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The whole paycut controversy seems a little strange to me. No one bats an eye when a company bumps your salary up if you move to NYC or SF yet if they bump it d

The whole paycut controversy seems a little strange to me. No one bats an eye when a company bumps your salary up if you move to NYC or SF yet if they bump it down when you move out surely that's the same thing right? Obviously there are edge cases but as a general principle that seems logical to me. Ofc it depends on how much each bump is etc. but on the surface a paycut while moving somewhere with lower cost of living doesn't seem radical to me.

deleted 6y ago
[deleted]
lotsofpulp 6y ago
Because bumping it down when you move out means the company thinks they have a higher probability of being able to replace you with a similar person from anywhere else and/or you have a lower probability of securing employment with similar compensation, which is a thought most people don't like to have.
lsaferite 6y ago
I think if they actually split out the COL adjustment amount on the paycheck then it would be a much simpler conversation. But with most every company just making it a lump sum it feels like a demotion vs. a COL adjustment.
- panopticon 6y ago
  nitpick: it's not a "cost of living" adjustment these companies make when you change locations; it's a market rate adjustment. The distinction is important when you end up in markets with high COL but low software engineer market rates (e.g., London), or how dealing with the expensive Bay Area can still make sense compared to midwestern metros--depending on the type of lifestyle you can live with, that is.
  - nrmitchi 6y ago
    You're right that they are different. Unfortunately, the terms are often used interchangeably, which makes discussions around this topic difficult to have.
  - jbay808 6y ago
    Part of the question is, why is market rate so location-dependent. COL is obviously a function of location, but it's much less obvious that market rate should be. In fact, if you assume that the market rate of an individual is based on the options available to them, and that individual has the option of moving to the Bay Area/Seattle and is just as happy to live there as anywhere else, then the Bay Area / Seattle rate, minus the COL difference, is that individual's market rate, regardless of where they actually live. Of course some SE's in London don't have a visa to work in the USA, and others wouldn't want to even for a huge pay boost. But it's still quite fascinating that a location-dependent "market rate" materializes from this dynamic. In some cases it seems like location is used as a proxy for skill -- as though an engineer who opts to drive three hours south from Vancouver, BC to Seattle, WA is now a higher-skilled "Seattle dev" than they were three hours before. If that assumption is taken away, then the fascinating thing is not that companies would pay less in areas like Vancouver or London, but rather that they are willing to pay such a high premium to engineers who live in Seattle and the Bay area. It's hard to think of any explanation other than that very profitable companies (like Google and Netflix in the Bay area, and Microsoft and Amazon in Seattle) started there, and paid a lot for engineers to move in and join them in an era where remote work was rare; then, when remote work became common, the legacy of a location-dependent market rate created a self-sustaining expectation (Schelling point) that engineers in that area wouldn't work for less to compete with talent elsewhere, sometimes using high COL as an excuse. That might gradually be reversed as companies seek to reduce their payroll expenses, or it might not.
    - cameldrv 6y ago
      I think it ultimately comes down to the decisions of the marginal worker. Most people are not indifferent to where they live. In the Bay Area, as long as the tech industry continues to grow at a rate faster than new local graduates, you have to pay people enough to convince them to migrate. Since the cost of living is much higher, they will demand more to move. In senior roles, many employees will put more of a premium on being able to afford a decent house and be less willing to live with roommates or in a tiny apartment, and so you see the rates for senior employees are much higher in the Bay Area.
nrmitchi 6y ago
When the pay cut is to the point where it not only impacts your cost of living (maybe 2-3k/month going from SF -> Fayetteville, AR), but also digs in to your lifestyle, savings, and ability to afford "national" things, it feels more like a demotion than an adjustment. According to one popular-remote-company, that is a 30% downward adjustment. If you were making 200k in SF (for many, that is low), that is a 60k pay cut. If we assume 30k was a "real" adjustment, that is a 30k difference in spendable income. That feels like a demotion. We also know that many large-ticket items in life do not adjust for "cost of living" in the area that you live. College tuition, medical expenses, etc. Over just a couple years that 30k/year difference is an entire college education for a child.
- tomjakubowski 6y ago
  Can that 30k/year be squirreled away for college untaxed?
  - coredog64 6y ago
    Via a 529 plan, yes. But depending on the plan you’re still going to have some overhead.
    - edoceo 6y ago
      You can shop around for 529, to find the right rate/plan. I got mine in MI but I don't live there
- tru3_power 6y ago
  Which company is this? 30% is a ton. In senior roles, getting 10-15% raises considered a good “promotion”. 30% cut in pay would feel like taking two years backwards...
  - nrmitchi 6y ago
    I don't want to call them out explicitly, but they're one of the largest all remote companies, and this information is ready available on their online (and googleable) remote compensation calculator.
jayd16 6y ago
The reality is that no, its not necessarily symmetrical. Rates will be set by market forces, not any concept of "fairness." Clearly companies are willing to pay $200k+ for top talent. "Cost of living" or however you want to break down that salary is irrelevant to what companies think employees are worth. Unless the company is getting less value, they can stand to pay the same no matter where you are physically. Calling it a cost of living decrease is just kabuki for paying less. If WFH continues, salaries should normalize across all regions but its yet to be seen what the value of top talent vs average employee is at a global scale.
- kinkrtyavimoodh 6y ago
  > Clearly companies are willing to pay $200k+ for top talent. In a market where the market equilibrium for that top talent is $200K+. There is no inherent virtue in a '$200k+' number. > "Cost of living" or however you want to break down that salary is irrelevant to what companies think employees are worth. Exactly. Companies care about the cost of labor, not the cost living. And if you are in a different geography with a lower cost of living, it is believable that the cost of your labor is less. Why is it surprising then?
  - jayd16 6y ago
    You're not understanding the demand side. >There is no inherent virtue in a '$200k+' number. Indeed there is. It shows that the value gained by the employer is at least that of $200k+. It is not arbitrary and it is not wholly derived by supply. The cost of labor is set by the labor supply as well as the labor demand. Not only does a an employee's location not change the employers' demand, the moving also does not change the supply available to employer. Moving or not, the employer could always find a new employee abroad if supply was indeed plentiful. A less abstract way to look at things is this. The cost of living boost is just a bait to work somewhere. There's no magic to it. Just because you took one deal doesn't mean you should so easily take the opposite deal.
    - majormajor 6y ago
      > Not only does a an employee's location not change the employers' demand, the moving also does not change the supply available to employer. Moving or not, the employer could always find a new employee abroad if supply was indeed plentiful. The company tolerating remote workers changes the supply to the company. The people moving immediately are seeing the first effect here, but if it becomes permanent, the people who don't move will inevitably get the same paycut. Why pay $200K for someone in SF when someone in Des Moines will take $140K, but wasn't willing to relocate five years ago?
ashtonkem 6y ago
You get your pay bumped if you have to move to SF to be in the office, because people would balk otherwise and they’d have no labor. Good luck trying to get your remote boss to give you a raise if you voluntarily move to NYC though, yet they’ll happily ratchet down your pay if you move to Iowa.

