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Companies were never paying based on value provided. They pay market rate which, until recently, was artificially limited to a few expensive markets. With remo
by jensensbutton 5y ago
Companies were never paying based on value provided. They pay market rate which, until recently, was artificially limited to a few expensive markets.
With remote, these companies are now able to do what every other large labor driven industry has done and lower their costs by finding labor in cheaper markets.
- tonyedgecombe 5y agoThis is a good thing, it's not healthy to have all your wealth in one small region of a country.
- ch4s3 5y agoGood thin the US has several huge, wealthy metro areas 8 or 9 states.
- minikites 5y agoFinding cheaper labor elsewhere further concentrates wealth. The only way to spread out the wealth would be to mandate the same salary across regions.
- namdnay 5y agoThat sounds good, but how do you determine this new universal salary? It's either going to be absurdly over market (are you going to pay fresh grads in Hyderabad 150k USD a year?) or absurdly under market (are you going to pay fresh grads in Mountain View 30k USD a year?)
- gowld 5y agoSame way oil is priced, at the market clearing rate. Maybe it's $60K/yr and we have happy Indians and Romanians and no Californians.
- namdnay 5y agoYes indeed, at that price you could hoover up all the talent in India, China, Russia, Ukraine etc
- isbvhodnvemrwvn 5y agoYou won't get top talent in Ukraine for 60k.
- namdnay 5y agoFor fresh grads?
- isbvhodnvemrwvn 5y agoFor fresh grads yes, assuming they don't work for another US-based company.
- eru 5y agoYes. And how do you determine which two jobs are similar enough to warrant the same salary by law? Where do you draw the lines?
- gmadsen 5y agowait till the even wider proliferation of offshoring of remote technical roles. The wealth will be even more concentrated, except only the executives, while the workers will have even less
- namdnay 5y agowhy even less? remote work has been a great boost for lots of workers. I see the effect of it here in Europe, in the past year average hire salaries have gone up by at least 10% due to the competition with fully remote orgs
- chrisco255 5y agoYeah been waiting for that to happen for the past 20 years...
- gmadsen 5y agowell the last 20 years didn't have a mass forced remote work event
- eru 5y agoWhy would the company splurge on executives, and not drive down their wages, too, if that's so easy? Executive cost money, too. They are also employees.
- RestlessMind 5y agoIf you come up with a way to spread that wealth in the different regions of a country, shareholders and execs will leverage that to get work done from even cheaper countries. A worker in Colombia or Mexico is much cheaper than someone in Kansas or Maryland. Btw, I am seeing this happening at my current workplace where a majority of the new headcount is for non-US countries. So be careful what you wish for. We have seen this movie before with manufacturing. The winners of this move will be the shareholders / execs and the middle class in cheap countries. The losers will be the American middle class.
- tonyedgecombe 5y ago>So be careful what you wish for. I see that as a good thing as well. If it is a problem to have all the wealth of a country in a few regions then it is equally bad to have the wealth of the world in a few countries. It might have been painful for some Americans but globalisation has been a success for most of the world.
- RestlessMind 5y agoGood for whom? Definitely not for American middle class. So if you are a middle class person in the US, do not root for WFH trend or globalization of Silicon Valley. It will only hurt you while benefiting poorer countries and the shareholders (aka top 1%-ers) in the US. > globalization has been a success for most of the world It has led to decimation of big industries in the US / Western Europe, fueling the rise of demagogues (Trump, Le Pen, AfD, ...). It has also given power to despot regimes like Chinese Communist Party.
- UncleMeat 5y agoAnd it makes it plain to see that we need collective action. All the people who say "I bring a ton of value to a company and therefore can negotiate to capture that value" are fooling themselves, because no company willingly pays people based on the value they provide.
- eru 5y agoHuh? I don't see how the need for collective action follows? Why would I or should I sabotage a trend that spreads wealth to poorer parts of the world? > ..., because no company willingly pays people based on the value they provide. That's what competition is for.
- norov 5y agoThe rest of the world does not necessarily have decent labor laws. What if you end up cheering on a terrible employment standard & reward anti-worker countries and economies?
