6 ms·

Facebook already pays people with the exact same credentials 1/3 in London what they would in California, despite London being similarly expensive. These compan

by arc0 6y ago

Facebook already pays people with the exact same credentials 1/3 in London what they would in California, despite London being similarly expensive. These companies do not pay anyone solely based on the work they produce, it has never and probably will never work that way.

bumby 6y ago
There is a pervasive misconception that you are paid for how much value you bring. In a market economy, you are paid commensurate to how much you can negotiate. The value you bring (real or imagined) is part of that negotiation, but so are other factors. It pains me to see people get frustrated by this fact.
- falcolas 6y ago
  This 'misconception' comes from two big sources, IMO: 1) Leadership is paid for the value they bring. Primarily through huge stock grants as part of their multi-million dollar compensation packages. 2) Companies always discuss employee compensation, especially raises and bonuses, in terms of the value an employee has relative to their peers. So, it's no wonder that people believe that their value has something to do with their compensation: it's what they've been told by the companies themselves; it's how the most visible employees (leadership) are compensated.
  - nicoburns 6y ago
    > Leadership is paid for the value they bring. Primarily through huge stock grants as part of their multi-million dollar compensation packages. No they're not. They're massively overpaid relative to value they bring. They generally get these multi-million dollar compensation packages regardless of performance. Presumably this is also because of their power to negotiate which is high because they're more or less in charge of everything.
    - falcolas 6y ago
      Overpaid or not (I tend to agree that they are overpaid), if a significant portion of their compensation is stock grants, then that portion of their compensation is directly tied to the value of the company.
      - nicoburns 6y ago
        I'd argue that the value of the company often doesn't reflect whether they're doing a good job. Which is why you often find CEOs taking short-termist approach which buoys the value of the company in the short term and completely destroys it in the long term.
        bumby 6y ago
        There's a famous study that concluded "CEO effects" only account for about 14.5% of performance [1]. It may be quite dated by today, though, it may be even less pronounced according to [2] that claims more recent studies show the CEO only explains for 4.5%-12.8% of performance.[2] [1] https://www.jstor.org/stable/2094020?seq=1 https://www.jstor.org/stable/2094020?seq=1 [2] https://www.theatlantic.com/magazine/archive/2009/06/do-ceos-matter/307437/ https://www.theatlantic.com/magazine/archive/2009/06/do-ceos...
        phamilton 6y ago
        In 2020 the value of the company largely was driven by the Fed.
      - bumby 6y ago
        >that portion of their compensation is directly tied to the value of the company. One small nuance: it can be disproportionately tied to the short term value of the company. One of the moral hazards of this compensation scheme is that it may incentivize an executive to make decisions that inflate the value of the company short term while also de-valuing it long term (when they are no longer part of the company -- presumably after they've extracted that value).
    - cercatrova 6y ago
  - ledauphin 6y ago
    stock grants mean you're paid for the value your company _has_, not the value _you_ provide to your company. For the vast majority of leaders, their input into the company's overall performance is vanishingly small.
    - falcolas 6y ago
      The job of leadership is to make the company succeed. The value of the company is a simple (but effective) "Key Result" metric that's used to evaluate how well they're doing their job (no matter how many others are also contributing).
- Dirlewanger 6y ago
