As a Bangladeshi, I can tell you that the workers in my country don't have proper unions. They can't negotiate. Salary is the last thing on their minds, they can't even negotiate safe working conditions. They are uneducated, so they don't know what they deserve. See here -> https://en.wikipedia.org/wiki/2012_Dhaka_garment_factory_fir...
So, the cheap stuff that you're getting is because someone is getting a super bad deal, by exploiting the heck out of workers. Same in China.
The garments factory owners are walking away with tonnes of money, leaving the workers high and dry.
The more _subtle_ point that the author is making, is that, "wait, if people realize that they can get awesome developers in developing nations for a lower price, I'm not going to get hired any more in my over-priced city".
Good, move to a place where your salary is worth more, and work to enrich that community. Why should SF and NY get all the benefits of economic growth?
Precisely. The OP reaches the wrong conclusion from an excellent point.
The fact that they are benefiting as a consumer because of location based salaries is another point against them. Pitting “closing down the ‘sweatshops’” (i.e. unemployment) as the only alternative for the workers is disingenuous. Another alternative is worker control over the factories. Yes OP as a consumer will loose some luxury as the price of consumer products rises along with the workers’ pay, but what natural law states that the OP has the right to that luxury at the cost of foreign workers?
The original point, you deserve the value of your work in salaries regardless of your location still holds. Even more so when it is applied to the global scale. And the fact that it isn’t applied on the global scale is just another fact pointing to the fact that we live in an unequal economy that exploits workers. Instead of rejecting this, OP should have reached the conclusion that there are alternative worker arrangements which would benefits workers globally.
> OP should have reached the conclusion that there are alternative worker arrangements which would benefits workers globally.
This is specifically what he DOESN'T want. What he's saying is that someone from Boise, ID shouldn't complain too loud about location-based pay, because taking the logic to its extreme would mean redistributing all this worker and consumer welfare with the rest of the billions of workers worldwide and, surprise surprise, that would actually suck to essentially every American, doesn't matter how poor.
So, basically: "Hey guys, don't rock the boat. We might be crew but you don't want the rowers competing for our place"
Realistically, if you improve working conditions or pay in Bangladesh, the business will shift to one of 10 other poor countries in the developing world. That's not to say we should give up trying to do that. But the comparison of the low-skilled labour with scarce developers, is simply not a very good one, because most developers have reasonable bargaining power.
I find the author's point to be a very disturbing one: If we really pay people fairly, I won't be able to afford all these cheap consumer goods any more.
The "idea" of location based pay for developers is that you an have the same standard of living in Boise on less salary than in London. Whether this is true or not is subject to debate.
But what's not subject to debate is that, as you say, Bangladeshi garment workers do not have a standard of living that is okay. What do we do with the fact that our (in the USA or UK) cheap clothing comes at that "price"?
On the flipside, if you can make Silicon Valley money and go live in Mexico or Thailand, chances are that you will cause real estate prices there to increase and become less accessible to the locals. You and your high salary, particularly in a low-income country, are an inflationary force. Does you bringing your high income there automatically translate in enriching the local community?
It definitely does. You are not going to have enough people migrating to make a large enough difference. By all means, go to Thialand, they will welcome you with open arms. More money in the economy means more jobs for people.
More people with a higher level of technical skill will also enrich the community should you choose to participate.
Only if you go there looking for luxury. The best at this gambit locate far away from where any other American or German or Canadian is likely to tread.
Perhaps it does, if Thai workers get their pay increased on a large enough scale. But these workers will also inject this increased money into the local economy, and pay more taxes towards the local government, so...
I have a feeling that many of the engineers who live in locations far off from SV such as Bangladesh, who do have the skills to make it as a FAANG employee (for example), already choose to move to SV/London/etc and collect that salary. If so, there shouldn't really be all that much untapped potential* in the third world. The way FAANG companies greedily hoover up the eligible talent pool (regardless of whether they have good project ideas for those folks to work on) makes me think it's not likely they'd overlook a vast pool of talent that's cheaper and just as productive.
*Not counting those who never had access to education or a computer to become fully realized engineers in the first place. Just commenting on ready-to-go software engineers.
I think there are a lot of preconceived notions regarding developing nations.
A lot of people who can leave, do leave. I left, for example. However, there are a tonne of people who are super smart, but can't leave because of their ageing parents, or other reasons.
Leaving everything you know behind takes courage, and adapting to a new world, a new life takes a lot out of you. Not everyone wants to leave their loved ones. Furthermore, if you are older, it's even harder.
Funny story, one of the reasons I left Bangladesh is because I used to work for this company that paid me 1/6th of the salary someone else was making in a more developed Asian country. I was doing the same work, succeeding at it too.
However, when I wanted equal pay for equal work, they decided to not renew my contract. Back then, I was young, so I decided to apply abroad, an was luckily accepted. Not everyone can do this, because again, you have family, and responsibilities.
2 months into my new job, my old company begs me to come back, and offers me the salary that was more than I wanted, and an O1 visa sponsorship should I want to go to America.
that's quite silly - leaving your family is a very questionable deal, you grandparents or parents basically wither away without seeing their children and grandchildren.
The visa laws make you a second-class citizen (well non- citizen, really) and ensure that you cannot spend much time with them - there is a maximum limit on the number of days you can spend out of the country. Also usually they mean you cannot bring your grandparents. Hell, UK home office basically killed a woman because they denied entry to UK to her sister for an organ transplant.
https://www.independent.co.uk/news/uk/home-news/leukaemia-pa...
You have to have relatives and friends that can look after your family, because every now and then they need help and you are not there to help them.
For many folks who have half-decent life at home, the trouble is not worth it. I have many friends from eastern Europe who have come to UK to study and went back.
Lastly, why is FAANG the ultimate benchmark? Some people develop safety and life-critical systems, land rovers on mars, etc. I hold them in higher regard.
I very much doubt this is true. I’m sure there are a very large number of FAANG quality engineers all over the eastern US, let alone other countries, that couldn’t or wouldn’t make the move to SV. I would be willing to put money on it being the MAJORITY capable of being hired into those roles couldn’t or wouldn’t move there to take them.
