If I could keep my current compensation and move to the low cost of living area where my family is located, I would reach financial independence 10-15 years ahead of my current trajectory with Bay Area rents/costs. I'll settle for the minor inconveniences of WFH any day in order to get a decade of my life to spend with family or to work on my own projects.
I couldn't agree more. If I could work from home permanently I would move far far away from where I am currently living. I would get myself a nice condo or small house, and settle in. Currently, where I live, despite the fact that I make almost 30k/year more than the medium average income I still can only just afford a one bedroom apartment spending the suggested 30% of my income. Imagine being able to buy a house!!!! What a world that would be!!!
What's the guarantee that say your San Francisco/NYC employer will keep paying you city rates when you are living in a small town in mid-west. At some point they will catch up and start saving money this way. Everyone at a tech company is not a crucial employee. Don't get me wrong, I am all in for getting paid SF rates while living in a cheap Texas suburb.
Bingo. As a director of a team at a mid-sized tech company who had conversations with employees making decisions like this, I can tell you that it is standard practice to adjust salary for the cost of living and the availability of talent in a particular market.
I work for a very pro remote work company, but that’s still how we did things. You want to move to the Midwest and work remotely, or apply for a transfer to a different regional office? Happy to let you do it, but know that the market rate for your skills there is X, which means an adjustment in salary for a voluntary move. People usually weren’t jazzed about it but understood.
Just because it's standard practice doesn't make it right. Is the employee contributing less to the company based on their location in a cheaper market? I think not. So why should we as workers allow a company to extract more profit from our labor based solely on our physical location?
Markets never pay you what you contribute, they pay you some number between "what you contribute" and "what you can earn working elsewhere". Your contribution sets a ceiling on your compensation; your opportunity cost sets a floor. What you actually make is whatever you can negotiate in between.
When you work in an area with fewer jobs in your field, it's far less likely that you'll have a competing offer that'll jeopardize the company's ability to keep you. That means your opportunity cost is much less, which means that the floor on what they can pay you is less.
(A similar dynamic on the investor side is why startups end up starting in the Bay Area to begin with. In most other regions of the company, there are very few investors willing to invest in high-risk tech startups. That means that a prospective startup needs to take the only financing option they can get, which means that the investor ends up owning the majority of the company. The Bay Area has a liquid and competitive market for funding, which means that there's a real chance of a VC firm losing the deal, which is what allows startups to raise capital on fair terms.)
It does feel quite bizzaro doesn’t it? The manager here says
Happy to let you do it, but know that the market rate for your skills there is X, which means an adjustment in salary for a voluntary move.
my question is: in this hypothetical, did my skills somehow lose monetary value to the company because I left the west coast and bought a house in Indiana? What’s the calculation on that one? Let’s talk numbers.
I’d love to sit down to coffee with a hiring budget manager one day and get into the weeds on CoL against present value and just do all of the math until the cafe closes or one of us has to take the first coffee induced “bio break”.
Or at least, this is how it would go if my company tried to sell me on this. Hell, I might even be amenable to the pay cut if the company was otherwise doing right by our relationship as employer and employee and I felt sufficiently invested in continuing that relationship, but we’re going to get real mechanical and be VERY thorough about it.
I mean CoL is a thing. There are some talent asymmetries in DevOps and InfoSec, that could command high salaries/remote work. Remote work in security vs. salaries support this.
But for your run of the mil developer -> senior developer, a large chunk of that $150k Bay Area pay for non-FAANG is COLA, no way around it.
> my question is: in this hypothetical, did my skills somehow lose monetary value to the company because I left the west coast and bought a house in Indiana? What’s the calculation on that one? Let’s talk numbers.
It doesn't have anything to do with your skills. It's just that they believe they can replace you in Indiana with a lower salary.
I'm not saying it makes a lot of sense, just that they're probably thinking about it in that way.
Or that there is less demand for those skills in Indiana so the market for those skills in Indiana pays less than the market for those skills in a separate location. This raises the question of if "remote" is its own "virtual location" in terms of market. Unfortunately, there is not yet enough remote work for there to be an established "remote" market distinction.
For people where there is only a handful of people with those skills in the world, they command ny/sf pay wherever they live.
This is an interesting take. I am a remote worker (technically in Chicago), but my employer is headquartered elsewhere. We have offices in Chicago. But I live in Indiana.
What's my 'demand market', as it were? Is it Cali where my parent company lives? Is it Chicago where the subsidiary division I support operates? Or is it Indy?
How does one negotiate salary taking in all that when negotiating a permanent full remote transition?