  If a company is going to use the lazy COL argument, they're going to do so no matter what. Take 2 people of equal skill, experience, and negotiating prowess. One lives in SF, another in Kansas City. Both apply to the same remote position for a SF-based company. The company will always take the one in KC. I don't see how negotiation skill has a role in this. Unless there are people out there who have successfully negotiated a SF-level salary while living somewhere like Kansas, but I haven't heard about it.
  - couchand 6y ago
    > Take 2 people of equal skill, experience, and negotiating prowess. This just doesn't exist, not even in a hand-wavy rhetorical sense.
    - atomize 6y ago
      lulz @ "...not even in a hand-wavy rhetorical sense..."
  - username90 6y ago
    High end companies doesn't work like that. For example Google first decides that they want you, then they pay you their market rate no matter where you live. You can choose to work in SF for a high pay or in India for a low pay, up to you, they still want you. In fact the high pay in SF is actually the easiest position to get, the lower wage positions in other areas are more competitive since they have fewer spots.
    - disgruntledphd2 6y ago
      That is just not true. Are they paying 250k base in London? They weren't a few years back, and therefore they pay based on the market. The London thing is even funnier because they claim to want top talent, but refuse to benchmark against actual top-talent companies in London (i.e. finance). It's just nonsense, and if some of this gets disrupted by remote work then I (as someone getting screwed by the current system) will be all for it.
  - 6y ago
- legulere 6y ago
  Which is the reason you should unionize. It strengthens your negotiation position.
- satyrnein 6y ago
  The value you bring is the ceiling on your compensation; employers are not going to pay more than that. Your cost of living is the floor; you're not going to take less than that. The spread between the two is what you're negotiating over.
  - bumby 6y ago
    In a perfect world with frictionless information, sure. But in the real-world, there are lots of examples of dead-weight or people who keep their job despite having limited (or even negative) value. Sometimes this is the result of weak leaders unable to bring themselves to fire people, sometimes it's because the litigation risk is too high. On the opposite end, there are lots of examples of people who accept jobs below their cost-of-living (those living off debt, for example).
  - ukoki 6y ago
    Your cost of living is not the floor -- just ask Uber drivers. An income of less than the cost of living is still better than nothing. The floor is the next best thing you have available, or the minimum wage if applicable.
    - nybble41 6y ago
      The actual cost of living is the floor, but cost-of-living metrics frequently overestimate the actual cost of living.
    - kgin 6y ago
      The unfortunate thing is that "cost of living" in this floor definition is literally the cost to stay alive. The floor in a pressurized market will not be the cost of a comfortable life, just a life at all.
  - heipei 6y ago
    The problem in a lot of modern software-based companies is that the value you create is impossible to calculate. It might be 10x of what your employer thinks or it might even be negative, and I have definitely seen examples for both myself based on my own calculations. And even in non-software based products and companies industries this might be hard since the output of so many teams gets lumped together and sold as one product. What's the value of the team that creates and markets the MacBook Pro Touch bar? Personally I think it is net negative, and maybe there's even division over that within Apple.
skynetv2 6y ago
There are local factors to take in to consideration. I managed a 100% remote team with team members in UK, Spain, India, China, Canada etc. The total cost to the company remains roughly same but the amount that goes to local taxes and what employee gets in hand varies by market. Europe has very high taxation, which does benefit the employee eventually. US has what it has but offers the employee very little in terms of benefit during their lifetime. Simply saying FB pays 1/3 of SF market doesn't make sense.
- benhurmarcel 6y ago
  Even considering taxes paid by the employer, the total cost of employment is not nearly the same.