There is no amount of money that would have convinced me to leave Florida. My family and my wife’s family is here. My children’s friends and extended support networks are here. This life is not worth losing for any pay raise. I’m willing to bet a very large number of quality engineer made the same decision I did.
you really overestimate how much FAANG companies understand about the world, or how to hire productive employees. It's all dances and bullshit, and puffery on behalf of the employees to make you believe we're the pinnacle of human intellect. I should know, I'm one of them :)
> I have a feeling that many of the engineers who live in locations far off from SV such as Bangladesh, who do have the skills to make it as a FAANG employee (for example), already choose to move to SV/London/etc and collect that salary
What is this feeling based on? You have to invest a lot of money, time and effort into paperwork before you can dream of migrating. One does not simply "choose" to move; it takes months or years of effort - not every talented individual takes this route, or even thinks it's worthwhile - there are a lot of trade-offs, even for the most naïve. I suspect this idea of talent=success is an instance of the Just-world fallacy (one way of reading what you said is that those who are talented have already been rewarded by FAANG jobs, therefore those who haven't yet are not talented, obviously)
> the cheap stuff that you're getting is because someone is getting a super bad deal
And this is Bad and should be fixed. Developed countries should push poorer countries into paying better salaries to their workers and improve their conditions. This would directly benefit "westerners" too, since it would reduce migratory pressures and get a more level-playing field in economic sectors that have been wiped from these shores -- some even in quite strategic sectors, like the PPE shenanigans last year showed.
Would that mean my plastic bullshit would get more expensive? Yeah, so what? Maybe this would reignite the debate on effective redistribution in our countries too, which was basically killed in 1989.
I totally agree with this. The exploitation of the human resource is true and brutal!
I grew up in Sri Lanka, and there is a relatively small yet similar situation. Workers are paid $100-200, and have the jobs hanging in a thread leaving no room for negotiations.
There is a massive environmental impact as well. Those big companies often don't play by the rules, and often pollute the water ways, air, etc because who cares if they make money.
> Good, move to a place where your salary is worth more, and work to enrich that community. Why should SF and NY get all the benefits of economic growth?
Do you really think Globalization should force everyone to move where their salary is worth more?
Salary is a negotiation between parties. Looked at soberly, you're the business, your employer is your customer, and the salary they pay you is really the price you charge for your services.
They have no obligation to pay more for your services than they think they have to, compared to alternatives on the market. And you have no obligation to charge less for your services than you can get from other "customers". Either of you can negotiate the price up or down, and the other is free to take it or leave it.
It's not about who "deserves" what. It's a simple negotiation, like every other business transaction.
The more valuable (and less replaceable) your services are, the more pay you can successfully negotiate for. I guarantee you there are plenty of people at these "location-based pay" companies who've negotiated for considerably higher pay than others in their location. Just as there are many businesses (e.g. Apple) who've found a way to charge more for their products than their competitors have.
So it's worth learning to negotiate. And, perhaps more importantly, it's worth learning to provide massive value that's hard to replace. Or accepting the tradeoffs if you choose not to.
Let's say you mould your skillset to fit perfectly into a commonly-open job description: front-end software engineer. Well great, the benefit is you have lots of jobs you can apply for, so you can easily "fire" one company to go work at another. The downside is you're now in direct competition with a million other people who've shaped themselves to have the same common skillset, so it's easier for companies to fire you. Competition drives prices down and makes you more easily replaceable. But it gives you some safety due to redundancy. That's often a reasonable tradeoff to make, but you should be aware you're making it. If you want the big bucks, it helps to be rarer, and to work at places and in roles where it's easier to demonstrate your value.
This ^ 1000x. Every job you join is a business negotiation between buyer and seller. Companies want to offer the lowest compensation they can get an engineer for, the engineer wants the highest compensating company they can get an offer from. The match is where the market gets what the market wants.
I’ve seen plenty of employees with deep context on codebase able to retain their SF salary as they’ve moved locations. For the business, it makes little difference where they work so they keep on paying, they’d rather not lose.
For new hires, it’s a different game. Global means a global talent pool to choose from, a bigger market. Sometimes a cheaper market.
Companies raise their salaries when they can’t hire talent they want at a price point. So know your worth, and be willing to walk away. Also offer something valuable that companies don’t want to walk away from.
Of course! I don't claim to be a master negotiator -- far from it. But I did negotiate. And, more importantly, I'm quite differentiated. There was no other Indie Hackers to buy.
Fearless Salary Negotiation is a great book - very approachable and practical. I learned a lot from it.
Also for context - just remember that actually negotiating already puts you in a good subset of people. Many people - including myself initially - are reluctant to negotiate. It's a learned skill.
If you're running a remote company, there's another reason (besides fairness) that location-based pay is a bad idea: it makes it harder to create a compensation structure that incentivizes high performance.
If Person A is outperforming Person B, but is getting paid less because they happen to live somewhere else, you lose the ability to claim that you compensate people for performance without sounding like you're talking out of both sides of your mouth. Not only is Person A not going to be happy about that, Person A is not going to believe that compensation at your company is based on performance.
Companies that want to hire and incentivize the best people need to be congruent in their messaging around compensation and performance. Claiming that compensation is performance-based and then including a factor (location) that has no bearing on performance is incongruent and will not help to develop the right culture in this regard.
I managed remote, multi-national teams before COVID.
The unspoken advantage of remote teams is that employers can use the location pay disparity to their advantage. For example, we had pressure from executives to do more hiring in our international offices because employees were cheaper.
Abandoning location-based pay sounds good to people who feel they are disadvantaged due to location, but location-based modifiers suddenly become popular again when companies start moving compensation toward their cheapest location instead of toward their most expensive location.
The other advantage of hiring in cheap locations is that it's equally cheaper to provide large incentives to the best performers in those locations.
I could pay $150,000 for an average engineer at some of our US offices, and that employee would still be shopping around for their next 10% raise at a competing company.
Or I could pay $100,000 USD equivalent for a great engineer at some of our international offices, and that employee would be so far above market rate that they'd be doing their best work every day because they were so thankful for the opportunity.
I suspect HN's opinion on location-based pay might change over time as Americans realize that US salaries are the outlier on an international scale, regardless of which state or city you live in.