(This is just for the sake of the hypothetical, I’m very satisfied with my current actual arrangement, but we’ve crossed into a new working world and consider me a career “prepper” or something)
i think there are reasonable arguments for each permutation of answers!
Ultimately, every negotiation comes down to BATNA (best alternative to negotiated agreement.) You have to demand from the company you think can/will pay the most the amount of compensation you are confident (but perhaps not sure) that you can get from the second-expected-highest company. This is similar to a Vickery auction -- the winner is the person who is willing to pay the most but they pay the price the second-highest bidder put forward.
In tech labor, the distribution of compensation for the same work is much wider than almost any market participant realizes.
To your last point, what would be the closest comparison? Is there even one? I’m sympathetic to the reality that there are lots of variables at play here between work sectors, but do you think a reasonable analogue exists in another industry, and could any actionable models be taken from, iterated upon and applied to tech labor with the effects of equalizing the demand curve and negotiating change through all of this?*
Appreciate the back and forth on this, it’s an interesting set of conditions we’re wading through as a society and I enjoy the thought experiment.
———
* there may be a better way to phrase this question, unable to figure how to put it, at the moment-if you’ll accept the pleasantry as far as the hypothetical will warrant it.
yes, your skills did loose monetary value. That's because it costs X less to hire in that location. The reason people are will to accept X less is because there's a lower COL.
But, the crucial thing to remember is that people's calculation of ROI of compensation to COL is way off. And so they're being under compensated in places like the bay area relative to other areas. Bay area is 50% more than the rest of the country but the COL is x4 to x8 (heck even day care is x4 more in SF than houston).
> yes, your skills did loose monetary value. That's because it costs X less to hire in that location.
I disagree. Your skills didn’t drop. Your value didn’t drop. They weren’t going to hire anyone in <location> anyways, they’ll hire <local> if you quit. So you’re negotiating between them wasting time & money hiring for someone of equal value locally
That chart is completely ridiculous. I moved from one of the cities at the top of that list to SF. My pay went up by 3x, my living expenses went up by 4x and my overall savings increased by 3x.
the compensation numbers I put up are averages based on Stackoverflow salary postings.
You're pay going up by x3 could have many reasons. If you're in the early part of your career, that's very much possible but it's not typical of an average SE in SF vs an average SE in the rest of the nation.
> my question is: in this hypothetical, did my skills somehow lose monetary value to the company because I left the west coast and bought a house in Indiana? What’s the calculation on that one? Let’s talk numbers.
It’s a bad idea for a company to pay you significantly more than you could earn at a different job. Because then you’ll never quit even if you’re miserable. You’ll stick around and be a toxic presence.
This framing is merely convenient. I work in a company that has workers in several countries, and an equally valid framing is "Those in poorer countries are as productive as the Bay Area folks, it is unfair they get paid less. Therefore we will pay everyone equally".
The outcome is that Bay Area folks will get paid less than their current pay, and those in India get paid more than their current pay. Because there's no way my company can afford to pay all their developers Bay Area rates.
That would be using exactly the same rationale as your comment: Equal pay for equal productivity.
I agree that workers in other countries deserve to get paid the same high wages I get paid for doing the same labor I do. If a company can afford to pay me those wages just because of the passport I carry then they can afford to pay, for instance, my Indian colleagues the same fair wage.
Let's not pretend that all companies are cash-strapped startups. The FAANGs of the world and the Fortune $x companies and the multinationals can absolutely afford to pay their global workforce uniform wages, but they choose not to because it's not maximally profitable to do so.
> Let's not pretend that all companies are cash-strapped startups. The FAANGs of the world and the Fortune $x companies and the multinationals can absolutely afford to pay their global workforce uniform wages,
I'll contest that. FAANGs are extreme outliers. I can assure you my company, while it certainly can pay everyone an extra, say, 10%, definitely cannot pay all its SW engineers Bay Area salaries. And then Non-SW engineering companies - even the top ones - rarely have that much money. Their operating expenses and capital costs are a lot more than a SW company's is.
> Those in poorer countries are as productive as the Bay Area folks, it is unfair they get paid less.
That does not really make sense. Work does not have some inherent value, its value is based on market situation, and different markets have different price equilibriums.
Honestly, if you go 100% remote, you are now competing with a much, much larger pool of developers. You are not going to command Silicon Valley prices.
i don't think morality is really useful here: right or wrong, it doesn't matter. labor is labor; that software engineers are a talented, "woke" (or at least perceived as such) group of labor doesn't change anything. you trade your time for money, which you use to buy stuff and then continue to trade your time for money. that's the game.
software engineers have it pretty good, anyway. this manager's example is perfect: sure, people grumble, but they typically eventually accept a reduced salary. why is that? even at a reduced salary, most laborers will be OK with a non-physically-straining, intellectually decent job that lets them live where they want to live and largely earn enough to not worry too much.
