5 ms·

What if somebody in SF was employed remotely by a company in a poorer country? Should the person in SF be paid less because employees in originating country ha

by tooop 7y ago

What if somebody in SF was employed remotely by a company in a poorer country? Should the person in SF be paid less because employees in originating country have lower salaries?. Having salaries based on location is fair, the same job that pays 120k$ in SF pays 70k$ in my country and that makes me in top 2% earners in the country. I could argue that i actually get more with 70k$ in my country than somebody with 120k$ in SF.

dragonwriter 7y ago
> Having salaries based on location is fair It's no more fair than paying based on lifestyle choices; if any employee in SF is providing labor worth $200k, then an employee in Bucharest providing the same labor is also worth $200k. The fact that the SF employee has higher expenses doesn't make their labor more valuable. Sure, they are paying more to live in a more desirable location, but that no more deserves higher pay from a remote employer than an employee paying more to live in a bigger house, or to consume more expensive designer drugs outside of work hours.
- ellius 7y ago
  But prices aren't based on fairness, they are based on demand and supply. If there is a supply of workers willing to work at a lower price in areas outside of San Francisco, then it makes sense for a company to purchase their cheaper labor if it supplies the same value as the more expensive labor.
  - dragonwriter 7y ago
    > But prices aren't based on fairness, they are based on demand and supply If they were based on supply and demand, locality of seller would have no effect on the price buyers were willing to pay for goods that aren't location-sensitive, e.g., remote work, because it's not a location-bound market and goods would trade at the global market clearing price absent (inefficient) artificial market segmentation that is only possible (for buyers) when there is an effective monopsony for the particular good/service being purchased (since competition would exploit the underpriced segments buy buying up what they are selling at a price above what the attempted segmenter was offering.)
    - ellius 7y ago
      That may very well happen over time. Non-Bay workers may bid down the price of coding labor, and remote workers from disparate markets will bid against each other, and eventually some "global market clearing price" may be established. Economic theory doesn't operate instantaneously, though. It manifests over time as individual actors bid and negotiate. Remote work is relatively new and its substitutability is being figured out. In the meantime companies may exploit the inefficiencies (and so might workers).
- Nerevarine76 7y ago
  In reality it has nothing to do with fairness, it's a result of real market conditions. An employee in the middle of the country will accept a lower salary than someone in the bay area due to cost-of-living expenses. Same can be said for someone in another country. Is it 'fair' from a pure salary-to-value ratio? No. But economics isn't about 1-1 'fairness', it's about the allocation of scarce resources at a mutually-agreed upon price, or wage in this case. This is partly why comparing salaries is stupid, especially across locations.
  - dragonwriter 7y ago
    > In reality it has nothing to do with fairness Well, yes, when I argued against the idea it was fair without also arguing against the clear fact that it occurs, I was rather clearly saying that the fact that it occurs has nothing to do with fairness. > it's a result of real market conditions Yes, specifically, the absence of robust competition for remote labor of the precise kinds Gitlab is buying is the “real market condition” that allows them to do this kind of segmentation. Ironically, the more attention (and copycats) all-remote firms like Gitlab get, the less viable this cost-saving tactic will be, provided that they don't involve in illegal (in many jurisdictions) joint cooperation to limit wages of the type that, unfortunately, tech firms have engaged in in local markets in the past.
    - meowface 7y ago
      Starting a remote company is a cost-saving tactic, and the ability to often not have to pay SF salaries can be a motivating factor, especially in the early stages of the company.
      - dragonwriter 7y ago
        Sure, if you make a cost-optimization rather than fairness argument for Gitlab’s policy—that it's simply a way of paying every employee the minimum they can get away with—I won’t argue against that.
        7y ago
- trilila 7y ago
  To be honest, Gitlab is paying way above the market rate in Bucharest, while the cost of living in Bucharest is significantly lower than that of SF. Oddly enough their pay rate is close to that of London for a Tech Lead, and that's a lot of money in a city like Bucharest. Even if pay is half of SF, Bucharest's cost of living if a few times less, so it really is great.
- hjk05 7y ago
