Location based salaries are discriminatory
I used to feel this way, but largely grown out of it. In the end, you're asking for SF salaries, and those in India are asking for NL salaries(or SF salaries). You'd largely find a race to the bottom, I think.
The simple fact is you made a good living for your area, and they made a good living for theirs. If you want more, move. If you won't move, there's likely a reason why.
Everyone wants a SF salary with an Indiana or even India cost of living. For obvious reasons, that can't work.
From the other angle: There exist companies that do not do location based pay. If you're hired, you get a US level salary, whether you're in San Francisco or Poland or Indonesia.
These positions are phenomenally competitive. You have swung open the doors to the world, and said "Give me what you got!", and you reap the benefits by having a much, much larger pool of applications and talent to sift through, with a lot of truly exceptional people in there - mostly very intelligent, very driven people from poorer countries.
That's how supply and demand works. If you are offer to pay people more, you usually end up hiring a higher quality candidate.
You also know that companies are looking to optimize margin, so those US level salaries are only temporarily. Given enough good people in India, or other low-income countries, that pay level will drop significantly.
Good enough people from India move elsewhere in no time. You still get what you pay for.
Not necessarily. There are costs and obstacles to moving (for example moving from India to US is extremely difficult these days).
There sure are, but there's Australia, Canada, Europe and Middle East.
Results of offshoring to Bangalore is a stereotype, but it wasn't born from nothing.
No -- it's born of attempts to cut costs.
I've worked with teams from Bangalore who were staff of the bank I was contracting for -- they were amazing, but also not appreciably (if at all) cheaper than employing someone in London or New York.
Several well-known banks had large offices, and competition for talent was high. No race for the bottom there.
It doesn't particularly matter where you employ people, if you're trying to save costs by paying people less then you're going to have a bad time.
Good engineers will accept lower payment if their costs are lower. Similar to how amazon is operating, by lowering costs, minimizing margin, they can win over customers and win the market.
Why would they move away from family and friends if they could get equal pay in India, with more spending power?
Because living in India sucks even if you're rich.
I recently visited some teams in India, they indicated quite a few coworkers moved back to India to be closer to family and friends. Not everyone is dreaming about moving to the US. And yes, I agree that I couldn’t see myself living in India, with all the pollution and overpopulation…
That has to be a small minority. As for missing family, chain migration is still a thing.
Nearly nobody is ever going back, even those who can't land a proper job just stay and drive ubers.
What makes you think US level salaries are temporary? Isn’t this the case for last 40 yrs? Why it will change now? Is it due to advance in remote work or more supply?
Salaries have been under big pressure from Asia.
Also from Europe, Canada, and Latin America.
Is it? The only place I know off the top of my head is maybe ten years old.
Sure, that's of course what we would expect. However - and I don't know about you - if my options were between getting paid $200 a month as a farmer with my dad, or earning $8000 a month as a software engineer in my room, I would probably still take the $8000 option, even if it only seemed like it would be around for 3 months.
I may even be grateful for the chance, instead of angry that it wasn't a deal that was going to last in perpetuity. I admit I may be in the minority here.
If you're just in time, yes.
Everyone after you is out of luck and can develop software for $200/m then.
A consequence of that is that local companies, that have local economy level income, can't compete on salary with those foreign companies. So they can't get the top-tier workforce they used to have access to. Ever increasing the economic disparity between countries.
They allow brain drain to happen, without the barriers of having to move countries.
You might be right, if we assume that everyone who takes these high paying remote jobs also makes sure to never ever spend the money they earn locally, either.
However, if I was earning an order of magnitude more money than I currently am, I might want to pay a little extra to go to the really good barber, or to eat at the really nice restaurant at the riverbank. Or, hell, I might just employ a cleaning service every week, to save myself a few hours' time vacuuming my apartment. These necessarily local services will also see their revenues rise. To me that seems to be a more important effect on the local economy at large.
But how would you feel about working as a barber, chef or cleaner, when you could earn two orders of magnitude more making Internet thingamajings for people on the other side of the world?
New York never has a critical shortage of barbers, chefs or cleaners even though for many decades it’s been possible to earn 100x as a Wall Street bond trader or quant.
