4 ms·

Here's a thought experiment. Let's say an employer is based out of downtown San Jose, and employs people on-site. Would it be reasonable for them to adjust sala

Here's a thought experiment. Let's say an employer is based out of downtown San Jose, and employs people on-site. Would it be reasonable for them to adjust salaries depending on what city an employee lived in? The average rent for a one-bedroom apartment is $3,291 in Mountain View, but $2,390 in Morgan Hill. If an employee moved from Mountain View to Morgan Hill, would the employer be justified in reducing the salary of the employee to adjust for the fact that the (on-site!) employee now lives in a lower cost-of-living area? (Let's assume that other CoL factors are not more expensive in Morgan Hill than Mountain View, which I feel is a safe assumption). Would it be justified if the company was fully remote? What about if the employee moved to Sunnyvale? The average rent is $3,016; a smaller difference, but still cheaper than Mountain View.

gnicholas 6y ago
Companies already effectively do this, but frame it as a perk for those who live close. IIRC Facebook and Palantir paid 10k to people who lived within 1 mile of the office.
vkou 6y ago
Or better yet, what if they moved to Stockton? A 1-bedroom's $1200/month there, and it's still technically within commuting distance from the bay area.
yongjik 6y ago
I'm not sure that the example is similar to the current topic: rent is cheaper than Morgan Hill largely because it takes an hour to drive to lots of workplaces. People are choosing between paying higher rent in Mountain View and paying with their commute time in Morgan Hill. It's arguably a different scenario from someone attending VC from their $400K, 5-bedroom mansion in Raleigh, NC.
- IggleSniggle 6y ago
  But that's also sort of the point, isn't it? When you are dealing with a remote worker, the commute time doesn't matter. You don't need to consider paying geographical based salaries, because the location isn't relevant. There is no "paying with commute time." You just need to pay the amount that enables you to get the workers you need. The "fair" thing to do is to pay people without regard to location and let them decide for themselves whether it is worth it to live in a HCOL area or not.
  - yongjik 6y ago
    Well, in an ideal, completely efficient market for remote workers, of course the "fair" thing to do is to pay for enough salary to hire the best people in Prague or Bangalore. People can decide whether they want to live in San Francisco with that salary. Most people can't, so naturally there will be a diaspora spreading out to low-cost areas, and rent in SF will drop until the area can be "competitive" again. But this dry description involves a ton of economic/social upheaval, which we (the society) really wouldn't like to deal with, especially right now. (Not to mention a "completely fair market" is an illusion: you can't just fire your entire team on the bay area and hire replacements from Bangalore.) So a compromise is reached, where companies try to keep people they have now at roughly the same price they're paying now, with ugly, stop-gap measures to dissuade people from getting ahead of the equation. I'm not saying we should thank Facebook - it's behaving completely in its own interest - but people who complain that this isn't "fair" might want to answer what's their position on the logical conclusion of a "fair market" for remote workers.
    - IggleSniggle 6y ago
      You've given voice to exactly what I intended in my comment, but didn't quite have the words to say. Thanks
  - cortesoft 6y ago
    Right, but they know they don't have to pay that remote worker as much to keep them, because that remote worker doesn't have as many options with where to work... or at least, that was the case before EVERYONE became remote workers. Companies always pay as little as they need to in order to retain the talent pool they feel is required to do the job they want. They aren't going to pay someone more than they HAVE to out of fairness. If all companies are remote and competing for workers everywhere in the world, you will see geographic salary discrepancies disappear... slowly.
    - deleted 6y ago
      [deleted]
  - 6y ago
- akhilcacharya 6y ago
  lol I grew up in Raleigh NC, and 5 bedroom mansions are not $400k, they're closer to $1mil even on the outskirts of town.
godelski 6y ago
What I don't get about these ideas is that isn't the factor "how much do you need to be in the office?" If you don't need to be in the office, why not just keep salaries the same and then you select from a larger pool of candidates (this should give you a pretty good pick, but you're still limited by when waking hours overlap). If you only need to be in the office once a month, dock a little as now you have to cover travel and lodging. It really seems like the factor of pay should be based on how important physical presence is, not on where the person is. Because otherwise I don't see it as a rational thing for a headquarters to be in SF and an employee in Arizona to get paid less than an employee in NYC. There's more advantages for the company for having your employee(your average programmer, at least) be in AZ rather than NYC. You need them in the office? A whole lot easier/cheaper to get that AZ employee there.
- UncleMeat 6y ago