deleted 6y ago

[deleted]

lotsofpulp 6y ago

Because bumping it down when you move out means the company thinks they have a higher probability of being able to replace you with a similar person from anywhere else and/or you have a lower probability of securing employment with similar compensation, which is a thought most people don't like to have.

lsaferite 6y ago

I think if they actually split out the COL adjustment amount on the paycheck then it would be a much simpler conversation. But with most every company just making it a lump sum it feels like a demotion vs. a COL adjustment.

panopticon 6y ago
nitpick: it's not a "cost of living" adjustment these companies make when you change locations; it's a market rate adjustment. The distinction is important when you end up in markets with high COL but low software engineer market rates (e.g., London), or how dealing with the expensive Bay Area can still make sense compared to midwestern metros--depending on the type of lifestyle you can live with, that is.
- nrmitchi 6y ago
  You're right that they are different. Unfortunately, the terms are often used interchangeably, which makes discussions around this topic difficult to have.
- jbay808 6y ago
  Part of the question is, why is market rate so location-dependent. COL is obviously a function of location, but it's much less obvious that market rate should be. In fact, if you assume that the market rate of an individual is based on the options available to them, and that individual has the option of moving to the Bay Area/Seattle and is just as happy to live there as anywhere else, then the Bay Area / Seattle rate, minus the COL difference, is that individual's market rate, regardless of where they actually live. Of course some SE's in London don't have a visa to work in the USA, and others wouldn't want to even for a huge pay boost. But it's still quite fascinating that a location-dependent "market rate" materializes from this dynamic. In some cases it seems like location is used as a proxy for skill -- as though an engineer who opts to drive three hours south from Vancouver, BC to Seattle, WA is now a higher-skilled "Seattle dev" than they were three hours before. If that assumption is taken away, then the fascinating thing is not that companies would pay less in areas like Vancouver or London, but rather that they are willing to pay such a high premium to engineers who live in Seattle and the Bay area. It's hard to think of any explanation other than that very profitable companies (like Google and Netflix in the Bay area, and Microsoft and Amazon in Seattle) started there, and paid a lot for engineers to move in and join them in an era where remote work was rare; then, when remote work became common, the legacy of a location-dependent market rate created a self-sustaining expectation (Schelling point) that engineers in that area wouldn't work for less to compete with talent elsewhere, sometimes using high COL as an excuse. That might gradually be reversed as companies seek to reduce their payroll expenses, or it might not.
  - cameldrv 6y ago
    I think it ultimately comes down to the decisions of the marginal worker. Most people are not indifferent to where they live. In the Bay Area, as long as the tech industry continues to grow at a rate faster than new local graduates, you have to pay people enough to convince them to migrate. Since the cost of living is much higher, they will demand more to move. In senior roles, many employees will put more of a premium on being able to afford a decent house and be less willing to live with roommates or in a tiny apartment, and so you see the rates for senior employees are much higher in the Bay Area.