A healthy growth economy can tolerate income differences. But the balance is certainly precarious, as the example of New York or London shows. It’s constantly on the edge of driving out the remaining barbers and chefs because they can’t afford rents.
They could build more apartments.
I'm pretty sure someone making 2-4x their local salary for a remote company and paying taxes is healthier for the economy than working your ass off (or not) for a local startup that wants to end up getting acquired OR doing the same remote work with 2-3 layers of management extracting the difference in pay. At least in Poland I can't think of any single company I'd want to work for.
There is also the factor of the country receiving hard foreign currency, which I understand is generally quite desireable. This is less relevant for EU vs US compensation, but for more developing ("3rd world") nations could be significant.
This. I did the same while living in Eastern Europe + working remote for a US startup.
The amount of money I poured into the local economy is probably an order of magnitude higher (maybe even 2) than if I had worked for a local company.
But the money stay in the country and increase the chance that the employee eventually starts their own business, possibly using the cheaper workforce as an advantage.
If they don't have to move countries, it's not really brain drain at all. It's exactly the opposite in fact.
If they did have to move, then they would, and you'd have brain drain. But because they can remain in their communities (while earning the globally-competitive income that they would otherwise have to move for), they now pay taxes to their local government, buy from local businesses, mentor local youth, and so on. When they've earned enough money from their job, they may quit and start a startup in their own community, or become an angel investor supporting startups in their area, rather than yet another bay-area based fund. These are all good things!
Assuming you actually can hire the best people, and somehow do so in an affordable manner when half the planet applies, that's a great strategy.
But I'd expect a very low number of firms to succeed at that.
Now see that's an interesting problem space to be in. Keen eye.
To me it seems like a really exciting place to apply recent innovations in LLMs. If LLMs can chew through thousand page legal binders like toilet paper, there's no reason they can't chew through a thousand 1-page resumes and spit out "These are the ten most promising ones based off of our statistical analysis." Firms can specialize in the production, hosting and fine tuning of these LLMs, and even play both sides of the market by allowing candidates to see how good their resume looks for a given job description.
I think this is much likely to become a lot more common in the latter half of the 2020s.
Yes lets make applying to jobs even more of an algorithmic hellscape.
Whether or not it is pleasant for the applicants, it'll happen if it provides a benefit for the companies. They don't care about the applicant experience because they have no incentive to.
And then you try to look at the top 3 candidates and realise the LLM hallucianted them all
The flipside of this is that there will be an asymmetric advantage available to firms that are capable of finding excellent candidates that fall into the ML blind spots.
Resumes are candidate controlled which inherently makes them useless once social rules on lying too much break down.
This is the dystopian future that is likely already happening. Slowly but surely we will lose control over our own labor. As the name implies, we're just human resources.
Yeah those companies don't exist because they would be wasting money. Salary isn't "location based", it's "competitive salary based". It just happens that competitive salaries strongly depend on location.
If you were to forget about location and just say "we'll negotiate all salaries" then you would end with exactly the same result because people in NL are willing to work for much lower salaries than people in SF.
I don't get why so many smart programmers don't understand this basic fact of economics. Eh maybe they do understand it and are just jealous of insane SF salaries (I certainly am!).
I would be wary of demanding equal pay by location anyway because you'll end up with all jobs moving to India.
Basecamp has been around for 20+ years and they publicly mention that they hire based on SF rates, not even SF but the top 10% of SF[0] for positions around the world.
[0]: https://signalvnoise.com/svn3/minimum-pay-at-basecamp-is-now...
Those companies do exist. I can confirm specifically that at least when I had an offer from Supabase they paid everyone, internationally, regardless of location, the same pay bands. Being USA based it was one of the reasons that I turned down the offer because I was able to get a much higher salary elsewhere but it would have been extremely competitive had I taken the role and moved to some place like Vietnam.
I wish I could have taken the Supabase role because it was definitely my top pick otherwise. One look at the output and caliber of people they hire also indicates that they have little issue finding talent.