There's nothing stopping companies from shipping their jobs overseas. It's always been an option. Luckily (for Americans), we as workers carry significant advantages over those who work overseas. If we didn't, there would be no reason to hire locally at all.
> I managed remote, multi-national teams before COVID.
> I suspect HN's opinion on location-based pay might change over time as Americans realize that US salaries are the outlier on an international scale
The world's most valuable tech companies still do the vast majority of development work in their home countries, and the trend to keep core development at home has only accelerated in recent years. A lot of things would have to change - including that - in order for this belief to age poorly.
Also fwiw, we built our team fully-remote pre-COVID as well, with location-agnostic pay. It only becomes clearer that this has been the right move with each passing year, and we're continuing to lean into this as a result.
I will say, though, that this can depend on what type of company you're building. If your company's core competency is something other than software (e.g. sales), building an extremely high-performing engineering culture may not be the most important thing to your company, and the tradeoffs you have to make in order to do so may not be worth it.
I mean it’s, but if you don’t take location into account then suddenly you can only hire from low cost locations where the talent does not exist.
It’s really unfair whatever you do, and right now there is no good solution. Partially because there is no good way of understanding the value of an employee.
> right now there is no good solution. Partially because there is no good way of understanding the value of an employee.
This is the perception among many startups, but I think this is more perception than it is reality.
Exceptional engineers are several times more valuable to most startups than an average engineer, but almost all will hire an average engineer for $115k before they hire an exceptional one for $175k. There's no rational basis for this, but it is the path of least resistance. You won't need to defend hiring an engineer for $115k to cofounders or investors.
This is counter-intuitive, but the solution is to actually pay more for remote engineering jobs. When you do this, you're widening your talent pool to the entire world - and then you're selecting from the very top of the pool. We've been doing this for years, and it's been one of our most significant competitive advantages.
What do you think of employee-owned companies as a way to accurately assess that value? It seems like capitalism and the question of whether profits should go to laborers vs owners is central to this issue.
If I could choose between paying $500 rent and earning $10000 a month or paying $5000 rent and earning $10001 a month I'd pick the first one even if the absolute number is higher, and I wouldn't feel ripped off if the other guy was a newer employee. The point of contention here seems to be people wanting to see a bigger number regardless of who actually takes home more disposable income. Seems short sighted to me.
What's missing from these debates is optionality. A company pays you not only what it takes for you to do the job, but also their perceptions of your options. Two people working the same job on-site at the same company can have a substantial pay difference even without negotiation because one is self-taught and has only high school while another has a master's degree from Stanford. Yes, the former's competent and shows drive and ambition and that's nice. The company just scored a dark horse. But the company also knows the former employee (likely) isn't as aggressively courted by other companies which can pay well, so they feel they can pay that person less.
If you're the only person in the world who can do what Facebook really needs done, they'll pay you $1M+ to do it from anywhere in the world.
If you're that one person who can do that one Facebook thing I'm sure you can get way more that $1M and I think that's good.
But I don't think that's about optionality. That's about the actual value of your skill, and its scarcity.
Optionality is more like: Google would probably hire you do CRUD apps because you went to Stanford and passed our Google-like interview when we hired you to do CRUD apps, so we will pay you what we think it costs for you to not go do that at Google. Dave over here went to SF State and was hired before the algo-interview craze; no chance Google will hire him, so we can and will pay him less even if he makes better CRUD apps than you do.
If I, your hiring manager, also went to Stanford I will pay you even more because I sure think I have high optionality! And if my manager went to Stanford then all the better because he will immediately understand why you need more than Dave. Which, in the end, is true: Dave's still here, right?
I agree with you. It will take a while for the adjustment of remote to re-settle to a new norm.
There is one other thing that is a small factor in all of this. I'm not saying it is unsurmountable or anything but local/state/country taxes are a factor. We hired someone remote recently who was in Canada. We had to create a new company in CA just so we could pay this individual. For salaried/W2 style employment, there can be a non-trivial amount of extra legal/finance work for the company. Hiring local-ish avoids this. Obviously, having everyone on a 1099/Contractor style employment would avoid this too but most people want salary plus provided benefits. Again, a larger company may easily be able to absorb these costs but they aren't zero.
There are SaaS services now that handle this problem, but honestly I am glad you did that. Most US company just hire as contractor in Canada even if it is not legal per Canadian law and it will get workers in trouble pretty soon I think. The CRA will crack down on that loophole and employees will be in trouble.
A worker sells their labor and a company purchases it.
When everyone lived in SF, a worker wouldn't accept a job paying below $100k because they wouldn't be able to afford to live. That same person in a cheaper state could negotiate a lower price, but most of the talent was saturated in SF. Now that everyone has left SF, there's no point in paying those prices if they can still retain you for a lower wage.
> But the company also knows the former employee (likely) isn't as aggressively courted by other companies which can pay well, so they feel they can pay that person less.
The corollary is that if you can reliably find and hire such people you’ll have a massive competitive advantage.
Someone else alluded to it as well, you could just as easily view pay as a measure of how much it will take to get you to work for them, rather than a measurement of how much value you will provide the company. From that lens, location based pay almost makes sense.
But it's still a stupid and arbitrary mechanism, and if you're negotiating you should treat it that way. It sounds very systematic and regulatory, but it's not. Just ask them for what you think they're willing to pay you, just like any other negotiation.
Company doesn't pay based on the "value of your work" - it pays based on what other companies would pay you.
Local candidates are scarcer than remote.
Personally, I hate the resulting dynamic. Move to SF and the company basically subsidizes a million dollar mortgage. Move to Manila and your subsidized mansion could be $10k, 100 times less (maybe I'm exaggerating, I have no idea about real estate in the Philippines - but you get the idea). That's insane!
The worst part is that landlords get a huge cut of this, and I don't think they add a fraction of that value to society.
I hope that in the end, with the pandemic, it all balances out to two tiers: on-site and remote. I get that many companies still value attendance, whatever. I just hope that all remote positions balance out globally. It doesn't make sense to pay some guy in Utah twice as much as some guy from Honduras, if neither come into the office.