  Salary is a market value. Your arguments read like “if a BigMac costs half a Dollar in a developing country then the BigMac is inherently worth half a dollar and should cost the same in the US”
  - dragonwriter 7y ago
    > Salary is a market value. Were that true, global markets where the location of the seller is immaterial to the utility of the good or service sold and didn't create extra costs to get it to the buyer wouldn't have different rates based on the seller's location, by the Law of One Price. > Your arguments read like “if a BigMac costs half a Dollar in a developing country then the BigMac is inherently worth half a dollar and should cost the same in the US” A more precise equivalent would be “there is no rational reason for the same buyer to be willing to pay more to purchase a Big Mac delivered from a neighboring higher CoL city as an identical one delivered with the same latency from a different neigboring community with a lower CoL.” Local prices for Big Macs between countries naturally vary precisely because Big Mac distribution isn't globalized the way remote labor is, and a Big Macs from a McDonald’s in Turkmenistan is not an equivalent substitute for one from a McDonald's next to Market Street for a buyer in Downtown SF. Local wage policies for remote work are an effort by employers to present a rationalization to employees not to increase their wage demands to what the globalized market they are actually competing in will support. They will only be able to be maintained so long as remote work isn't widely offered and there isn't a meaningful competitive (on both sides) market; once there are enough competing buyers for any given kind of labor, competition for labor will see the best workers from low-CoL area consistently going to employers that aren't lowballing them.
- tooop 7y ago
  The fact that employee in SF gets $200k doesn't mean that the labor is worth $200k in Bucharest. It is worth whatever somebody is ready to do the job for and what the company is ready to offer, in this case - SF it is $200k while in Bucharest it is $100k. If the employee is happy with $100k in Bucharest then the salary is fair.
  - dragonwriter 7y ago
    The fact that the purchaser pays $200k for it means that the labor is worth $200k to that purchaser. Assuming that what they get doesn't vary based on the seller's location, the only reason to offer less for identical labor from Bucharest is because they think they aren't competing with other buyers who are likewise location-insensitive, so that the Law of One Price doesn't apply, and they can optimize their cost with market segmentation. That's obviously what is going on. Trying to sell it with a dishonest narrative about some inherent fairness of scaling compensation to local cost of living is B.S. Local cost of living is just assumed to be a reasonable approximate proxy for what competing bidders, most of whom are presumed to be local and thus location-sensitive rather than remote and thus location-insensitive, are likely to offer. There's no ethical rationale in operation, just cost optimization.
- txsoftwaredev 7y ago
  They should price their service the same. Charge less in ares in the US with a lower cost of living as the wages/revenue will be less for developers/businesses in those areas.
lordfoom 7y ago
>Should the person in SF be paid less because employees in originating country have lower salaries? So in your view it's fine to pay different amounts of money for the same work?
- Nerevarine76 7y ago
  Why would it not be? It's a mutual transaction. If an developer in kansas is willing to accept less than the bay area worker, whose living expenses are twice as much, who is anyone to say that's not allowed? If you forced them to be paid the same then one of them will not be working for you even if they want to; either because you can't afford to hire them both or the bay area engineer can't live on the salary.
  - lordfoom 7y ago
    >Why would it not be? Because they did the same work? >who is anyone to say that's not allowed? I didn't say it's not allowed. I think it's poor business practice, and poor for society, incentivizing devs to stay in expensive areas instead of moving out to cheaper remote areas. >If you forced them to be paid the same then one of them will not be working for you even if they want to; either because you can't afford to hire them both or the bay area engineer can't live on the salary. That is speculation and I speculate you are wrong.
    - Nerevarine76 7y ago
      It's not speculation, it's economics. If you have to pay a higher wage the number of available jobs decrease. It's supply and demand. There's not an infinite amount of money in a company's budget. It's also not a company's job to incentivize where it's employees live. I understand where you're coming from but there's nothing inherently wrong with paying different wages for the same work if it's a consensual agreement. If one worker is satisfied with his salary, and is being paid well for his area, the only reason to complain about a worker in a costlier area being paid more is envy/jealousy.
- tooop 7y ago

