4 ms·

Pay isn’t directly based on COL. It’s based on supply and demand. If there were thousands of baristas available to fill jobs at SF Starbucks, the pay would be l

Pay isn’t directly based on COL. It’s based on supply and demand. If there were thousands of baristas available to fill jobs at SF Starbucks, the pay would be lower. The reason pay is higher in SV is because all the same firms were competing against each other for the limited supply of talent. One could argue the supply is impacted by COL, but it’s still only an indirect cause of pay determination.

kmonsen 6y ago
At least in google pay was more based on col than supply and demand. The reason was if not everyone would move to Mountain View and that was not good for the company. So in general offices in low col like India or Taiwan paid better than expected to try to have people stay. There were exceptions like London for some reason.
lotsofpulp 6y ago
I don't understand where people get the idea that prices are based on anything but supply and demand.
- darth_avocado 6y ago
  Because COL drives supply and demand. If you're only willing to pay $5/hr in SF, you'd have less supply because people won't be willing to work for that price.
- inglor_cz 6y ago
  An interesting exception from intuitive understanding of supply and demand: https://en.wikipedia.org/wiki/Veblen_good https://en.wikipedia.org/wiki/Veblen_good
  - kec 6y ago
    I'm not an economist but it has always seemed to me that Veblen goods are actually selling status and prestige. Flooding the market with product devalues the associated status which is what causes the price to drop.
  - deleted 6y ago
    [deleted]
- FooHentai 6y ago
  Consider the offshoring of manufacturing to undeveloped/developing nations. It reduced manufacturing costs, increased profits to businesses, and/or lowered the price to consumers giving the products a competitive advantage over those made in developed nations. The ability to outsource to places where cost of living and wages were low allowed this to occur. I don't see that the office-based/remote-based working situation is much different to this. The main uncertainty whether remote working is actually as effective, at scale, as when it occurs in an office environment. Since knowledge work output is far less tangible than manufacturing output, I'm skeptical. The main incentive for employers to shift to remote workers, outside of the current pandemic situation, is the same reason they shifted to open-plan offices - Cost saving. Here, that's realized via lower wages.
  - lotsofpulp 6y ago
    I agree with what you write, but I don't see what this has to do with price being the intersection of supply and demand curves.

kmonsen 6y ago

At least in google pay was more based on col than supply and demand. The reason was if not everyone would move to Mountain View and that was not good for the company. So in general offices in low col like India or Taiwan paid better than expected to try to have people stay. There were exceptions like London for some reason.

lotsofpulp 6y ago

I don't understand where people get the idea that prices are based on anything but supply and demand.

darth_avocado 6y ago
Because COL drives supply and demand. If you're only willing to pay $5/hr in SF, you'd have less supply because people won't be willing to work for that price.
inglor_cz 6y ago
An interesting exception from intuitive understanding of supply and demand: https://en.wikipedia.org/wiki/Veblen_good https://en.wikipedia.org/wiki/Veblen_good
- kec 6y ago
  I'm not an economist but it has always seemed to me that Veblen goods are actually selling status and prestige. Flooding the market with product devalues the associated status which is what causes the price to drop.
- deleted 6y ago
  [deleted]
FooHentai 6y ago
Consider the offshoring of manufacturing to undeveloped/developing nations. It reduced manufacturing costs, increased profits to businesses, and/or lowered the price to consumers giving the products a competitive advantage over those made in developed nations. The ability to outsource to places where cost of living and wages were low allowed this to occur. I don't see that the office-based/remote-based working situation is much different to this. The main uncertainty whether remote working is actually as effective, at scale, as when it occurs in an office environment. Since knowledge work output is far less tangible than manufacturing output, I'm skeptical. The main incentive for employers to shift to remote workers, outside of the current pandemic situation, is the same reason they shifted to open-plan offices - Cost saving. Here, that's realized via lower wages.
- lotsofpulp 6y ago
  I agree with what you write, but I don't see what this has to do with price being the intersection of supply and demand curves.