> It doesn't make sense to pay some guy in Utah twice as much as some guy from Honduras, if neither come into the office.
This assumes equal education, skill level, cultural norms and infrastructure. But these are often not equal. If your clients are in the US, hiring developers US side greatly reduces the chance of cultural misunderstanding and communication problems. Also timezone issues here too, for clients based on North America.
US higher education system is fairly strong, and not all countries are equal on that front. India for example, is known for degree mills and ways to "cheat" the system. Which is why US masters degrees are required for the most part. That is not to say there aren't incredibly smart people in every country, but it's not an even playing field and some countries have risks associated with hiring.
Another good example is infrastructure. I'm not sure how many times a developing world coworker has been blocked because of shoddy internet or inconsistent utilities.
These asymmetries will persist, remote or otherwise.
> I just hope that all remote positions balance out globally.
I've been working remotely since 2015 and the market has been gradually moving in this direction(at least in eastern Europe where I come from) - COVID-19 only speeded things up.
The elephant in the room is not whether I‘m worth 150K in S.V. but 50K if my cost of living is lower elsewhere. The real issue is what enables S.V. companies top pay three times as much. Why is it not possible to set up a similar company elsewhere which makes similar revenue and should be either insanely profitable or pay 150K and employees would become insanely rich as cost of living are lower.
You might say "but...but...the internet". Well, perfecting remote work is just the beginning. The unplanned/sponteneous interactions that lead to new relationships also matter. Maybe when we get that soviet internet that browses you.
> I think neither S.V. nor the market is rational.
I agree, and it's possible general "bullshit jobs" and Q.E./softbank bubble type phenomena dwarf the intrinsic value of cities. But still, those are orthogonal effects. Contrary to most American nostalgia, going rural does not defeat the bullshit.
>You might say "but...but...the internet". Well, perfecting remote work is just the beginning. The unplanned/sponteneous interactions that lead to new relationships also matte
Yes, I can totally get why anyone would pay a premium for someone who is physically present, or can be on relatively little notice.
But that only be relevant as far as "local or remote?", where the former gets a premium against the latter, and it shouldn't care about looking up the specific CoL of which remote location you're working from (so long as business hours are maintained). The issue is that location-based pay does do this.
All the more reason to implement a land value tax, with additional taxes on speculation properties (say, lived in for less than 33% of the year), and on vacancy (blight tax).
What “enables” companies to pay more is profits, but what forces them to is the labor market. SV pays more because as an IC you can get a $150k job at thousands of other companies within commute distance.
Of course it is possible to set up a tech company elsewhere and have lower operating costs—there are plenty of examples—but that doesn’t it’s a slam dunk; remote work is a trade off that does not work for every person or company, and talent pools and ecosystems matter a great deal.
> Why is it not possible to set up a similar company elsewhere which makes similar revenue and should be either insanely profitable or pay 150K and employees would become insanely rich as cost of living are lower.
There are two reasons why SV companies pay outrageous amounts.
1. Some companies have insane revenues. Google/Facebook lead the way but others are in this space as well. They can pay engineers huge amounts because they can afford it. These companies are rare and there aren't many outside of a few hubs.
2. Other companies run huge deficits and are funded by VCs. These companies pay huge amounts because their VCs want them to grow crazy fast and want them to hire top people, so they have to compete with the rich companies. The VCs are primarily located in a few hubs because they want to be able to physically stop in to their startups.
If a few companies weren't bringing in stupid high revenues, the entire HCOL compensation for the industry would collapse. It'd return to something closer to what we saw in 2005 before the rise of the megagiants with more money than God.
> If a few companies weren't bringing in stupid high revenues, the entire HCOL compensation for the industry would collapse. It'd return to something closer to what we saw in 2005 before the rise of the megagiants with more money than God.
The companies I worked for in the 90s, well before goog or fb existed, had location-based salary tables.
>Why is it not possible to set up a similar company elsewhere which makes similar revenue and should be either insanely profitable or pay 150K and employees would become insanely rich as cost of living are lower.
The canned answer is that SV provides easy access to capital and talent. These are rationale incentives, although they may be overvalued and this is changing.
Companies can absolutely pocket the difference. I know a SV CEO who is building out his software team in Pakistan because college educated programmers are paid $6/hr and the talent is adequate
Apple has a gross revenue of $1.9 million per employee. Paying 150k is generally only a small fraction of the value they create and Apple could afford to pay more, and at the same time a better offer than anywhere else for many
Well, one reason that S.V. companies can pay more is that they earn more thanks to being in S.V. Once I've been visiting the mothership and took a bike to drive up/down the road. There have been offices of all kinds of companies I would've never heard about... Except I've seen so many of the logos on various things in the office a quarter world away. I imagine there's quite some value in having your engineers mingle with potential customer's engineers after work.
It's like a black hole. The more dollars & developers you feed SV, the more gravity it has to suck in more dollars & developers, in an endless feedback loop.
If the supply of dollars was limited, it would never have reached such critical mass.
Right. It indicates that market forces aren’t benefitting labor as much as they could an extreme degree. What aspect of the market needs to be changed in order for everyone to benefit similarly? Clearly companies are making far more per worker than they’re paying out (at least in this case). Why is it so extreme?
I do not want to debate the fairness of it, because it is way too complex for a comment.
But there is another downside of pay cuts for remote workers: A remote worker does not have access to the same market as someone living in a hot cluster like The Valley.
A real-world example from Europe: If I take my Berlin salary and live just 50km out of the city, I am easily one of the top-earners in that area. Naturally, I lose easy access to many offerings of that city, but that's part of the deal, I think. Now if I ever wish to switch employers, I can look in Berlin, but I am at a disadvantage if many companies insist on on-site work. If they don't, I compete on a much larger market with many more would-be employees. This problem should be reflected in payment, I think.
So from my, completely egocentric, perspective it would be ideal if companies demand on-site one or two days a week, so I can choose the best spot for living in a larger area, but still only compete in a limited market.
> But there is another downside of pay cuts for remote workers: A remote worker does not have access to the same market as someone living in a hot cluster like The Valley.
It’s not another downside, it’s the very reason the employer can reduce pay. They are betting your supply and demand curves are moving in such a way that you will be willing to accept a lower price, because you won’t have a better option.
