5 ms·

So how do you imagine hiring people with similar experience/skill level SF if they base salary offers are $200k and Europe people are happy with $100k since the

by enra 6y ago

So how do you imagine hiring people with similar experience/skill level SF if they base salary offers are $200k and Europe people are happy with $100k since their rent/mortgage/livingcost is about 5-10x less? Pay everyone $200k or $100k (essentially stop hiring in high cost location)? Until the markets/remote salaries align, you kind of have to pay based salaries the people are able/need to receive in their respected market.

_AzMoo 6y ago
If an employee is worth $200k to your company in SF, why are they not worth $200k to your company in Europe?
- ericd 6y ago
  Because, at least for the moment, it's unlikely that any company is going to offer that European $200k. It's about BATNA, not perceived fairness. That said, this might change if remote work becomes a lot more common, and we might see a big flattening of salaries. Bad for SF real estate prices (and for high earners in those companies in general), since people in those HCOL markets will suddenly be competing a lot more directly with workers from elsewhere, modulo language skills, ease of scheduling, cultural fit, etc.
  - _AzMoo 6y ago
    Right, it's about BATNA, but it stands to reason that especially in a time of ubiquitous remote work, offering remote workers salary parity will attract the highest talent from all regions, thereby providing a competitive advantage.
- enra 6y ago
  There isn't an objective measure available what an employee is worth to a company, especially at the hiring stage, especially in startups. If engineer lvl4 with the criteria you're hiring, is paid x in y market at z stage of the company then you pretty pay bit more or less depending how good you think they are compared to the average. Basically companies base their compensation bands on the 50-90th percentile what the market is. People are also anchored their previous compensation, it's hard to get people to accept drastically lower compensation even if you think they are overpaid in their current job. So it all comes down to finding a compensation that both parties are willing to engage in at (the market). The market is still not fully liquid, uniform or not all talent is the same so the pay differs in different markets. You could obviously game this too by saying to pay what people are they are "worth" but you just happen value SF experience more than other experience, essentially.
- paxys 6y ago
  An employee is only worth the minimum it takes to keep them employed. Where is the competition that is paying them $200K in Europe?
nrmitchi 6y ago
You're discussing "markets" across countries, which had much more reason for adjustments to be made. Social services, taxes, and healthcare are all different. There is not necessarily free movement between countries, and large goods that most people purchase in their lives (cars, education, healthcare) have very different costs. In my opinion that is different that companies doing large-scale adjustments within a country, where social services, taxes (for the most part) and general cost of goods is the same. I'm not sure we will ever be able to treat different countries as a single market, but I do think that a single country (or hell, even state) should be able to be treated as a market.
- alexeys 6y ago
  Taxes and cost of goods vary widely across markets within the US. Not to mention that progressive scale shifts more tax burden to people living in high cost of living (COL) locations. Think $120k in Washington or Florida with no state income tax and lower COL. you’d pay maybe 25% tax. In San Francisco, $200k comp to adjust for higher COL will push you into higher federal tax bracket plus 10-12% state income tax. Now you’re paying more than 40% in taxes. 25% vs 40% is a significant difference. Local taxes also greatly affect the cost of goods and services. 9.5% sales tax in SFBA vs 0% sales tax in Oregon. 25% vs 49.5% — two extremes, but that the reality in the US. Not to mention gasoline taxes in CA — highest in the nation, they directly affect the cost of gas that we pay as consumers.
  - kyawzazaw 6y ago
    Taxes are calculated on the bracket though. So not the whole amount.
ponker 6y ago
Yeah, essentially stop hiring ordinary skill in high cost locations. Why would you? Why would you pay $200K to someone in San Francisco for work that can be done for $100K in Alabama? Unless the person in San Francisco is higher skill, in which case they will be hired at a higher level/comp package, which has nothing to do with geography. Pay adjusted to location is an unearned bonus for people living in expensive areas. People arguing for non-location-adjusted comp want wages to race to the bottom, allowing the people living in the poorest areas to earn that money, which makes sense from a social justice point of view but is going to really suck for the people who have gotten used to earning $200K entry level in San Francisco.
- kag0 6y ago
  > going to really suck for the people who have gotten used to earning $200K entry level in San Francisco at first, yes, but wouldn't CoL eventually come down if everyone were earning a nationally based income?
gyulai 6y ago
...the argument I was trying to make was: remote work with no geographical adjustment of pay could be a force for good in the world economy to bring about a non-ridiculous market equilibrium. Ridiculous is what I call the situation where wealth creation done by tech companies and tech workers ends up in the pockets of Bay Area landlords instead of in the pockets of the people who take the risks and do the work. Ridiculous is what I call the situation where other geographies invest heavily in getting their young people top-notch education (like in Europe), and instead of earning a return on that investment for themselves see their young people relocate to the Bay Area and contribute to the tax base there. Ridiculous is what I call the situation where you're a top-notch tech professional and in order to earn money commensurate with your value you have to go through the hardships of the immigrant situation and be part of a culture / economic system that you may not like, subject yourself to political leadership that you may not approve of etc. Shall I continue? The good news is that the market will eventually sort this out: Some remote companies will be doing geographical adjustments to pay. Some will not. The best workers in low-COL areas will end up with the companies not making adjustments. So making adjustments will leave you stuck with the worse workers. So you will end up getting what you pay for: If you pay little you will get low-quality work even in low-COL areas. People in high-COL areas will figure out that there's an opportunity to have more disposable income by relocating away from high-COL areas and taking remote jobs with companies not making adjustments. The only people who can't do that is the people whose work is so low-quality that they actually can't compete internationally so that their high-COL postcode actually is their only viable argument when it comes to negotiating high compensation. So paying higher compensation to people in high-COL areas will become detached from the narrative that those also happen to be the best people. It will come to mean nothing more and nothing less than making donations to those poor needy Silicon Valley landlords, and I doubt that this is a cause that many tech companies will be getting behind, as opposed to using their money to do actual tech.
- ptkd 6y ago
  Some really compelling points here, nice

by enra 6y ago

_AzMoo 6y ago

If an employee is worth $200k to your company in SF, why are they not worth $200k to your company in Europe?