by tooop 7y ago

dragonwriter 7y ago

> Having salaries based on location is fair It's no more fair than paying based on lifestyle choices; if any employee in SF is providing labor worth $200k, then an employee in Bucharest providing the same labor is also worth $200k. The fact that the SF employee has higher expenses doesn't make their labor more valuable. Sure, they are paying more to live in a more desirable location, but that no more deserves higher pay from a remote employer than an employee paying more to live in a bigger house, or to consume more expensive designer drugs outside of work hours.

ellius 7y ago
But prices aren't based on fairness, they are based on demand and supply. If there is a supply of workers willing to work at a lower price in areas outside of San Francisco, then it makes sense for a company to purchase their cheaper labor if it supplies the same value as the more expensive labor.
- dragonwriter 7y ago
  > But prices aren't based on fairness, they are based on demand and supply If they were based on supply and demand, locality of seller would have no effect on the price buyers were willing to pay for goods that aren't location-sensitive, e.g., remote work, because it's not a location-bound market and goods would trade at the global market clearing price absent (inefficient) artificial market segmentation that is only possible (for buyers) when there is an effective monopsony for the particular good/service being purchased (since competition would exploit the underpriced segments buy buying up what they are selling at a price above what the attempted segmenter was offering.)
  - ellius 7y ago
    That may very well happen over time. Non-Bay workers may bid down the price of coding labor, and remote workers from disparate markets will bid against each other, and eventually some "global market clearing price" may be established. Economic theory doesn't operate instantaneously, though. It manifests over time as individual actors bid and negotiate. Remote work is relatively new and its substitutability is being figured out. In the meantime companies may exploit the inefficiencies (and so might workers).
Nerevarine76 7y ago
In reality it has nothing to do with fairness, it's a result of real market conditions. An employee in the middle of the country will accept a lower salary than someone in the bay area due to cost-of-living expenses. Same can be said for someone in another country. Is it 'fair' from a pure salary-to-value ratio? No. But economics isn't about 1-1 'fairness', it's about the allocation of scarce resources at a mutually-agreed upon price, or wage in this case. This is partly why comparing salaries is stupid, especially across locations.
- dragonwriter 7y ago
  > In reality it has nothing to do with fairness Well, yes, when I argued against the idea it was fair without also arguing against the clear fact that it occurs, I was rather clearly saying that the fact that it occurs has nothing to do with fairness. > it's a result of real market conditions Yes, specifically, the absence of robust competition for remote labor of the precise kinds Gitlab is buying is the “real market condition” that allows them to do this kind of segmentation. Ironically, the more attention (and copycats) all-remote firms like Gitlab get, the less viable this cost-saving tactic will be, provided that they don't involve in illegal (in many jurisdictions) joint cooperation to limit wages of the type that, unfortunately, tech firms have engaged in in local markets in the past.
  - meowface 7y ago
    Starting a remote company is a cost-saving tactic, and the ability to often not have to pay SF salaries can be a motivating factor, especially in the early stages of the company.
    - dragonwriter 7y ago
      Sure, if you make a cost-optimization rather than fairness argument for Gitlab’s policy—that it's simply a way of paying every employee the minimum they can get away with—I won’t argue against that.
      - 7y ago
trilila 7y ago
To be honest, Gitlab is paying way above the market rate in Bucharest, while the cost of living in Bucharest is significantly lower than that of SF. Oddly enough their pay rate is close to that of London for a Tech Lead, and that's a lot of money in a city like Bucharest. Even if pay is half of SF, Bucharest's cost of living if a few times less, so it really is great.
hjk05 7y ago
Salary is a market value. Your arguments read like “if a BigMac costs half a Dollar in a developing country then the BigMac is inherently worth half a dollar and should cost the same in the US”
- dragonwriter 7y ago
  > Salary is a market value. Were that true, global markets where the location of the seller is immaterial to the utility of the good or service sold and didn't create extra costs to get it to the buyer wouldn't have different rates based on the seller's location, by the Law of One Price. > Your arguments read like “if a BigMac costs half a Dollar in a developing country then the BigMac is inherently worth half a dollar and should cost the same in the US” A more precise equivalent would be “there is no rational reason for the same buyer to be willing to pay more to purchase a Big Mac delivered from a neighboring higher CoL city as an identical one delivered with the same latency from a different neigboring community with a lower CoL.” Local prices for Big Macs between countries naturally vary precisely because Big Mac distribution isn't globalized the way remote labor is, and a Big Macs from a McDonald’s in Turkmenistan is not an equivalent substitute for one from a McDonald's next to Market Street for a buyer in Downtown SF. Local wage policies for remote work are an effort by employers to present a rationalization to employees not to increase their wage demands to what the globalized market they are actually competing in will support. They will only be able to be maintained so long as remote work isn't widely offered and there isn't a meaningful competitive (on both sides) market; once there are enough competing buyers for any given kind of labor, competition for labor will see the best workers from low-CoL area consistently going to employers that aren't lowballing them.
tooop 7y ago
The fact that employee in SF gets $200k doesn't mean that the labor is worth $200k in Bucharest. It is worth whatever somebody is ready to do the job for and what the company is ready to offer, in this case - SF it is $200k while in Bucharest it is $100k. If the employee is happy with $100k in Bucharest then the salary is fair.
- dragonwriter 7y ago
  The fact that the purchaser pays $200k for it means that the labor is worth $200k to that purchaser. Assuming that what they get doesn't vary based on the seller's location, the only reason to offer less for identical labor from Bucharest is because they think they aren't competing with other buyers who are likewise location-insensitive, so that the Law of One Price doesn't apply, and they can optimize their cost with market segmentation. That's obviously what is going on. Trying to sell it with a dishonest narrative about some inherent fairness of scaling compensation to local cost of living is B.S. Local cost of living is just assumed to be a reasonable approximate proxy for what competing bidders, most of whom are presumed to be local and thus location-sensitive rather than remote and thus location-insensitive, are likely to offer. There's no ethical rationale in operation, just cost optimization.
txsoftwaredev 7y ago
They should price their service the same. Charge less in ares in the US with a lower cost of living as the wages/revenue will be less for developers/businesses in those areas.