  > why not just keep salaries the same and then you select from a larger pool of candidates (this should give you a pretty good pick, but you're still limited by when waking hours overlap). Because you make less profit if you pay the outrageously high SF salaries. Bay Area salaries are incredibly high because there is outrageous competition for the top engineers and there are a lot of rich companies local to the region who can afford high salaries. They aren't able to hire a bay area engineer at 2/3 pay because that hire can go somewhere else. If you are one of the early ones to the remote-game then you aren't competing with other bay area companies for an engineer in Tulsa. You are competing with local Tulsa businesses, which don't tend to make the gazillions in profit or VC money needed to afford to pay engineers 300k+. So you don't lose as many candidates when you say now you are paying 150k. So you make more money. Over time this difference could even out as more and more companies become remote-friendly or remote-first and there are no more local job markets. But this isn't going to end with bay area salaries for the whole world outside of a very very small number of companies and very top performers who can command high pay.
  - godelski 6y ago
    How does this address a office in SF and a remote worker in NYC making more than a remote worker in Phoenix? Both workers are remote. How does the NYC worker provide ~2x utility to the company compared to the AZ worker (remember, both are remote).
cortesoft 6y ago
To answer your thought experiment: salaries aren't dictated by justifications or fairness. Silicon Valley firms don't pay high salaries because employees have to pay a high cost of living, they pay the high salaries because if they don't, some other company will pay it and the employee will leave. They pay the salary that they need to get people to come work. The cost of living is an OUTCOME of this calculation, not the input. The CoL is lower in Morgan Hill because people living there have to commute further to get to their jobs, so fewer people want to live there. You can figure out the price people put on commute distance by comparing housing prices based on distance from work sites. The really interesting thing will be to see how CoLs in the country change when commute distance is no longer a factor in home prices.
- csunbird 6y ago
  I think a new wage fixing agreement between companies within SV is going to happen, just to avoid the situation you have mentioned in your reply.
  - cortesoft 6y ago
    I don't think they are going to need it, because the actual problem is going to be the opposite; this will drive down developer salaries. Having to be local to Silicon Valley really limited the supply of good developers; only so many people can physically live in the area, so increased demand can't be met with increased supply indefinitely. This drives prices up. If everyone is remote, suddenly the supply of available developers goes way up for these firms. The supply of developers available to them goes way up. Sure, they have to compete with firms everywhere in the world now, but that is fine for them; the global market is not nearly as strong a seller's market for developers as it is in Silicon Valley.
flir 6y ago
Companies pay as little as they can get away with. Fair enough. But when their workers are remote, those companies are competing with every other company that's willing to hire remote workers. On the other hand, SWEs are notorious for accepting low pay. So in summary.... who knows how it would shake out?
- war1025 6y ago
  > SWEs are notorious for accepting low pay I am simultaneously one of the highest paid people in my peer group, and according to the ranks on HN "low paid". There is an extreme disconnect between what people in tech seem to think of as normal wages and what the country as a whole (even college educated sectors) considers normal wages.
  - mikekchar 6y ago
    My comparison is usually nurses who have an actually hard job where people's lives are on the line (and lately their own lives). If someone thinks that software developers are notorious for accepting low pay, I can't imagine what they think of nurses. The worst thing that happens in my day is that I might have to battle bombastic management or know it all whipper snappers in order to get my way :-) (Well, to be fair, as a contractor for a company in the travel industry, my biggest stress is making sure they don't get the impression that paying my invoice is optional...)
    - iso947 6y ago
      Low pay compared to hedge fund managers. Both can (in massive scale organisations) swing massive amounts of money to the company. Neither does it reliably.
    - flir 6y ago
      I'm not trying to denigrate nurses (a job that would destroy me, emotionally), but there are more of them and they're in less demand (in general).
  - flir 6y ago
boto3 6y ago
Everything is factored in the real estate price: the weather, the school district, the night life, the ethnic grocery stores, crime rate etc. and last but not least, the opportunity to change to a new job with much higher comp. Real estate, while not as liquid as stock market, is quite efficient in my opinion.
esoterica 6y ago
> Would it be reasonable for them to adjust salaries depending on what city an employee lived in? Companies pay people less in LCOL areas because the local competing offers they receive are lower and they don't have to pay as much to outbid the competition. Not because they actually care about how much you're paying in rent. If two suburbs are in the same metro area, then they are part of the same local hiring pool so there is no reason to offer different compensation based on the average local rents.