FWIW this was a couple of years ago and I have no idea whether they are still doing this equal pay band thing or not. But they were doing it for awhile at least
The fact is that location is irrelevant for some roles. If you are looking for top talent, you'll pay top talent value. If you constrain your hiring to a single location, you're simply reducing your own pool of candidates.
Today, most labor arrangements are more and more like companies. If you were to select top companies to contract for some job that doesn't really care about location, you wouldn't be choosing companies based on that. You'd choose based on how good they are.
It's the difference between trying to buy the cheapest versus buying the best. Of course if you're always looking for the cheapest, you'll always move towards overseas jobs. But if you're looking for the best, you can get the best from all over the world by offering a single solid compensation package.
It's all a transaction, isn't it? At the end of the day my labor is worth however much I can get for it.
Sure, you could squeeze even more profit by paying overseas workers less, but then you create all sorts of imbalances that can and will hurt your business in the long run.
I always joke that if you want to hire me (I am not from the US) and pay 50-60% less just because I live here, why wouldn't I work 50-60% less?
You're getting the 1% of a lower income country, for an average local developer salary. If you want the 1% of SF you'll have to pay a lot more, even if they are equivalent in the value they provide. The company still wins, and as a result you get happier employees.
You can always cheap out, but it's never without consequences.
Where are all those companies? TFA mentions "oxide.computer" but they actually hire people only in US with very rare exceptions.
To be clear: we don’t only hire in the US. We have employees in at least the US, Canada, and Europe at the moment.
We do want some overlap in working hours with the US, so it is true that we cannot realistically hire anywhere just yet, but not being in the US is not a dealbreaker.
Hotjar used to do this, with a heavy bias for EMEA timezone overlap.
Indeed. I don't understand why a remote company would want to pay top dollar for a mediocre developer living in the US, while refusing to pay the same for an exceptional developer living somewhere else.
Because of marginal returns on applicant motivation. A $200,000 position sounds great to a person expecting $150,000. $200,000 also sounds amazing to someone expecting $40,000. But, the same person expecting $40,000 will also be amazed by a $100,000 position, and certainly not half as amazed as the $200,000 one.
The issue I see is that software engineering is a team sport. Having a bunch of intelligent driven people doesn't mean they will together act like an intelligent driven group. Work cultures differ greatly between countries including in some subtle unconscious ways. Even Western Europe versus the USA have a very different dynamic in terms of how ICs and managers interact with one another.
If that means you also get US level working conditions and job security that can be a net negative.
A smaller company can do it. The post links to a post by Bryan at Oxide Computer. The salary scheme for the generally senior people they hire is quite egalitarian. It's also pretty modest by senior-level Bay Area (and even many other locations) standards.
Interviewing/hiring is incredibly noisy though. If SF engineers have a much higher average skill than the rest of the world then you might still end up with better people if you just hire from SF rather than the world in general, even if the latter has a much wider pool with more top people in absolute numbers.
This may work if you are only hiring senior people, but imagine hiring some mid level or junior employee. if US junior salary is Poland senior salary, would you willing to hire the senior dev from Poland to junior position ?
No. You got it all wrong.
You're asking for equal pay for equal work. If all your team members are paid in full but you, in spite of doing the exact same work, are paid a fraction of what they are paid, then something is terribly off.
Your contribution to your team does not depend on where you're currently located. How much time you waste on commute does not change the expectation placed on your output. If your office location is prohibitively expensive that means your company needs to sort their mess and work on a location that's more affordable. It makes no sense that you need to subsidize your employer's bad office location.
The problem with this line of thinking is that cost of living is the same everywhere. It is not.
Why does it matter? Salaries should depend on the value you deliver. I don't think companies limit their profits depending on the location. Apple devices are often more expensive outside the US.
While I can empathize with this, this is a moral judgement. Price is not determined by fairness, but by offer and demand (and other factors). Otherwise teachers might earn more than football players. I think one could argue they should.
I agree. It's just supply and demand. I just disagree with people saying salaries are somehow pegged to living standards. No it isn't. Companies don't care about your living standards. They pay what the market commands thats all.
Whilst we all want SF wages, those wages are because housing and cost of living in SF are exceptionally high compared to say Bali.