Let me take it another step: Every reason that it's "rational" that remote workers are payed less, i.e. not just a stupid faux-rationilization of the labor market reaching a new equilibrium, is evidence that remote work is a failure.
A world of resort-town skilled works chained to their hegemon isn't just terrible for workers. It's a terribly inefficient market: a "sharded monopsony". The very unplanned interactions that allow hot-spot workers to change jobs is also a big reason cities are such dynamic economies in the first place.
>So from my, completely egocentric, perspective it would be ideal if companies demand on-site one or two days a week,
Pretty much all the surveys I see suggest that this will be the most common outcome. Maybe roughly 20% fully remote and 20% mostly back in the office. Though doubtless not uniform across companies. (I expect my company will tilt more towards remote given that we were relatively heavily remote pre-pandemic.) Which implies that most will probably remain in the orbit of a larger metro; many of the jobs aren't in the city anyway. And many people will want to stay accessible to a metro for other reasons.
I had about a 45 mile commute most non-travel days at one point for a while. (I did take the train some days.) It was pretty doable 1-2 days per week but wasn't sustainable on a daily basis.
I'm applying to jobs now (in the UK) and I'm yet to speak to a single company that plans on a full return to the pre-pandemic normal. Everyone is either staying 100% remote indefinitely, or they're hoping to adopt a hybrid approach like what you describe.
It's a bad time to own city-centre commercial real estate.
> Pretty much all the surveys I see suggest that this will be the most common outcome. Maybe roughly 20% fully remote and 20% mostly back in the office.
While intriguing as an employee, this seems very pricey as the employer. Office space is expensive. Is it worth the cost given the low utilization? Would you really miss out on an excellent employee who cannot come in the 20% of the days others come to the office? How intriguing is it gonna be to hire someone who works the same time zone, is equally qualified but only costs 30%?
OP asserts that we have no right to complain because other people have it worse... This is a logic fallacy known as the 'fallacy of relative privation.' It's faulty reasoning because its an infinite race to the bottom. Noooo: you can't complain about that because [...] and they in tern also cant complain because [...] until eventually you reach the last person on Earth who was born in infinite pain and suffering who can complain. It's just a very unrealistic model.
OPs sweat shop metaphor is also a little far-fetched since they are comparing relatively unskilled workers with specialized tech workers (specialization commands a higher price based on limiting supply.) I think we have every right to complain about companies exploiting workers. They --already-- rely on a disparity of information in salary negotiations to manipulate prices in their favor. I think these practices and others are highly immoral and lead to people being paid far less than they're worth.
The whole reason an "employee" exists is because they create more value than they cost. The only relevant factor is how much value they create (either in the form of eventual increased profits or eventual decreased costs)...location has absolutely nothing to do with that calculation. I.E. If a business could rent a money printing machine, the location of that machine doesn't matter....the only thing that matters is how much money it prints in relation to how much it costs to rent. Any argument from the business stating they should "rightfully" be charged less to rent the machine is merely a negotiation tactic intended to increase profits for the business owners.
If you work at a company that does this or is threatening to do this, I'd seriously consider making a move to one that takes the opposite approach. Any hint of this mindset from a company should be taken as a huge red flag.
> The only relevant factor is how much value they create (either in the form of eventual increased profits or eventual decreased costs)
Not true. Its a market. The upper bound on your pay is how much value you're expected to create. The lower bound is your breakeven point - where you're not sure if its worth going in to work or not.
The range in the middle is pure profit - its value created by your employment. If your income is close to your value to the company, you're capturing most of that profit in your pay packet. If your income is close to your breakeven point, your workplace is capturing most of the value of your employment. Where it lands is dependent on competition. If there's lots of capable software engineers and almost nobody hiring, then competition for jobs pushes wages down. If there's lots of jobs and not enough capable software engineers then competition for software engineers pushes our salaries up.
"Location based pay" assumes your employer is no longer competing with other SV-based software companies (because you don't live there). But your remote job is proof that you have remote work choices! And as more companies become remote-friendly, your company is competing for my time with all the other remote-friendly employers. (Which should push wages up). And employees are competing with everyone else who can apply for remote work (which is a larger pool of applicants).
I think a highly contributing factor in employment for that phenomenon is the employers themselves. Just as a company won't pay you what you're actually worth, you won't demand what you're actually worth. You as an employee will usually demand what you need to afford the things you want. If you live in India, the money needed for that is probably less. If you live in SF, the money needed for that is much more. An employee doesn't negotiate thinking about their true worth to the company. They negotiate thinking about what they need to survive comfortably in their current location. At least, this is on average.
One side needs to change their way of negotiating before this becomes equal.
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So, the cheap stuff that you're getting is because someone is getting a super bad deal, by exploiting the heck out of workers. Same in China.
The garments factory owners are walking away with tonnes of money, leaving the workers high and dry.
The more _subtle_ point that the author is making, is that, "wait, if people realize that they can get awesome developers in developing nations for a lower price, I'm not going to get hired any more in my over-priced city".
Good, move to a place where your salary is worth more, and work to enrich that community. Why should SF and NY get all the benefits of economic growth?
The fact that they are benefiting as a consumer because of location based salaries is another point against them. Pitting “closing down the ‘sweatshops’” (i.e. unemployment) as the only alternative for the workers is disingenuous. Another alternative is worker control over the factories. Yes OP as a consumer will loose some luxury as the price of consumer products rises along with the workers’ pay, but what natural law states that the OP has the right to that luxury at the cost of foreign workers?
The original point, you deserve the value of your work in salaries regardless of your location still holds. Even more so when it is applied to the global scale. And the fact that it isn’t applied on the global scale is just another fact pointing to the fact that we live in an unequal economy that exploits workers. Instead of rejecting this, OP should have reached the conclusion that there are alternative worker arrangements which would benefits workers globally.
> OP should have reached the conclusion that there are alternative worker arrangements which would benefits workers globally.
This is specifically what he DOESN'T want. What he's saying is that someone from Boise, ID shouldn't complain too loud about location-based pay, because taking the logic to its extreme would mean redistributing all this worker and consumer welfare with the rest of the billions of workers worldwide and, surprise surprise, that would actually suck to essentially every American, doesn't matter how poor.