ericd 6y ago
Because, at least for the moment, it's unlikely that any company is going to offer that European $200k. It's about BATNA, not perceived fairness. That said, this might change if remote work becomes a lot more common, and we might see a big flattening of salaries. Bad for SF real estate prices (and for high earners in those companies in general), since people in those HCOL markets will suddenly be competing a lot more directly with workers from elsewhere, modulo language skills, ease of scheduling, cultural fit, etc.
- _AzMoo 6y ago
  Right, it's about BATNA, but it stands to reason that especially in a time of ubiquitous remote work, offering remote workers salary parity will attract the highest talent from all regions, thereby providing a competitive advantage.
enra 6y ago
There isn't an objective measure available what an employee is worth to a company, especially at the hiring stage, especially in startups. If engineer lvl4 with the criteria you're hiring, is paid x in y market at z stage of the company then you pretty pay bit more or less depending how good you think they are compared to the average. Basically companies base their compensation bands on the 50-90th percentile what the market is. People are also anchored their previous compensation, it's hard to get people to accept drastically lower compensation even if you think they are overpaid in their current job. So it all comes down to finding a compensation that both parties are willing to engage in at (the market). The market is still not fully liquid, uniform or not all talent is the same so the pay differs in different markets. You could obviously game this too by saying to pay what people are they are "worth" but you just happen value SF experience more than other experience, essentially.
paxys 6y ago
An employee is only worth the minimum it takes to keep them employed. Where is the competition that is paying them $200K in Europe?

nrmitchi 6y ago

You're discussing "markets" across countries, which had much more reason for adjustments to be made. Social services, taxes, and healthcare are all different. There is not necessarily free movement between countries, and large goods that most people purchase in their lives (cars, education, healthcare) have very different costs. In my opinion that is different that companies doing large-scale adjustments within a country, where social services, taxes (for the most part) and general cost of goods is the same. I'm not sure we will ever be able to treat different countries as a single market, but I do think that a single country (or hell, even state) should be able to be treated as a market.

alexeys 6y ago
Taxes and cost of goods vary widely across markets within the US. Not to mention that progressive scale shifts more tax burden to people living in high cost of living (COL) locations. Think $120k in Washington or Florida with no state income tax and lower COL. you’d pay maybe 25% tax. In San Francisco, $200k comp to adjust for higher COL will push you into higher federal tax bracket plus 10-12% state income tax. Now you’re paying more than 40% in taxes. 25% vs 40% is a significant difference. Local taxes also greatly affect the cost of goods and services. 9.5% sales tax in SFBA vs 0% sales tax in Oregon. 25% vs 49.5% — two extremes, but that the reality in the US. Not to mention gasoline taxes in CA — highest in the nation, they directly affect the cost of gas that we pay as consumers.
- kyawzazaw 6y ago
  Taxes are calculated on the bracket though. So not the whole amount.

ponker 6y ago

Yeah, essentially stop hiring ordinary skill in high cost locations. Why would you? Why would you pay $200K to someone in San Francisco for work that can be done for $100K in Alabama? Unless the person in San Francisco is higher skill, in which case they will be hired at a higher level/comp package, which has nothing to do with geography. Pay adjusted to location is an unearned bonus for people living in expensive areas. People arguing for non-location-adjusted comp want wages to race to the bottom, allowing the people living in the poorest areas to earn that money, which makes sense from a social justice point of view but is going to really suck for the people who have gotten used to earning $200K entry level in San Francisco.

kag0 6y ago
> going to really suck for the people who have gotten used to earning $200K entry level in San Francisco at first, yes, but wouldn't CoL eventually come down if everyone were earning a nationally based income?

gyulai 6y ago

...the argument I was trying to make was: remote work with no geographical adjustment of pay could be a force for good in the world economy to bring about a non-ridiculous market equilibrium. Ridiculous is what I call the situation where wealth creation done by tech companies and tech workers ends up in the pockets of Bay Area landlords instead of in the pockets of the people who take the risks and do the work. Ridiculous is what I call the situation where other geographies invest heavily in getting their young people top-notch education (like in Europe), and instead of earning a return on that investment for themselves see their young people relocate to the Bay Area and contribute to the tax base there. Ridiculous is what I call the situation where you're a top-notch tech professional and in order to earn money commensurate with your value you have to go through the hardships of the immigrant situation and be part of a culture / economic system that you may not like, subject yourself to political leadership that you may not approve of etc. Shall I continue? The good news is that the market will eventually sort this out: Some remote companies will be doing geographical adjustments to pay. Some will not. The best workers in low-COL areas will end up with the companies not making adjustments. So making adjustments will leave you stuck with the worse workers. So you will end up getting what you pay for: If you pay little you will get low-quality work even in low-COL areas. People in high-COL areas will figure out that there's an opportunity to have more disposable income by relocating away from high-COL areas and taking remote jobs with companies not making adjustments. The only people who can't do that is the people whose work is so low-quality that they actually can't compete internationally so that their high-COL postcode actually is their only viable argument when it comes to negotiating high compensation. So paying higher compensation to people in high-COL areas will become detached from the narrative that those also happen to be the best people. It will come to mean nothing more and nothing less than making donations to those poor needy Silicon Valley landlords, and I doubt that this is a cause that many tech companies will be getting behind, as opposed to using their money to do actual tech.

ptkd 6y ago
Some really compelling points here, nice