4 ms·
Rent in central cities is one of the unintuitive outcomes of the modern economy. SV might be an extreme example, but it isn't the only one. The world is far mor
by netcan 12y ago
Rent in central cities is one of the unintuitive outcomes of the modern economy. SV might be an extreme example, but it isn't the only one. The world is far more globalized. People work with clients, customers, and coworkers mostly through the internet, even if they are in the same building or city.
Google's a good example. They have offices all over. They have clients everywhere.
Common sense would dictate that employees would be easier to hire for the same cost elsewhere where that salary affords a better lifestyle. With all due respect to SF (last time I visited I was 12), there are lots of places where a $140k salary will get you the best schools for kids, entertainment for the adults and palatial digs. It is quite literally like doubling you salary to take it someplace else, even within the US.
I wonder what the reasons are. Obviously clusters matter. There's the tautology that everyone wants what everyone wants. Being someplace vibrant and affluent is valuable to the resident & employees (or resident-employees). I also think that nominal salaries are important to people's decision making. A 25% pay cut from relocation resulting in a 10% cut in after tax salary but a real measurable and provable increase in purchasing power still feels like a 25% pay cut.
Interesting.
- Iftheshoefits 12y agoThe cities where a $140k salary exist in the same quantity as in the bay area are roughly equivalent with respect to the cost to live there. A job in SF that pays $140k might fetch $60-$90k in most of the rest of the US, with higher salaries being more rare. So while there are lots of places where $140k is practically king-like, the number of positions with that salary are both hotly competed for and far fewer in number.
- netcan 12y agoThis is the paradox. You can phrase it as a question: Why don't blubsoft or blub.ly open offices in city X and continue to pay the same salaries there. Relocated employees would be richer and blub.ly should have an easier time hiring. Obvious'y this doesn't happen even though a simple common sense "story" suggests that it should. Hence unintuitive. I'm not saying that individuals don't have their reasons for doing what they do, that's not the interesting part. It's interesting that we don't see digitization and globalization take the pressure off high rent areas and encourage a migration of firms and employees to lower rent (for equivalent of better quality of life) areas at a systemic level.
- gaadd33 12y agoDoesn't Google do that? I'm pretty sure salaries at their Pittsburgh office are pretty much on par with their NYC office despite Pittsburgh being half as expensive (or less).
- marcosdumay 12y agoA possible answer is that they often do. And those companies that do relocate discover that they can pay less, and book the difference.
- netcan 12y agoObviously there are examples of companies and individuals doing all sorts of things. But there is still a huge spread in cost of living between places. The reasons for that spread existing are diminishing. Meanwhile, the spread is growing, not shrinking.
- TeMPOraL 12y ago> Why don't blubsoft or blub.ly open offices in city X and continue to pay the same salaries there. Because they could open offices in city X and pay smaller salaries in absolute value, though equivalent relative to living costs, and get the same hires for less money. I don't see the paradox here; you could phrase it as a question: why should blubsoft or blub.ly pay more for something, when they can pay less and still get it.
- netcan 12y agoThey don't have to be in silicon valley. The only reason for Google to be anywhere is employees and to a lesser extent investors, lawyers and other service providers of the cluster. It's mostly employees though. Why are they there, paying high salaries if they could be getting the same for less elsewhere?
- tbrownaw 12y agoOr, what might they be getting (or think they're getting) that they wouldn't (think that they would) be able to get elsewhere? Maybe they're concerned about lead times for hiring new people (stealing someone from a competitor vs all new employees needing to move first)? Supposedly one of the reasons that Silicon Valley did so well, is that California doesn't allow non-compete agreements. Perhaps there's actually some benefit to exchanging employees with your competitors more often? (But then, what about the no-poaching agreements that companies were getting sued over recently?) Maybe they're concerned that being the only shop in town would make managers more reluctant to fire people who need it (does corporate location preference correlate to corporate culture regarding expected length of service)? Maybe having offices in less expensive locations hurts the company image (for customers, or potential employees, or both) enough that the extra salary cost is worth it?
- davidw 12y agoThere's a great book exploring this: The New Geography of Jobs http://www.amazon.com/The-Geography-Jobs-Enrico-Moretti/dp/0544028058?tag=dedasys-20 http://www.amazon.com/The-Geography-Jobs-Enrico-Moretti/dp/0... He talks about why things have not gone 'flat'.
- netcan 12y agoCare to do a spoiler? Does he have an interesting reason why not?
- davidw 12y agoBecause proximity to other people still matters a lot, especially in terms of "cross-pollination", in the sense of more random interactions than you might get if you just hired a few people to work remotely on a specific project. You could even call it an 'ecosystem' despite the word's abuse. It's been a while since I read it, but I didn't think it was all that revolutionary... it just mostly made sense. http://davids-book-reviews.blogspot.it/2012/10/the-new-geography-of-jobs.html http://davids-book-reviews.blogspot.it/2012/10/the-new-geogr...