So you want to earn 200,000 USD. Whilst living in a part of the world where that effectively places you in the top 1% of earners.
You're only looking at this from that angle. What about the person who's living in SF, and scrapes by paycheck to paycheck. Whilst you live in a much cheaper area to live in, and you have a very different financial situation. Your both paid the same wage.. because "fairness".
You might say, "JUST MOVE". But do you think that's a fair thing to tell someone?
Sure people move to places like SF, but people do that for more than money, they do it for a variety of reasons. And one of them is that there's a lot of demand in that area for your talents. So if you wanted to change jobs, grow your career, etc.. you can. But that area has a higher cost of living.
You sacrifice some of those things when you move to the small country town, there's no tech hub. No meetups, nothing.
So do you think it's still fair to say to that person "Hey I know you're living hard... But at least you can spend that little money you have left on public transport getting to a meetup!". Whilst the person living in the middle of nowhere can afford first class.
I get what you are trying to say. I'm one of those people who makes that kind of money in a cheap country. I'm just saying its fair from a value delivered perspective. Paying you less doesn't mean the company donates the money saved to a charity. It just goes to the companies balance sheet. I've had plenty of arguments with company exec's about this:
1. its not fair you get to live like a king! -> would you move here to live like "a king"? Oh you don't want to deal with the pollution and the bureaucracy and lack of safety. Ok. Ah so there is a cost I am paying by living in a bad country.
2. paying you SF salaries would be unfair to people living around you -> ok so you would be ok paying that extra amount directly to a charity right? Oh ok you aren't.
I'm saying it's only fair for a employee to think they should be paid proportional to the value delivered. Companies exist to make more money. This causes a clash. In my last company the CEO specifically wouldn't hire staff engineers from cheap countries because he didn't want to give the other engineers the idea that they too can command higher wages.
Just pay people the same amount and let them decide how to live their lives. They are adults.
I don't understand what point you think you're making. My disposable income is not my employer's business, and I definitely do not live below my means to subsidize my employer's business.
You wanted me to do my work in exchange for my salary. Pay me. Don't think for a minute you are entitled to go through my grocery bill to see if you impose pay cuts.
Equal pay for equal work doesn't mean the same pay. It means that an employee from Bay Area, one from Netherlands and one from India are able to buy the same amount of goods on their local markets from their wage.
Remember that all of those local markets sell iPhones at a higher cost in USD than the Bay Area. Exactly which goods should they be able to buy the same amount of?
You're literally arguing that every area has different economics. But also failing to also understand that every area has different economics.
iPhones don't keep you warm at night.
I’m literally not.
A roof over their heads for one.
Rent, obviously
Of course a Bay Area employee needs to be paid more, their rent is insanely higher than the rent of employees in the NL
But money is portable, and Local market means a different thing than it did pre-pandemic.
The argument that local cost of living is the only factor falls apart when people are moving from high CoL markets to low CoL markets with their advantaged savings. Especially within a nation, or times of large movement (again, pandemic - where folks with higher CoL wages were better positioned to acquire prime real estate in lower CoL markets).
Big discussion, let me touch another point
The cost for you as business is NOT the same. Start from the taxes part, that 100k is what the employee gets but the cost for the business is higher depending on the country/area because they also pay tax on top, social benefits etc. Also need to have in many cases a local business, doesn't matter if that is virtual etc, since they need to adhere to local laws thus having resources supporting that etc.
So while I'm on the employee side here as I'm also working on a multinational coorp with global role yet paid with local standards, there is more than meets the eye
yep. People vastly underestimate how difficult the logistics of "pay an employee for services" can be, particularly when you don't have a legal corporate presence in the country where the employee resides. There are services that handle this for you and they charge a 30-40% premium on top of the employee's salary. And sometimes this is still worth it, because many countries charge an absolutely obscene incorporation fee for foreign-owned businesses.
That's the company's problem.
It’s not. If I have to pay some service or agency a lot of money to be able to employ you, there’s less money left to pay you. Employers at distributed companies don’t look at your take-home salary, they look at the total cost to employ you. Fees and taxes differ wildly per country, there’s no other way to compare. So if a large % of that total cost goes to middle men, then that makes you a more costly employee at no benefit to either you or the company.