- eru 5y agoLetting people in less fortunate countries work for foreign multinationals would give them more alternatives. Compare also https://pseudoerasmus.com/2017/10/02/ijd/ https://pseudoerasmus.com/2017/10/02/ijd/
- Aunche 5y agoSalary is a function of supply and demand. By expanding to Poland, the supply of labor increases, so overall SWE compensation goes down. Collective bargaining can only work by artificially constraining the supply of labor such as preventing a Polish SWE from having the ability to undercut an American SWE's salary, which disincentivizes hiring in Poland.
- eru 5y agoSort-of. But programmers tend to create more work for programmers.
- deanclatworthy 5y agoThis. I’ve been saying it all along. This is what is going to happen to all the SV bros on their 6 figure salaries. You’re no better than someone on the other side of the globe who will have lower living expenses. If your employer doesn’t see value in having you on site, location is meaningless. If I were Google I’d start looking aggressively into labour markets that are cheaper but with good education. Poland, Phillipines, Romania. Just three I’ve worked with that have been exceptional.
- alex504 5y agoEngineers in the US are much more expensive but they have experience working in high scale environments that isn't widely available in the markets you are talking about. FAANG companies and well-funded startups aren't going to substitute someone else even if they can theoretically pay 5x less for someone 90% as good. All these companies care about is being as competitive as possible. They have a pretty much unlimited supply of money, and one of the most primary things driving their business success is how good their engineers are.
- disgruntledphd2 5y ago> Engineers in the US are much more expensive but they have experience working in high scale environments that isn't widely available in the markets you are talking about Then why do the same engineers (pre and post-transfer) get paid such ridiculously different salaries between London and the valley? Do you get special scaling powers when they stamp your visa at SF?
- alex504 5y agoAre these engineers working at the same company?
- bitbuilder 5y agoNot OP, but at a former gig I was in a position to know the salaries of an engineering team spread out between North America and the UK. The UK engineers were doing the same work but paid salaries that would be considered insulting to most US engineers. And frankly, the UK team was coding circles around much of the US engineers. It was incredibly eye opening, and humbling.
- PragmaticPulp 5y ago> Companies were never paying based on value provided. They pay market rate Trying to negotiate salary based on value provided is one of the biggest misconceptions I see online and with in-person mentoring groups. Compensation is not about value provided. It’s only about market rate and convincing the person to stay at the company. I encounter a lot of people, especially juniors, who are disgruntled because they think their employers are getting more value out of their work than is being passed along in their paychecks. I usually ask them if their employer sends them a bill every time they fail to deliver a project or make a mistake that costs the company money. That usually makes the disconnect between value provided and compensation click. I say this as someone who worked remote and managed remote teams before COVID: The reality is they WFH is a perk and WFH employees require some additional management overhead due to reduced communication efficiency and higher collaboration overhead. As much as I love remote work and my remote teams, it would be dishonest to say that we wouldn’t perform better or faster if we were in-person in the same building. It may not be a popular opinion or what people want to hear, but in my direct experience with mixed WFH/remote teams it’s always true. In-person is just too efficient to replace with Zoom and Slack and e-mail. The second reality is that once you open the doors to full-time WFH, you’ve opened the doors to full-time remote, which means you’ve opened the doors to a much larger labor market. It becomes easy to replace your $200K Silicon Valley hires with someone a couple states away who is thrilled to do the same job for $180K or even $150K. Then you start expanding your search and find people who live in other countries who deliver the same results for $100K or even $80K. It’s not surprising that companies don’t want to pay the highest salaries in the country for people who aren’t actually in those areas for work. Losing only 10% of their high salaries honestly seems like a bargain.
- djoldman 5y ago> Compensation is not about value provided. It’s only about market rate and convincing the person to stay at the company. I don't think reasonable people would disagree with this statement about compensation. That being said, I don't believe it says much. "Only about market rate" allows for tautological reasoning in that the market rate is just whatever you end up getting paid. A stricter definition of market rate as "you get paid what people like you get paid" doesn't seem to say much either: when you get a promotion, did you suddenly start producing more for your employer? Or did they suddenly realize you produced more for them? As most pricing goes, so does employee pay: you're paid the salary to which you agree. You can increase your salary by 1. threatening to quit your current employer unless pay rises or by 2. convincing some other employer to pay you more.
- runeks 5y ago> Companies were never paying based on value provided. I’d go even further and say that nothing is paid for in terms of value provided. Price is a negotiation between two parties, where production and use value form the floor and ceiling price, respectively.