Prices aren't set (solely) by value provided. If that were the case, toilet paper and other essentials would cost 10-100x more than it does today.
Prices are set by supply-and-demand. More to the point, companies will pay you the least amount of money they can, while still retaining you. Just like you pay the toilet paper company the least amount of money you can get away with, even if you get vastly more value out of it.
You're welcome to reject the above on principle. But then you'll have to settle for the next best alternative. And if the company's done its homework right, your next best alternative wouldn't be any better.
I mean really you already nailed it on the "anyone can clean a toilet or cook a burger". This is only from my own experience working in a chain restaurant kitchen, but to a pretty high level. You don't need to be a great chef or anything to be a standard line cook, even if you don't know how to cook they can teach you in one or two training days, everything is timed to the second and all the equipment beeps to let you know when it's done. I was 18 at the time with no experience, my interview was "what days can you work, and are you comfortable staying until the bar closes" and for every one of me there were 30 people ready to take over when someone quit, including high school kids and people fresh out of jail without many other options.
What is there to debate? As the person you responded to explained, people don't want to pay $10 for a roll of toilet paper because people can buy one for $0.50. People don't pay a janitor or cook $200 per hour because people can buy one at $15 per hour.
If UBI existed and no one "had" to work, then people would probably have to pay a janitor or a cook $200 per hour.
Employee compensation has very little to do with contribution. It has to do with labor competition. The only way to capture more compensation is shut out workers willing to work for less.
People need to understand that salaries are set based on cost of labor, not cost of living. Companies will pay what it takes, but that value is preset by what employees are willing to accept in any given market.
> You want to move to the Midwest and work remotely, or apply for a transfer to a different regional office? Happy to let you do it, but know that the market rate for your skills there is X, which means an adjustment in salary for a voluntary move.
It seems like nobody wins in this situation. If my goal is to maximize savings, I'd move to the Bay Area to get the maximum salary from you and find the cheapest housing in the area. I'd be miserable because I'm living in a place I don't like in a shitty apartment. On the other hand, if you offered to pay the same amount while I live in the midwest, I'd be happier with my living situation and be pocketing more cash. This would make me more productive and make me stay at the company longer, with no additional cost to you.
>"As a director of a team at a mid-sized tech company who had conversations with employees making decisions like this, I can tell you that it is standard practice to adjust salary for the cost of living and the availability of talent in a particular market."
It's standard practice for your company maybe. This hasn't been my experience at all. I have had three jobs where this was not the case. I've had colleagues who have experienced similar as well. People should be paid for their time. I can't even believe a company would want to engage in salary reduction negotiations with employees they value.
That doesn't make sense though, 'the market' isn't wherever they decide to move to, it's 'remote'. And yes, that will be less than SF rates, but it may well be more than non-remote rates wherever the employee happens to live.
It's not paying less that's silly, it's paying an artificial amount less. The only way in which location should come into it is restricting candidates to those located in (or willing to work to) a particular time zone(s).
Generally speaking, CoL adjustments don't really make you whole. You may make more if you're in SF but housing is still going to take a significantly bigger chunk of your paycheck and you may or may not come out ahead at the end of the day.
Being on the periphery of a high cost area is probably the best deal. For most companies, for example, I imagine that Boston/Cambridge will be considered the same as Boston suburbs--even though within an hour drive you can get to vastly cheaper housing than in the city proper.
I wanted to add: If you live in SF and make $150k/yr and are able to put away 10% on investments that's $15k/yr. If you work somewhere else and take a move and make $75k/yr and are able to invest 20%, you haven't made a financial change. But a pay cut that big likely means you're somewhere that has less going on, less access to food, less for different types of activities, lower quality schools (that are funded less because property tax is lower), lower quality hospitals (big cities can afford all the fancy equipment and big time doctors), etc.
So to be honest, moving to a cheaper area with the exact same COL might not be better because of other factors involved.
Price, as it turns out, is a signal of value. Some of the value might be access to jobs which you may now be able to access from elsewhere, but certainly not all of it.
How many places in the United States have the immigrant communities of the Bay Area, for example? And how do you recreate such communities in cheap places without making them expensive?
> Generally speaking, CoL adjustments don't really make you whole.
Only if you don't live frugally, or if you aren't a senior engineer.
If you do, a lot of the high costs of a high-CoL area can be avoided.
If you are a senior engineer, that XY% raise over a junior is free money... Applied to a larger starting salary.