So, basically: "Hey guys, don't rock the boat. We might be crew but you don't want the rowers competing for our place"
The "idea" of location based pay for developers is that you an have the same standard of living in Boise on less salary than in London. Whether this is true or not is subject to debate.
But what's not subject to debate is that, as you say, Bangladeshi garment workers do not have a standard of living that is okay. What do we do with the fact that our (in the USA or UK) cheap clothing comes at that "price"?
More people with a higher level of technical skill will also enrich the community should you choose to participate.
*Not counting those who never had access to education or a computer to become fully realized engineers in the first place. Just commenting on ready-to-go software engineers.
A lot of people who can leave, do leave. I left, for example. However, there are a tonne of people who are super smart, but can't leave because of their ageing parents, or other reasons.
Leaving everything you know behind takes courage, and adapting to a new world, a new life takes a lot out of you. Not everyone wants to leave their loved ones. Furthermore, if you are older, it's even harder.
Funny story, one of the reasons I left Bangladesh is because I used to work for this company that paid me 1/6th of the salary someone else was making in a more developed Asian country. I was doing the same work, succeeding at it too.
However, when I wanted equal pay for equal work, they decided to not renew my contract. Back then, I was young, so I decided to apply abroad, an was luckily accepted. Not everyone can do this, because again, you have family, and responsibilities.
2 months into my new job, my old company begs me to come back, and offers me the salary that was more than I wanted, and an O1 visa sponsorship should I want to go to America.
The visa laws make you a second-class citizen (well non- citizen, really) and ensure that you cannot spend much time with them - there is a maximum limit on the number of days you can spend out of the country. Also usually they mean you cannot bring your grandparents. Hell, UK home office basically killed a woman because they denied entry to UK to her sister for an organ transplant. https://www.independent.co.uk/news/uk/home-news/leukaemia-pa...
You have to have relatives and friends that can look after your family, because every now and then they need help and you are not there to help them.
For many folks who have half-decent life at home, the trouble is not worth it. I have many friends from eastern Europe who have come to UK to study and went back.
Lastly, why is FAANG the ultimate benchmark? Some people develop safety and life-critical systems, land rovers on mars, etc. I hold them in higher regard.
There is no amount of money that would have convinced me to leave Florida. My family and my wife’s family is here. My children’s friends and extended support networks are here. This life is not worth losing for any pay raise. I’m willing to bet a very large number of quality engineer made the same decision I did.
What is this feeling based on? You have to invest a lot of money, time and effort into paperwork before you can dream of migrating. One does not simply "choose" to move; it takes months or years of effort - not every talented individual takes this route, or even thinks it's worthwhile - there are a lot of trade-offs, even for the most naïve. I suspect this idea of talent=success is an instance of the Just-world fallacy (one way of reading what you said is that those who are talented have already been rewarded by FAANG jobs, therefore those who haven't yet are not talented, obviously)
And this is Bad and should be fixed. Developed countries should push poorer countries into paying better salaries to their workers and improve their conditions. This would directly benefit "westerners" too, since it would reduce migratory pressures and get a more level-playing field in economic sectors that have been wiped from these shores -- some even in quite strategic sectors, like the PPE shenanigans last year showed.
Would that mean my plastic bullshit would get more expensive? Yeah, so what? Maybe this would reignite the debate on effective redistribution in our countries too, which was basically killed in 1989.
I grew up in Sri Lanka, and there is a relatively small yet similar situation. Workers are paid $100-200, and have the jobs hanging in a thread leaving no room for negotiations.
There is a massive environmental impact as well. Those big companies often don't play by the rules, and often pollute the water ways, air, etc because who cares if they make money.
You don’t need a formal education to know whether you are being taken advantage of. Only people with formal education believe such lies.
Do you really think Globalization should force everyone to move where their salary is worth more?
They have no obligation to pay more for your services than they think they have to, compared to alternatives on the market. And you have no obligation to charge less for your services than you can get from other "customers". Either of you can negotiate the price up or down, and the other is free to take it or leave it.
It's not about who "deserves" what. It's a simple negotiation, like every other business transaction.
The more valuable (and less replaceable) your services are, the more pay you can successfully negotiate for. I guarantee you there are plenty of people at these "location-based pay" companies who've negotiated for considerably higher pay than others in their location. Just as there are many businesses (e.g. Apple) who've found a way to charge more for their products than their competitors have.
So it's worth learning to negotiate. And, perhaps more importantly, it's worth learning to provide massive value that's hard to replace. Or accepting the tradeoffs if you choose not to.
Let's say you mould your skillset to fit perfectly into a commonly-open job description: front-end software engineer. Well great, the benefit is you have lots of jobs you can apply for, so you can easily "fire" one company to go work at another. The downside is you're now in direct competition with a million other people who've shaped themselves to have the same common skillset, so it's easier for companies to fire you. Competition drives prices down and makes you more easily replaceable. But it gives you some safety due to redundancy. That's often a reasonable tradeoff to make, but you should be aware you're making it. If you want the big bucks, it helps to be rarer, and to work at places and in roles where it's easier to demonstrate your value.
I’ve seen plenty of employees with deep context on codebase able to retain their SF salary as they’ve moved locations. For the business, it makes little difference where they work so they keep on paying, they’d rather not lose.
For new hires, it’s a different game. Global means a global talent pool to choose from, a bigger market. Sometimes a cheaper market.
Companies raise their salaries when they can’t hire talent they want at a price point. So know your worth, and be willing to walk away. Also offer something valuable that companies don’t want to walk away from.
I've read Never Split the Difference by Chris Voss [0] and found it interesting but I'm curious as to other reads folks might recommend.
0 - https://www.goodreads.com/book/show/26156469-never-split-the...
Also for context - just remember that actually negotiating already puts you in a good subset of people. Many people - including myself initially - are reluctant to negotiate. It's a learned skill.
https://fearlesssalarynegotiation.com
If Person A is outperforming Person B, but is getting paid less because they happen to live somewhere else, you lose the ability to claim that you compensate people for performance without sounding like you're talking out of both sides of your mouth. Not only is Person A not going to be happy about that, Person A is not going to believe that compensation at your company is based on performance.
