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The reality behind "cost of living" is actually "market price". Companies having this policy don't actually try to figure out how much it costs to live in a cit

The reality behind "cost of living" is actually "market price". Companies having this policy don't actually try to figure out how much it costs to live in a city in an other, they just look how much people are paid for a similar job in the area. In other words, companies with this policy pay you as low as the market allows them, without you being poached by a local competitor.

xenocratus 6y ago
So presumably once a sufficient number of employers switch to accepting fully-remote on the reg, "local competitor" won't mean much anymore. This impacts "local-first" companies more, right, because their pool of candidates will shrink/be poached, so it will put more pressure on them to switch to "remote accepted" as well
- internet_user 6y ago
  Already happening in significant size.
- warkdarrior 6y ago
  Correct. Symmetrically, the pool of candidates increases once "local-first" companies migrate to "remote accepted", so companies get more power to hire from anywhere in the world. So you as an employee will compete with anyone in the country/world purely based on your skills/expertise, regardless of your cost of living.
klodolph 6y ago
Kind of putting the cart before the horse, here. Saying that something is “market price” doesn’t explain anything. Market price is driven by millions of factors including cost of living. “Market price” just means that it’s the price that people actually pay for something in the real world, it’s just a name for that price that doesn’t offer any explanatory power. Cost of living does have explanatory power.
- username90 6y ago
  Cost of living is determined by how much people living there are paid, not the other way around.
  - klodolph 6y ago
    It’s interconnected. You can’t claim that the relationship goes in one direction.
  - dragonwriter 6y ago
    > Cost of living is determined by how much people living there are paid, not the other way around. Cost of living affects the supply side of labor pricing. Wages affect the demand side of cost of living. Neither is determined solely by the other, but each influences the other.
- bagacrap 6y ago
  But cost of living is only one possible explanation. Desirability also affects it. For example, on the whole, people are willing to spend a greater percent of their income to live in LA vs Dallas. Desirability drives down the market price. Many things go into market price and you don't actually have to pretend to understand them all.
  - klodolph 6y ago
    Cost of living is only part of the explanation, but “market price” isn’t even an explanation at all.
- 6gvONxR4sf7o 6y ago
  Market price connotes a two sided equilibrium, and in this case the point seemed to me to suggest the possibility of irrationality. It’s the same point being made in more plainly biased cases where equal pay for equal work is brought up. Sometimes a market price disparity for a group is driven by nothing but social expectations. Consider that the causal arrow might more strongly point the other direction on wages vs cost of living.
leothecool 6y ago
To me this looks like the practices that led to the High-Tech Employee Antitrust Litigation of 2013 are still going on. The market is still broken. Companies that have this policy are only free to pay "cost of living" based salaries because the companies that are offering remote work aren't competing with each other. Like you said, they are only competing with the local startups in the cities where remote workers live.
coward8675309 6y ago
Yes, pretty spot on. Would these Facebook employees be happier if Fb decided the equilibrium point was way below SV/SF subsistence and reset everyone's salary accordingly? "We're being fair. Work from wherever you like. Happy now?" I don't see that scenario hurting Fb. In fact, if I were Zuck, I might do it to clean house. There are plenty of talented people outside SV/SF and I bet they might be less focused on work as a source of free snacks and as a vehicle for their pet political causes.
- disgruntledphd2 6y ago
  The loss of institutional knowledge caused by a mass exodus at the same time would cripple them (and pretty much any company that doesn't have incredibly rigorous standards for documentation).
  - coward8675309 6y ago
    I've been at startups where we experienced 90% engineering turnover over 12 mo. due to M&A or change of leadership. We got by. I'm sure Fb could cope.
    - disgruntledphd2 6y ago
      Having spent a lot of time listening to FB employees rant about the lack of documentation and the amount of information sitting in random employees heads, I'm not sure they would. For instance, all the ads leads who understand the core C++ code leave - how do they fix bugs?
    - iaw 6y ago
      I've worked at a startup and a very large company that grew from a startup. The former could survive, the latter most definitely would not (or at least not in the highly profitable form it existed).
    - rednerrus 6y ago
      I've been involved in these and it's a nightmare.
cma 6y ago
> without you being poached by a local competitor There are other newly remote companies as well, but many of them were guilty of illegal anti poaching agreements in the past. Poaching is basically another word for "hiring away," that shows a strange employee ownership mentality.
fishtoaster 6y ago
This is why I strongly suspect this is a self-correcting problem. A company decides to pay based on COL. Their engineers in rural areas are much cheaper and they now have a strong incentive to hire more people in Des Moines than in SF. They do so, thus driving up the demand for (and thus, price of) engineers in Des Moines. Likewise, by hiring fewer SF engineers, they're driving down the demand for (and thus, price of) engineers in SF. Give it a while and the national price for a given engineer converges. I don't know exactly what the timeline here is - probably longer than a couple years, but less than 20. As an SF engineer, this'll probably pull my salary down, but the salary of engineers throughout the country up.
- titanomachy 6y ago
  That was my first thought reading this article. As more of the workforce shifts to remote, the market price of talent should become less location-dependent. > As an SF engineer, this'll probably pull my salary down, but the salary of engineers throughout the country up. I'd say the salary of engineers throughout the world would go up. I think this is a positive change that will make the overall industry more efficient and benefit society as producing high-quality software becomes more affordable. And I say this as an engineer in a high-pay city who benefits from the current inequality in the system. I believe the change will be gradual enough that people like me can keep earning good pay by continuing to improve our skills and learn from experience.