If I’m considering two people for a job but one is in a place where paying them well means I spend a huge amount on fees (or “employer-side taxes” for that matter, looking at you Austria), I might well choose the other.
Yep, and they choose not to have it unless there's some compelling reason to. We've got staff in many countries, but it's not a blanket "work from wherever you like".
Fwiw companies like Remote and Deel charge a fixed fee of substantially less than 30-40%. IIRC we pay about 600 euros per employee per month to Remote. That’s a lot of money that I’d rather give to the employees themselves, but it’s much much less than 30-40%.
Having a freelancer registered in another country paid is not as complicated as people make it to be (pay an employee for services). As contractors.
The complication is the company prefers to work in one/a few jurisdictions only and have "proper" employees. It simplifies a lot for the company.
so why not set a “total remuneration package” as it’s known where I live. It’s the total value, inclusive of compulsory payroll deductions and taxes, and set the salary to match that. The cost to the company is the same, but your take-home depends on where you live.
in many areas salaries must be specified as the take-home part (including the taxes you pay as employee, but not including the part that the employers pay, which is not part of your remuneration), because doing otherwise would be confusing and could be considered deceptive.
Why is this downvoted? What's wrong about it?
in general i agree, but the problem with location based salaries is that they are working for locals, but not for expats. expats everywhere have higher living costs than locals, in part because they will get more expensive housing that is more up to the standard they are used to, and they also may have kids that they can't or don't want to send to a local school, and they will buy more imported food that they are used from home.
when i looked at their salariy calculator i figured that i could not live on the salary they would offer for my location. school costs alone for each child are as much as i pay for rent.
Why is that a problem?
it's a problem because it means that many expats can't work for gitlab because they can't afford to live on that salary.
if i am working for gitlab in my home country, i can't move into the home country of my wife because my salary would be reduced below what we need to live there
Salaries are based on the market economy of supply and demand. Salaries for a specific role are different in one location over another because that is what the market is in each location.
If you want developer salaries to be the same in all locations for the same level of work for reasons of fairness and anti-discrimination, you should ask why salaries of developers are higher or lower than other roles. Developers get paid highly because of supply and demand. Why not advocate for all workers, regardless of role, be paid the same - this would also be fair and anti-discriminatory. It seems we want to benefit from the market economy on one side and then want fairness on the other side. The logical conclusion of this kind of reasoning is communism where all workers at a company are paid the same, regardless of role. We know how that worked out.
If all developers, regardless of location, were paid the same, companies would much rather hire all their developers in a single location. Why bother hiring in locations far away? Jobs would have never flowed out of high paying locations to lower paying locations.
The Bay Area has the highest salaries because Silicon Valley has had many years to develop and the vast majority of tech companies are based in the Bay Area. Many companies are started in the Bay Area because people who work together in one company often break off and start another company. Many people at these successful companies have become wealthy and this has driven up home prices. This has made the Bay Area one of the most expensive places to live. Other workers cannot afford to live in the Bay Area and so there is a shortage of labor. This drives up the cost of every thing, including restaurants, groceries, and personal services. If the Bay Area does not add substantial housing, it will continue to see companies move to other metros.
In the US, salaries are different based on metro and state and are based on the market economy. Companies move to offices to particular metros if they is a healthy supply of workers and supply is greater than demand so that it is more cost effective. This location competition is healthy.
The role of any government, whether it is metro, state or country, is to create thriving economies so people want to move to that location. This means investing in critical mass in particular industries so many companies in that industry want to locate there. It also means ensuring other costs are low. In the US, health care insurance cost between $24k and $36k/year for anyone with a family. This is higher than the full salary in other countries. If the US does not figure out how to solve its health care costs, it will continue to see jobs leave for lower cost locations.
Supply and demand, yes, and when jobs are tied to locations the demand is concentrated. So supply needs to move to where the demand is, or face a lack of demand and lower prices. If the demand is willing to disregard geography, their supply will be that much greater.
With fully-remote working, the demand isn't as concentrated, so supply need not be as concentrated either.
