actually seeking the other sides limit price: as an employee, you demand what you think you are worth to the employer; as an employer, you offer what you think the employee is willing to work for (both sides, of course, present this as reflecting their own side rather than their guess of what the other side will accept.) This gets weird when an employer continues to try to do this but tries to have salary transparency, because then they either have to abandon elements that go into their estimate of what employees will accept or make it clear that that' they are targeting an estimate of the employees lower limit.
      - evrydayhustling 9y ago
        What lets you pay them less is not their lower costs, it's the unavailability of higher pay in their area. So if you're going to do it, size it that way and, ideally, call it what it is.

Pay is never never never about value. It's about supply and demand. If the only way to hire that SF engineer is to offer competitive salaries, then you have no choice.

amorphid 9y ago

My visualization of supply & demand. Somewhere in rural America... "Will you work for 80K?" "Yes." Meanwhile in San Francisco... "Will you work for 80K?" "No." "Will you work for 120K?" "No." "Will you work for 160K?" "Yes."

jonny_eh 9y ago
And that difference can be called whatever you want, e.g. 'Cost of Living Stipend".

dragonwriter 9y ago

> Pay is never never never about value. Pay is 100% about value. > It's about supply and demand. The supply function is a reflection of value perspective of potential suppliers. The demand function is a reflection of value to potential purchasers.

pfisch 9y ago
You are both getting into a weird sort of definition fight here. Pay is a reflection of market demand, not the monetary value you bring to a company which is not easily quantifiable. Walmart wouldn't function without someone at the register, but how much "value" that person at the register brings doesn't dictate their salary. The supply of people who could do the same job does.
- evrydayhustling 9y ago
  What you're saying is true at the bottom end of the job market, where labor is highly exchangeable. At the other side -- say a one of a kind performer, like Beyonce -- price gets set by an auction of gigs, where she accepts those that keep her busy and leave her with the highest margins. In between, where most of us live, neither candidates nor jobs are fully exchangeable, so both value to company and appeal to candidate (however imperfectly estimated) come into play. A hiring manager's job is to pay an employee less than the value they generate, but as much or more than they would get at a job they like just as much. Paying a Utah programmer 80 cents for what a SoMa dev gets a buck for sends the message that (a) you could pay either of them more than a dollar but (b) you could replace either of them for less than .80. Yet (c) for some reason you want them both to have the same left over after paying for their very different apartments.
- dragonwriter 9y ago
  > Pay is a reflection of market demand, not the monetary value you bring to a company Market demand is itself based on the perception of the hiring parties of the value you would supply. Companies hire people [0] only when they expect that that the cost of doing so will be justified by the return. But, yes, I agree that supply and demand set price, but I just disagree with the idea that those are somehow unrelated to value. > Walmart wouldn't function without someone at the register, but how much "value" that person at the register brings doesn't dictate their salary. The value sets an upper limit to what WalMart will pay, just as the perceived opportunity cost to the worker of taking the job sets the lower limit of pay they’ll accept. The former is demand, the latter supply. [0] outside of hires where a decision maker is funnelling business resources to the hired party as a kind of personal gift, which do happen, sure.
  - pathseeker 9y ago
    Value only sets a maximum. It's meaningless when you are talking about giving paycuts to people you know are in cheaper locations.
    - dragonwriter 9y ago
      > Value only sets a maximum. That sounds very much like what said about setting an upper limit, yes. > It's meaningless when you are talking about giving paycuts to people you know are in cheaper locations. Sure, each side is actually seeking the other sides limit price: as an employee, you demand what you think you are worth to the employer; as an employer, you offer what you think the employee is willing to work for (both sides, of course, present this as reflecting their own side rather than their guess of what the other side will accept.) This gets weird when an employer continues to try to do this but tries to have salary transparency, because then they either have to abandon elements that go into their estimate of what employees will accept or make it clear that that' they are targeting an estimate of the employees lower limit.
    - evrydayhustling 9y ago
      What lets you pay them less is not their lower costs, it's the unavailability of higher pay in their area. So if you're going to do it, size it that way and, ideally, call it what it is.