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Frankly, I think that implicit assumption by workers is totally fair! The way COL adjustments are done results in a strong incentive to live wherever costs the
by PNWChris 6y ago
Frankly, I think that implicit assumption by workers is totally fair! The way COL adjustments are done results in a strong incentive to live wherever costs the most. Some time ago I made a comment on this concept that I'll re-post here with minor edits:
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Say you move to a lower cost of living area, perhaps 6% cheaper, and your employer adjusts your wages down by the same amount as the change in COL.
Now all your expenses are 6% lower, but your money left after expenses is also 6% lower. That means that despite being no worse off in terms of quality of life, your savings went down 6%.
Strictly speaking, if you maintain the same relative ratio of costs to savings, it’s always rational to take the highest income, even if it’s in a higher COL area. This is because costs can be measured as a percentage of income, but savings ought to be measured as an absolute value.
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The "fix" would be to somehow work out what workers spend, and only adjust that part of their salary by COL. That's invasive and gives an unfair COL-adjusted comp advantage to the highest earners who can save a bigger portion of their income.
I don't have an ideal solution. I guess there could be a standardized single remote COL adjustment (perhaps adjusted by country or something to account different legal frameworks and mandatory benefits), and the remote worker can live wherever without comp adjustments other than local tax.
- downerending 6y ago> Now all your expenses are 6% lower, but your money left after expenses is also 6% lower. If so, arguably the COL is being done incorrectly. It should be adjusting just literally the "costs of living", not total comp. That said, having lived in a very high COL area and a normal area, my total take was higher in the former, but the risk/variance was also higher--a lot higher. It could easily have bankrupted me. Thinking in risk/reward terms (or like a market investor), I'd actually prefer the lower variance at this point in my life, even if the mean is also lower.
- noodle 6y agoThis is true but its not linear. Even remote jobs are coalescing around a median salary. If you go from SF to Chang Mai, you probably aren't going to take a 85% pay cut, it will probably hit a local minimum for your role/experience/etc.. Your skillset still has a certain value regardless of location. Below a certain line, your savings rate will go back up again.
- ykevinator 6y agoIt's not 6 it's 60