xenocratus 6y ago

So presumably once a sufficient number of employers switch to accepting fully-remote on the reg, "local competitor" won't mean much anymore. This impacts "local-first" companies more, right, because their pool of candidates will shrink/be poached, so it will put more pressure on them to switch to "remote accepted" as well

internet_user 6y ago
Already happening in significant size.
warkdarrior 6y ago
Correct. Symmetrically, the pool of candidates increases once "local-first" companies migrate to "remote accepted", so companies get more power to hire from anywhere in the world. So you as an employee will compete with anyone in the country/world purely based on your skills/expertise, regardless of your cost of living.

klodolph 6y ago

Kind of putting the cart before the horse, here. Saying that something is “market price” doesn’t explain anything. Market price is driven by millions of factors including cost of living. “Market price” just means that it’s the price that people actually pay for something in the real world, it’s just a name for that price that doesn’t offer any explanatory power. Cost of living does have explanatory power.

username90 6y ago
Cost of living is determined by how much people living there are paid, not the other way around.
- klodolph 6y ago
  It’s interconnected. You can’t claim that the relationship goes in one direction.
- dragonwriter 6y ago
  > Cost of living is determined by how much people living there are paid, not the other way around. Cost of living affects the supply side of labor pricing. Wages affect the demand side of cost of living. Neither is determined solely by the other, but each influences the other.
bagacrap 6y ago
But cost of living is only one possible explanation. Desirability also affects it. For example, on the whole, people are willing to spend a greater percent of their income to live in LA vs Dallas. Desirability drives down the market price. Many things go into market price and you don't actually have to pretend to understand them all.
- klodolph 6y ago
  Cost of living is only part of the explanation, but “market price” isn’t even an explanation at all.
6gvONxR4sf7o 6y ago
Market price connotes a two sided equilibrium, and in this case the point seemed to me to suggest the possibility of irrationality. It’s the same point being made in more plainly biased cases where equal pay for equal work is brought up. Sometimes a market price disparity for a group is driven by nothing but social expectations. Consider that the causal arrow might more strongly point the other direction on wages vs cost of living.

leothecool 6y ago

To me this looks like the practices that led to the High-Tech Employee Antitrust Litigation of 2013 are still going on. The market is still broken. Companies that have this policy are only free to pay "cost of living" based salaries because the companies that are offering remote work aren't competing with each other. Like you said, they are only competing with the local startups in the cities where remote workers live.

coward8675309 6y ago

Yes, pretty spot on. Would these Facebook employees be happier if Fb decided the equilibrium point was way below SV/SF subsistence and reset everyone's salary accordingly? "We're being fair. Work from wherever you like. Happy now?" I don't see that scenario hurting Fb. In fact, if I were Zuck, I might do it to clean house. There are plenty of talented people outside SV/SF and I bet they might be less focused on work as a source of free snacks and as a vehicle for their pet political causes.

disgruntledphd2 6y ago
The loss of institutional knowledge caused by a mass exodus at the same time would cripple them (and pretty much any company that doesn't have incredibly rigorous standards for documentation).
- coward8675309 6y ago
  I've been at startups where we experienced 90% engineering turnover over 12 mo. due to M&A or change of leadership. We got by. I'm sure Fb could cope.
  - disgruntledphd2 6y ago
    Having spent a lot of time listening to FB employees rant about the lack of documentation and the amount of information sitting in random employees heads, I'm not sure they would. For instance, all the ads leads who understand the core C++ code leave - how do they fix bugs?
  - iaw 6y ago
    I've worked at a startup and a very large company that grew from a startup. The former could survive, the latter most definitely would not (or at least not in the highly profitable form it existed).
  - rednerrus 6y ago
    I've been involved in these and it's a nightmare.

cma 6y ago

> without you being poached by a local competitor There are other newly remote companies as well, but many of them were guilty of illegal anti poaching agreements in the past. Poaching is basically another word for "hiring away," that shows a strange employee ownership mentality.

fishtoaster 6y ago

This is why I strongly suspect this is a self-correcting problem. A company decides to pay based on COL. Their engineers in rural areas are much cheaper and they now have a strong incentive to hire more people in Des Moines than in SF. They do so, thus driving up the demand for (and thus, price of) engineers in Des Moines. Likewise, by hiring fewer SF engineers, they're driving down the demand for (and thus, price of) engineers in SF. Give it a while and the national price for a given engineer converges. I don't know exactly what the timeline here is - probably longer than a couple years, but less than 20. As an SF engineer, this'll probably pull my salary down, but the salary of engineers throughout the country up.

titanomachy 6y ago
That was my first thought reading this article. As more of the workforce shifts to remote, the market price of talent should become less location-dependent. > As an SF engineer, this'll probably pull my salary down, but the salary of engineers throughout the country up. I'd say the salary of engineers throughout the world would go up. I think this is a positive change that will make the overall industry more efficient and benefit society as producing high-quality software becomes more affordable. And I say this as an engineer in a high-pay city who benefits from the current inequality in the system. I believe the change will be gradual enough that people like me can keep earning good pay by continuing to improve our skills and learn from experience.