by arc0 6y ago

bumby 6y ago

There is a pervasive misconception that you are paid for how much value you bring. In a market economy, you are paid commensurate to how much you can negotiate. The value you bring (real or imagined) is part of that negotiation, but so are other factors. It pains me to see people get frustrated by this fact.

falcolas 6y ago
This 'misconception' comes from two big sources, IMO: 1) Leadership is paid for the value they bring. Primarily through huge stock grants as part of their multi-million dollar compensation packages. 2) Companies always discuss employee compensation, especially raises and bonuses, in terms of the value an employee has relative to their peers. So, it's no wonder that people believe that their value has something to do with their compensation: it's what they've been told by the companies themselves; it's how the most visible employees (leadership) are compensated.
- nicoburns 6y ago
  > Leadership is paid for the value they bring. Primarily through huge stock grants as part of their multi-million dollar compensation packages. No they're not. They're massively overpaid relative to value they bring. They generally get these multi-million dollar compensation packages regardless of performance. Presumably this is also because of their power to negotiate which is high because they're more or less in charge of everything.
  - falcolas 6y ago
    Overpaid or not (I tend to agree that they are overpaid), if a significant portion of their compensation is stock grants, then that portion of their compensation is directly tied to the value of the company.
    - nicoburns 6y ago
      I'd argue that the value of the company often doesn't reflect whether they're doing a good job. Which is why you often find CEOs taking short-termist approach which buoys the value of the company in the short term and completely destroys it in the long term.
      - bumby 6y ago
        There's a famous study that concluded "CEO effects" only account for about 14.5% of performance [1]. It may be quite dated by today, though, it may be even less pronounced according to [2] that claims more recent studies show the CEO only explains for 4.5%-12.8% of performance.[2] [1] https://www.jstor.org/stable/2094020?seq=1 https://www.jstor.org/stable/2094020?seq=1 [2] https://www.theatlantic.com/magazine/archive/2009/06/do-ceos-matter/307437/ https://www.theatlantic.com/magazine/archive/2009/06/do-ceos...
      - phamilton 6y ago
        In 2020 the value of the company largely was driven by the Fed.
    - bumby 6y ago
      >that portion of their compensation is directly tied to the value of the company. One small nuance: it can be disproportionately tied to the short term value of the company. One of the moral hazards of this compensation scheme is that it may incentivize an executive to make decisions that inflate the value of the company short term while also de-valuing it long term (when they are no longer part of the company -- presumably after they've extracted that value).
  - cercatrova 6y ago
- ledauphin 6y ago
  stock grants mean you're paid for the value your company _has_, not the value _you_ provide to your company. For the vast majority of leaders, their input into the company's overall performance is vanishingly small.
  - falcolas 6y ago
    The job of leadership is to make the company succeed. The value of the company is a simple (but effective) "Key Result" metric that's used to evaluate how well they're doing their job (no matter how many others are also contributing).
Dirlewanger 6y ago
If a company is going to use the lazy COL argument, they're going to do so no matter what. Take 2 people of equal skill, experience, and negotiating prowess. One lives in SF, another in Kansas City. Both apply to the same remote position for a SF-based company. The company will always take the one in KC. I don't see how negotiation skill has a role in this. Unless there are people out there who have successfully negotiated a SF-level salary while living somewhere like Kansas, but I haven't heard about it.
- couchand 6y ago
  > Take 2 people of equal skill, experience, and negotiating prowess. This just doesn't exist, not even in a hand-wavy rhetorical sense.
  - atomize 6y ago
    lulz @ "...not even in a hand-wavy rhetorical sense..."
- username90 6y ago
  High end companies doesn't work like that. For example Google first decides that they want you, then they pay you their market rate no matter where you live. You can choose to work in SF for a high pay or in India for a low pay, up to you, they still want you. In fact the high pay in SF is actually the easiest position to get, the lower wage positions in other areas are more competitive since they have fewer spots.
  - disgruntledphd2 6y ago
    That is just not true. Are they paying 250k base in London? They weren't a few years back, and therefore they pay based on the market. The London thing is even funnier because they claim to want top talent, but refuse to benchmark against actual top-talent companies in London (i.e. finance). It's just nonsense, and if some of this gets disrupted by remote work then I (as someone getting screwed by the current system) will be all for it.
- 6y ago
legulere 6y ago
Which is the reason you should unionize. It strengthens your negotiation position.
satyrnein 6y ago
The value you bring is the ceiling on your compensation; employers are not going to pay more than that. Your cost of living is the floor; you're not going to take less than that. The spread between the two is what you're negotiating over.
- bumby 6y ago
  In a perfect world with frictionless information, sure. But in the real-world, there are lots of examples of dead-weight or people who keep their job despite having limited (or even negative) value. Sometimes this is the result of weak leaders unable to bring themselves to fire people, sometimes it's because the litigation risk is too high. On the opposite end, there are lots of examples of people who accept jobs below their cost-of-living (those living off debt, for example).
- ukoki 6y ago
  Your cost of living is not the floor -- just ask Uber drivers. An income of less than the cost of living is still better than nothing. The floor is the next best thing you have available, or the minimum wage if applicable.
  - nybble41 6y ago
    The actual cost of living is the floor, but cost-of-living metrics frequently overestimate the actual cost of living.
  - kgin 6y ago
    The unfortunate thing is that "cost of living" in this floor definition is literally the cost to stay alive. The floor in a pressurized market will not be the cost of a comfortable life, just a life at all.
- heipei 6y ago
  The problem in a lot of modern software-based companies is that the value you create is impossible to calculate. It might be 10x of what your employer thinks or it might even be negative, and I have definitely seen examples for both myself based on my own calculations. And even in non-software based products and companies industries this might be hard since the output of so many teams gets lumped together and sold as one product. What's the value of the team that creates and markets the MacBook Pro Touch bar? Personally I think it is net negative, and maybe there's even division over that within Apple.

skynetv2 6y ago

There are local factors to take in to consideration. I managed a 100% remote team with team members in UK, Spain, India, China, Canada etc. The total cost to the company remains roughly same but the amount that goes to local taxes and what employee gets in hand varies by market. Europe has very high taxation, which does benefit the employee eventually. US has what it has but offers the employee very little in terms of benefit during their lifetime. Simply saying FB pays 1/3 of SF market doesn't make sense.

benhurmarcel 6y ago
Even considering taxes paid by the employer, the total cost of employment is not nearly the same.