gnicholas 6y ago

Companies already effectively do this, but frame it as a perk for those who live close. IIRC Facebook and Palantir paid 10k to people who lived within 1 mile of the office.

vkou 6y ago

Or better yet, what if they moved to Stockton? A 1-bedroom's $1200/month there, and it's still technically within commuting distance from the bay area.

yongjik 6y ago

I'm not sure that the example is similar to the current topic: rent is cheaper than Morgan Hill largely because it takes an hour to drive to lots of workplaces. People are choosing between paying higher rent in Mountain View and paying with their commute time in Morgan Hill. It's arguably a different scenario from someone attending VC from their $400K, 5-bedroom mansion in Raleigh, NC.

IggleSniggle 6y ago
But that's also sort of the point, isn't it? When you are dealing with a remote worker, the commute time doesn't matter. You don't need to consider paying geographical based salaries, because the location isn't relevant. There is no "paying with commute time." You just need to pay the amount that enables you to get the workers you need. The "fair" thing to do is to pay people without regard to location and let them decide for themselves whether it is worth it to live in a HCOL area or not.
- yongjik 6y ago
  Well, in an ideal, completely efficient market for remote workers, of course the "fair" thing to do is to pay for enough salary to hire the best people in Prague or Bangalore. People can decide whether they want to live in San Francisco with that salary. Most people can't, so naturally there will be a diaspora spreading out to low-cost areas, and rent in SF will drop until the area can be "competitive" again. But this dry description involves a ton of economic/social upheaval, which we (the society) really wouldn't like to deal with, especially right now. (Not to mention a "completely fair market" is an illusion: you can't just fire your entire team on the bay area and hire replacements from Bangalore.) So a compromise is reached, where companies try to keep people they have now at roughly the same price they're paying now, with ugly, stop-gap measures to dissuade people from getting ahead of the equation. I'm not saying we should thank Facebook - it's behaving completely in its own interest - but people who complain that this isn't "fair" might want to answer what's their position on the logical conclusion of a "fair market" for remote workers.
  - IggleSniggle 6y ago
    You've given voice to exactly what I intended in my comment, but didn't quite have the words to say. Thanks
- cortesoft 6y ago
  Right, but they know they don't have to pay that remote worker as much to keep them, because that remote worker doesn't have as many options with where to work... or at least, that was the case before EVERYONE became remote workers. Companies always pay as little as they need to in order to retain the talent pool they feel is required to do the job they want. They aren't going to pay someone more than they HAVE to out of fairness. If all companies are remote and competing for workers everywhere in the world, you will see geographic salary discrepancies disappear... slowly.
  - deleted 6y ago
    [deleted]
- 6y ago
akhilcacharya 6y ago
lol I grew up in Raleigh NC, and 5 bedroom mansions are not $400k, they're closer to $1mil even on the outskirts of town.

godelski 6y ago

What I don't get about these ideas is that isn't the factor "how much do you need to be in the office?" If you don't need to be in the office, why not just keep salaries the same and then you select from a larger pool of candidates (this should give you a pretty good pick, but you're still limited by when waking hours overlap). If you only need to be in the office once a month, dock a little as now you have to cover travel and lodging. It really seems like the factor of pay should be based on how important physical presence is, not on where the person is. Because otherwise I don't see it as a rational thing for a headquarters to be in SF and an employee in Arizona to get paid less than an employee in NYC. There's more advantages for the company for having your employee(your average programmer, at least) be in AZ rather than NYC. You need them in the office? A whole lot easier/cheaper to get that AZ employee there.