nrmitchi 6y ago

When the pay cut is to the point where it not only impacts your cost of living (maybe 2-3k/month going from SF -> Fayetteville, AR), but also digs in to your lifestyle, savings, and ability to afford "national" things, it feels more like a demotion than an adjustment. According to one popular-remote-company, that is a 30% downward adjustment. If you were making 200k in SF (for many, that is low), that is a 60k pay cut. If we assume 30k was a "real" adjustment, that is a 30k difference in spendable income. That feels like a demotion. We also know that many large-ticket items in life do not adjust for "cost of living" in the area that you live. College tuition, medical expenses, etc. Over just a couple years that 30k/year difference is an entire college education for a child.

tomjakubowski 6y ago
Can that 30k/year be squirreled away for college untaxed?
- coredog64 6y ago
  Via a 529 plan, yes. But depending on the plan you’re still going to have some overhead.
  - edoceo 6y ago
    You can shop around for 529, to find the right rate/plan. I got mine in MI but I don't live there
tru3_power 6y ago
Which company is this? 30% is a ton. In senior roles, getting 10-15% raises considered a good “promotion”. 30% cut in pay would feel like taking two years backwards...
- nrmitchi 6y ago
  I don't want to call them out explicitly, but they're one of the largest all remote companies, and this information is ready available on their online (and googleable) remote compensation calculator.

jayd16 6y ago

The reality is that no, its not necessarily symmetrical. Rates will be set by market forces, not any concept of "fairness." Clearly companies are willing to pay $200k+ for top talent. "Cost of living" or however you want to break down that salary is irrelevant to what companies think employees are worth. Unless the company is getting less value, they can stand to pay the same no matter where you are physically. Calling it a cost of living decrease is just kabuki for paying less. If WFH continues, salaries should normalize across all regions but its yet to be seen what the value of top talent vs average employee is at a global scale.

kinkrtyavimoodh 6y ago
> Clearly companies are willing to pay $200k+ for top talent. In a market where the market equilibrium for that top talent is $200K+. There is no inherent virtue in a '$200k+' number. > "Cost of living" or however you want to break down that salary is irrelevant to what companies think employees are worth. Exactly. Companies care about the cost of labor, not the cost living. And if you are in a different geography with a lower cost of living, it is believable that the cost of your labor is less. Why is it surprising then?
- jayd16 6y ago
  You're not understanding the demand side. >There is no inherent virtue in a '$200k+' number. Indeed there is. It shows that the value gained by the employer is at least that of $200k+. It is not arbitrary and it is not wholly derived by supply. The cost of labor is set by the labor supply as well as the labor demand. Not only does a an employee's location not change the employers' demand, the moving also does not change the supply available to employer. Moving or not, the employer could always find a new employee abroad if supply was indeed plentiful. A less abstract way to look at things is this. The cost of living boost is just a bait to work somewhere. There's no magic to it. Just because you took one deal doesn't mean you should so easily take the opposite deal.
  - majormajor 6y ago
    > Not only does a an employee's location not change the employers' demand, the moving also does not change the supply available to employer. Moving or not, the employer could always find a new employee abroad if supply was indeed plentiful. The company tolerating remote workers changes the supply to the company. The people moving immediately are seeing the first effect here, but if it becomes permanent, the people who don't move will inevitably get the same paycut. Why pay $200K for someone in SF when someone in Des Moines will take $140K, but wasn't willing to relocate five years ago?

ashtonkem 6y ago

You get your pay bumped if you have to move to SF to be in the office, because people would balk otherwise and they’d have no labor. Good luck trying to get your remote boss to give you a raise if you voluntarily move to NYC though, yet they’ll happily ratchet down your pay if you move to Iowa.