Companies that want to hire and incentivize the best people need to be congruent in their messaging around compensation and performance. Claiming that compensation is performance-based and then including a factor (location) that has no bearing on performance is incongruent and will not help to develop the right culture in this regard.
The unspoken advantage of remote teams is that employers can use the location pay disparity to their advantage. For example, we had pressure from executives to do more hiring in our international offices because employees were cheaper.
Abandoning location-based pay sounds good to people who feel they are disadvantaged due to location, but location-based modifiers suddenly become popular again when companies start moving compensation toward their cheapest location instead of toward their most expensive location.
The other advantage of hiring in cheap locations is that it's equally cheaper to provide large incentives to the best performers in those locations.
I could pay $150,000 for an average engineer at some of our US offices, and that employee would still be shopping around for their next 10% raise at a competing company.
Or I could pay $100,000 USD equivalent for a great engineer at some of our international offices, and that employee would be so far above market rate that they'd be doing their best work every day because they were so thankful for the opportunity.
I suspect HN's opinion on location-based pay might change over time as Americans realize that US salaries are the outlier on an international scale, regardless of which state or city you live in.
> I suspect HN's opinion on location-based pay might change over time as Americans realize that US salaries are the outlier on an international scale
The world's most valuable tech companies still do the vast majority of development work in their home countries, and the trend to keep core development at home has only accelerated in recent years. A lot of things would have to change - including that - in order for this belief to age poorly.
Also fwiw, we built our team fully-remote pre-COVID as well, with location-agnostic pay. It only becomes clearer that this has been the right move with each passing year, and we're continuing to lean into this as a result.
I will say, though, that this can depend on what type of company you're building. If your company's core competency is something other than software (e.g. sales), building an extremely high-performing engineering culture may not be the most important thing to your company, and the tradeoffs you have to make in order to do so may not be worth it.
It’s really unfair whatever you do, and right now there is no good solution. Partially because there is no good way of understanding the value of an employee.
This is the perception among many startups, but I think this is more perception than it is reality.
Exceptional engineers are several times more valuable to most startups than an average engineer, but almost all will hire an average engineer for $115k before they hire an exceptional one for $175k. There's no rational basis for this, but it is the path of least resistance. You won't need to defend hiring an engineer for $115k to cofounders or investors.
This is counter-intuitive, but the solution is to actually pay more for remote engineering jobs. When you do this, you're widening your talent pool to the entire world - and then you're selecting from the very top of the pool. We've been doing this for years, and it's been one of our most significant competitive advantages.
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If you're the only person in the world who can do what Facebook really needs done, they'll pay you $1M+ to do it from anywhere in the world.
But I don't think that's about optionality. That's about the actual value of your skill, and its scarcity.
Optionality is more like: Google would probably hire you do CRUD apps because you went to Stanford and passed our Google-like interview when we hired you to do CRUD apps, so we will pay you what we think it costs for you to not go do that at Google. Dave over here went to SF State and was hired before the algo-interview craze; no chance Google will hire him, so we can and will pay him less even if he makes better CRUD apps than you do.
If I, your hiring manager, also went to Stanford I will pay you even more because I sure think I have high optionality! And if my manager went to Stanford then all the better because he will immediately understand why you need more than Dave. Which, in the end, is true: Dave's still here, right?
There is one other thing that is a small factor in all of this. I'm not saying it is unsurmountable or anything but local/state/country taxes are a factor. We hired someone remote recently who was in Canada. We had to create a new company in CA just so we could pay this individual. For salaried/W2 style employment, there can be a non-trivial amount of extra legal/finance work for the company. Hiring local-ish avoids this. Obviously, having everyone on a 1099/Contractor style employment would avoid this too but most people want salary plus provided benefits. Again, a larger company may easily be able to absorb these costs but they aren't zero.
A worker sells their labor and a company purchases it.
When everyone lived in SF, a worker wouldn't accept a job paying below $100k because they wouldn't be able to afford to live. That same person in a cheaper state could negotiate a lower price, but most of the talent was saturated in SF. Now that everyone has left SF, there's no point in paying those prices if they can still retain you for a lower wage.
The corollary is that if you can reliably find and hire such people you’ll have a massive competitive advantage.
This is the same thing as:
>but also their perceptions of your options.
But it's still a stupid and arbitrary mechanism, and if you're negotiating you should treat it that way. It sounds very systematic and regulatory, but it's not. Just ask them for what you think they're willing to pay you, just like any other negotiation.
Local candidates are scarcer than remote.
Personally, I hate the resulting dynamic. Move to SF and the company basically subsidizes a million dollar mortgage. Move to Manila and your subsidized mansion could be $10k, 100 times less (maybe I'm exaggerating, I have no idea about real estate in the Philippines - but you get the idea). That's insane!
The worst part is that landlords get a huge cut of this, and I don't think they add a fraction of that value to society.
I hope that in the end, with the pandemic, it all balances out to two tiers: on-site and remote. I get that many companies still value attendance, whatever. I just hope that all remote positions balance out globally. It doesn't make sense to pay some guy in Utah twice as much as some guy from Honduras, if neither come into the office.
This assumes equal education, skill level, cultural norms and infrastructure. But these are often not equal. If your clients are in the US, hiring developers US side greatly reduces the chance of cultural misunderstanding and communication problems. Also timezone issues here too, for clients based on North America.
US higher education system is fairly strong, and not all countries are equal on that front. India for example, is known for degree mills and ways to "cheat" the system. Which is why US masters degrees are required for the most part. That is not to say there aren't incredibly smart people in every country, but it's not an even playing field and some countries have risks associated with hiring.
Another good example is infrastructure. I'm not sure how many times a developing world coworker has been blocked because of shoddy internet or inconsistent utilities.
These asymmetries will persist, remote or otherwise.
I've been working remotely since 2015 and the market has been gradually moving in this direction(at least in eastern Europe where I come from) - COVID-19 only speeded things up.
I think neither S.V. nor the market is rational.
You might say "but...but...the internet". Well, perfecting remote work is just the beginning. The unplanned/sponteneous interactions that lead to new relationships also matter. Maybe when we get that soviet internet that browses you.