UncleMeat 6y ago
> why not just keep salaries the same and then you select from a larger pool of candidates (this should give you a pretty good pick, but you're still limited by when waking hours overlap). Because you make less profit if you pay the outrageously high SF salaries. Bay Area salaries are incredibly high because there is outrageous competition for the top engineers and there are a lot of rich companies local to the region who can afford high salaries. They aren't able to hire a bay area engineer at 2/3 pay because that hire can go somewhere else. If you are one of the early ones to the remote-game then you aren't competing with other bay area companies for an engineer in Tulsa. You are competing with local Tulsa businesses, which don't tend to make the gazillions in profit or VC money needed to afford to pay engineers 300k+. So you don't lose as many candidates when you say now you are paying 150k. So you make more money. Over time this difference could even out as more and more companies become remote-friendly or remote-first and there are no more local job markets. But this isn't going to end with bay area salaries for the whole world outside of a very very small number of companies and very top performers who can command high pay.
- godelski 6y ago
  How does this address a office in SF and a remote worker in NYC making more than a remote worker in Phoenix? Both workers are remote. How does the NYC worker provide ~2x utility to the company compared to the AZ worker (remember, both are remote).

cortesoft 6y ago

To answer your thought experiment: salaries aren't dictated by justifications or fairness. Silicon Valley firms don't pay high salaries because employees have to pay a high cost of living, they pay the high salaries because if they don't, some other company will pay it and the employee will leave. They pay the salary that they need to get people to come work. The cost of living is an OUTCOME of this calculation, not the input. The CoL is lower in Morgan Hill because people living there have to commute further to get to their jobs, so fewer people want to live there. You can figure out the price people put on commute distance by comparing housing prices based on distance from work sites. The really interesting thing will be to see how CoLs in the country change when commute distance is no longer a factor in home prices.

csunbird 6y ago
I think a new wage fixing agreement between companies within SV is going to happen, just to avoid the situation you have mentioned in your reply.
- cortesoft 6y ago
  I don't think they are going to need it, because the actual problem is going to be the opposite; this will drive down developer salaries. Having to be local to Silicon Valley really limited the supply of good developers; only so many people can physically live in the area, so increased demand can't be met with increased supply indefinitely. This drives prices up. If everyone is remote, suddenly the supply of available developers goes way up for these firms. The supply of developers available to them goes way up. Sure, they have to compete with firms everywhere in the world now, but that is fine for them; the global market is not nearly as strong a seller's market for developers as it is in Silicon Valley.

flir 6y ago

Companies pay as little as they can get away with. Fair enough. But when their workers are remote, those companies are competing with every other company that's willing to hire remote workers. On the other hand, SWEs are notorious for accepting low pay. So in summary.... who knows how it would shake out?

war1025 6y ago
> SWEs are notorious for accepting low pay I am simultaneously one of the highest paid people in my peer group, and according to the ranks on HN "low paid". There is an extreme disconnect between what people in tech seem to think of as normal wages and what the country as a whole (even college educated sectors) considers normal wages.
- mikekchar 6y ago
  My comparison is usually nurses who have an actually hard job where people's lives are on the line (and lately their own lives). If someone thinks that software developers are notorious for accepting low pay, I can't imagine what they think of nurses. The worst thing that happens in my day is that I might have to battle bombastic management or know it all whipper snappers in order to get my way :-) (Well, to be fair, as a contractor for a company in the travel industry, my biggest stress is making sure they don't get the impression that paying my invoice is optional...)
  - iso947 6y ago
    Low pay compared to hedge fund managers. Both can (in massive scale organisations) swing massive amounts of money to the company. Neither does it reliably.
  - flir 6y ago
    I'm not trying to denigrate nurses (a job that would destroy me, emotionally), but there are more of them and they're in less demand (in general).
- flir 6y ago

boto3 6y ago

Everything is factored in the real estate price: the weather, the school district, the night life, the ethnic grocery stores, crime rate etc. and last but not least, the opportunity to change to a new job with much higher comp. Real estate, while not as liquid as stock market, is quite efficient in my opinion.

esoterica 6y ago

> Would it be reasonable for them to adjust salaries depending on what city an employee lived in? Companies pay people less in LCOL areas because the local competing offers they receive are lower and they don't have to pay as much to outbid the competition. Not because they actually care about how much you're paying in rent. If two suburbs are in the same metro area, then they are part of the same local hiring pool so there is no reason to offer different compensation based on the average local rents.