lordfoom 7y ago

>Should the person in SF be paid less because employees in originating country have lower salaries? So in your view it's fine to pay different amounts of money for the same work?

Nerevarine76 7y ago
Why would it not be? It's a mutual transaction. If an developer in kansas is willing to accept less than the bay area worker, whose living expenses are twice as much, who is anyone to say that's not allowed? If you forced them to be paid the same then one of them will not be working for you even if they want to; either because you can't afford to hire them both or the bay area engineer can't live on the salary.
- lordfoom 7y ago
  >Why would it not be? Because they did the same work? >who is anyone to say that's not allowed? I didn't say it's not allowed. I think it's poor business practice, and poor for society, incentivizing devs to stay in expensive areas instead of moving out to cheaper remote areas. >If you forced them to be paid the same then one of them will not be working for you even if they want to; either because you can't afford to hire them both or the bay area engineer can't live on the salary. That is speculation and I speculate you are wrong.
  - Nerevarine76 7y ago
    It's not speculation, it's economics. If you have to pay a higher wage the number of available jobs decrease. It's supply and demand. There's not an infinite amount of money in a company's budget. It's also not a company's job to incentivize where it's employees live. I understand where you're coming from but there's nothing inherently wrong with paying different wages for the same work if it's a consensual agreement. If one worker is satisfied with his salary, and is being paid well for his area, the only reason to complain about a worker in a costlier area being paid more is envy/jealousy.
tooop 7y ago