> I think neither S.V. nor the market is rational.
I agree, and it's possible general "bullshit jobs" and Q.E./softbank bubble type phenomena dwarf the intrinsic value of cities. But still, those are orthogonal effects. Contrary to most American nostalgia, going rural does not defeat the bullshit.
>You might say "but...but...the internet". Well, perfecting remote work is just the beginning. The unplanned/sponteneous interactions that lead to new relationships also matte
Yes, I can totally get why anyone would pay a premium for someone who is physically present, or can be on relatively little notice.
But that only be relevant as far as "local or remote?", where the former gets a premium against the latter, and it shouldn't care about looking up the specific CoL of which remote location you're working from (so long as business hours are maintained). The issue is that location-based pay does do this.
Of course it is possible to set up a tech company elsewhere and have lower operating costs—there are plenty of examples—but that doesn’t it’s a slam dunk; remote work is a trade off that does not work for every person or company, and talent pools and ecosystems matter a great deal.
There are two reasons why SV companies pay outrageous amounts.
1. Some companies have insane revenues. Google/Facebook lead the way but others are in this space as well. They can pay engineers huge amounts because they can afford it. These companies are rare and there aren't many outside of a few hubs.
2. Other companies run huge deficits and are funded by VCs. These companies pay huge amounts because their VCs want them to grow crazy fast and want them to hire top people, so they have to compete with the rich companies. The VCs are primarily located in a few hubs because they want to be able to physically stop in to their startups.
If a few companies weren't bringing in stupid high revenues, the entire HCOL compensation for the industry would collapse. It'd return to something closer to what we saw in 2005 before the rise of the megagiants with more money than God.
The companies I worked for in the 90s, well before goog or fb existed, had location-based salary tables.
There's nothing post-2005 about this.
The canned answer is that SV provides easy access to capital and talent. These are rationale incentives, although they may be overvalued and this is changing.
Companies can absolutely pocket the difference. I know a SV CEO who is building out his software team in Pakistan because college educated programmers are paid $6/hr and the talent is adequate
If the supply of dollars was limited, it would never have reached such critical mass.
But there is another downside of pay cuts for remote workers: A remote worker does not have access to the same market as someone living in a hot cluster like The Valley.
A real-world example from Europe: If I take my Berlin salary and live just 50km out of the city, I am easily one of the top-earners in that area. Naturally, I lose easy access to many offerings of that city, but that's part of the deal, I think. Now if I ever wish to switch employers, I can look in Berlin, but I am at a disadvantage if many companies insist on on-site work. If they don't, I compete on a much larger market with many more would-be employees. This problem should be reflected in payment, I think.
So from my, completely egocentric, perspective it would be ideal if companies demand on-site one or two days a week, so I can choose the best spot for living in a larger area, but still only compete in a limited market.
It’s not another downside, it’s the very reason the employer can reduce pay. They are betting your supply and demand curves are moving in such a way that you will be willing to accept a lower price, because you won’t have a better option.
A world of resort-town skilled works chained to their hegemon isn't just terrible for workers. It's a terribly inefficient market: a "sharded monopsony". The very unplanned interactions that allow hot-spot workers to change jobs is also a big reason cities are such dynamic economies in the first place.
Pretty much all the surveys I see suggest that this will be the most common outcome. Maybe roughly 20% fully remote and 20% mostly back in the office. Though doubtless not uniform across companies. (I expect my company will tilt more towards remote given that we were relatively heavily remote pre-pandemic.) Which implies that most will probably remain in the orbit of a larger metro; many of the jobs aren't in the city anyway. And many people will want to stay accessible to a metro for other reasons.
I had about a 45 mile commute most non-travel days at one point for a while. (I did take the train some days.) It was pretty doable 1-2 days per week but wasn't sustainable on a daily basis.
It's a bad time to own city-centre commercial real estate.
While intriguing as an employee, this seems very pricey as the employer. Office space is expensive. Is it worth the cost given the low utilization? Would you really miss out on an excellent employee who cannot come in the 20% of the days others come to the office? How intriguing is it gonna be to hire someone who works the same time zone, is equally qualified but only costs 30%?
https://rationalwiki.org/wiki/Not_as_bad_as
OPs sweat shop metaphor is also a little far-fetched since they are comparing relatively unskilled workers with specialized tech workers (specialization commands a higher price based on limiting supply.) I think we have every right to complain about companies exploiting workers. They --already-- rely on a disparity of information in salary negotiations to manipulate prices in their favor. I think these practices and others are highly immoral and lead to people being paid far less than they're worth.
The whole reason an "employee" exists is because they create more value than they cost. The only relevant factor is how much value they create (either in the form of eventual increased profits or eventual decreased costs)...location has absolutely nothing to do with that calculation. I.E. If a business could rent a money printing machine, the location of that machine doesn't matter....the only thing that matters is how much money it prints in relation to how much it costs to rent. Any argument from the business stating they should "rightfully" be charged less to rent the machine is merely a negotiation tactic intended to increase profits for the business owners.
If you work at a company that does this or is threatening to do this, I'd seriously consider making a move to one that takes the opposite approach. Any hint of this mindset from a company should be taken as a huge red flag.
Not true. Its a market. The upper bound on your pay is how much value you're expected to create. The lower bound is your breakeven point - where you're not sure if its worth going in to work or not.
The range in the middle is pure profit - its value created by your employment. If your income is close to your value to the company, you're capturing most of that profit in your pay packet. If your income is close to your breakeven point, your workplace is capturing most of the value of your employment. Where it lands is dependent on competition. If there's lots of capable software engineers and almost nobody hiring, then competition for jobs pushes wages down. If there's lots of jobs and not enough capable software engineers then competition for software engineers pushes our salaries up.
"Location based pay" assumes your employer is no longer competing with other SV-based software companies (because you don't live there). But your remote job is proof that you have remote work choices! And as more companies become remote-friendly, your company is competing for my time with all the other remote-friendly employers. (Which should push wages up). And employees are competing with everyone else who can apply for remote work (which is a larger pool of applicants).
One side needs to change their way of negotiating before this becomes equal.