As someone not currently living in the Bay Area, or London, or another tech hub, I'm quite happy not to be paying the cost of living there. And honestly I don't think it's fair that people who live there should be better compensated just because they decide to live somewhere expensive. But I understand why it happens, because when companies hire specifically in a tech hub there are lots of people willing to work with them but only if their pay is higher. It's a vicious circle for employers, a virtuous circle for employees, and only sustainable for as long as productivity remains above cost. It's not built on a stable economic foundation.
I don't want to accept lower pay for the same job, which may mean that I don't work for those companies. That's the market at work :). On the other hand, if a company wants to employ folk to be physically present in London, they're not going to want to employ me. While if a company is willing to pay the same to everyone, they'll get fewer people in London and more people outside London, and they might even be the same people just dropping their commute :).
There's enough global demand for Software Engineering to drag everyone up. It is universally the case that if you pay peanuts you'll get monkeys, but paying an equal wage for equal work benefits the company and wider society and I don't particularly care if that's lower than I might get if I was willing to work in London (or the Bay Area), so long as I'm not required to work in London (or the Bay Area).
The approach taken by Igalia (a co-op) is quite interesting: https://wingolog.org/archives/2013/06/25/time-for-money. Basically they target equal pay but adjust it for cost of living, rather than cost of hiring.
By that logic, the only one who wins is the company. I would like to believe that most of us, employees, want what’s best for us, employees.
If company X was paying N for a SF engineer, and suddenly it finds out that it can pay N/2 for an engineer that’s as good as the SF one (but lives, let’s say, in Mexico)… well, jackpot for company X.
If I work for you, and you're willing to double my salary to subsidize my moving to an area that has wildly more opportunities for me (which is precisely why the salary is higher there), don't mind if I do move there.
You just need to ask yourself if offering incentives to get your employees to move to hot job markets is in your benefit.
Same here. The reality is that what company chooses to pay is the minimal amount they can get a candidate to accept for that location.
If the candidate had other better offers, then they can either reject the offer or propose a higher counter-offer. If the company received a counter-offer and chose to accept it, then this amount becomes the new minimal amount.
Over a period of time, if there are enough counter-offers (or rejections), this continues to increase. Since, the two (or however many) locations don't necessarily have the same demand or supply, it's inevitable that some location will end up with much higher compensation than others. It's the nature of free market and why some companies engage/d in hiring collusion (see https://en.wikipedia.org/wiki/High-Tech_Employee_Antitrust_L...)
Why should someone living in Indiana make less money than someone living in NYC for a remote tech job?
Both are located in the US separated by a 2 hour flight. Both are in the same timezone too. For a remote company where you have employees spread around the US, there's no difference to anything here.
Kids would have to leave school and all their friends behind, wife hasn’t finished education here - there’s those reasons as well.
There are two ways to evaluate salaries / compensation packages: 1. What is your price in the market? 2. How much money do you need to be able to focus on your work and not worry about money. Most companies use a mix of both approaches, depending on the role and the individual. For most employees, the second perspective makes for a better experience. As long as you get enough each month to make the money problem a non-issue, you get to focus on the work itself, which can be a very positive experience. Some people (or the same people at different phases of their lives) want to optimise for getting the highest price they can get in the market. That's a valid choice, but one that in many cases results in a suboptimal work experience.
This suggests that cost of living in SF is the cause of high salaries but in fact the only reason SF/Bay Area has high cost of living is because of the high concentration of highly capital efficient businesses with strong skilled labor demand coupled with the complete unwillingness to build high rise density most places in the Valley area. I know quite a few people who make SF level salaries working remote in random states across the country. Of course it can work. And SF should not get too cocky. Detroit used to be the Motor City, Music City, and a cultural and technological force in the world, but then its core competencies got disrupted by cheaper, more efficient labor elsewhere.
Why is that? It isn't obvious to me. It seems like an excuse companies use to pay people less, especially if the company is based in a high-paying city.
Yes, the result would be that they wouldn't have any employees in the Netherlands, let alone in the Bay area.
If they also don't have regional pricing then it's discriminatory.
For some lucky people that does work.