Oddly enough, high-CoL areas have the same, or higher % raises, when you are promoted, than low-CoL areas. In the mid-west, the wage difference between a senior and a junior may be $30,000. In the bay area, it can be $150,000. Your CoL doesn't go up just because you have a better job title.
It creates an incentive to establish legal domicile in a high-rent neighborhood and then always be somewhere else, "traveling", and taking care of all your business over the network.
So you can own/lease a broom closet or pied-a-terre in Expensiveton, maybe rent it out intermittently or to a "roommate", and actually work and sleep in Cheapsville.
If home address has an impact on take-home pay, it will be gamed just as hard as all the other metrics.
Yes, on the flipside, it works exactly the same way in reverse if someone is moving to a higher cost market. We benchmark against data from Radford & Comtrix (salary/pricing data providers) and adjust upwards on a regular basis too.
To simplify, it seems like either you want developers that are physically present in London, in which case you have to find some and pay them London rates, or you don't particularly care if they are physically present, in which case I don't understand why you would pay someone working remotely from London differently from someone working remotely from Llanfairpwllgwyngyllgogerychwyrndrobwllllantysiliogogogoch.
Presumably in both cases your company is getting the same value out of the employee. So why not hire only people working out of the Welsh countryside and refuse raises to anyone who wants to move to a higher COL area?
In other words, it seems like if I decide to work remote and lie about where I physically spend most of my time, it would make no difference to the company but might make one to my compensation, which, ignoring any moral judgement, just seems strange for the company.
>So why not hire only people working out of the Welsh countryside and refuse raises to anyone who wants to move to a higher COL area?
Companies do this to a certain degree. My anecdotal observation is that a lot of tech companies that aren't in the Bay Area or only have a small presence there don't in fact try particularly hard to be competitive with the big Bay Area employers--unless there's someone they really really want. People may still join for various reasons.
Because not everyone wants to work out of the Welsh countryside and the number of developers available there is limited. Which is a factor because developers still have some power. Because the market isn't completely flooded with developers.
For a business a "GOOD" engineer is one who is able to deliver business value at minimal cost. If by "GOOD" you mean talented then you have to realize that the US doesn't have a monopoly on talented coders.
The greenback goes far in many places within your timezone. If borders are opened up via remote work companies will be forced to re-evalute the axes by which they quantify "GOOD" (talent, cost).
>Happy to let you do it, but know that the market rate for your skills there is X
This seems logical, but determining X is still in your authority, so let's not pretend this is fair. It's usually not a granular break down of skills either, or worse, it's calculated by job title plus a single primary skill, e.g. "Senior C#/.NET Developer".
Make remote protected. Substitute your argument for any protected class and see how silly it becomes[1]. Just because the market (actually people) [2] can discriminate against group X it does not make it right.
Do these transitions actually work? I can't imagine taking a massive pay cut because I need to be closer to ailing parents. That is going to generate a lot of bitterness. What is the turnover like at your company?
If I deliver enough value to receive salary X, I don't see how my personal living arrangements factor in. There are stories of Google engineers vandwelling in company parking, by that standard they should have their salaries reduced.
I'm sure that if one of your directs asked for a raise because they moved in to a more expensive apartment you would politely refuse.
CoL adjustments have always seemed like a bit of a foreign idea to me, as someone who has been a freelancer for 20 years (WfH for 15). I'm not sure I would be able to sell my customers on the idea that I should get paid more because I live in X county. (Since my value proposition would be the same, assuming the customer wasn't in/near X.) On the other hand, if I lived in an area with a weaker tech scene, maybe my ability to negotiate would be weakened if they knew I didn't have a wealth of local options to fall back on?
So, as a director of a big team, you also offer to increase the salary of employees who want to move to higher col areas like, say London or Tokyo right? I mean, it's only fair. You pay what the market rate for the talent in that area is.
All places I've worked that have multiple locations adjust salary both up and down when employees move to different markets. It's all about the prevailing rate for labor where you are located, and not some measurement of the "value you provide".
Yes, but I assume these are all markets where these companies have physical presence. I doubt many are adjusting up because you want to move to London because you like the fog.
I'm mixed on the cost of living to salary argument. If I provide X value to a company. Say I complete a project that generates Y revenue. Why am I now docked on pay, because I'm choosing to live in a lower cost of area. Have I contributed less to compete this business item that now generates revenue. I find I'm more productive working remotely. So I'm doing more to drive that revenue line for the company.
I think this comes down, we're not paid based on revenue we generate. But to keep us out of the talent pool. Or how much an adjacent firm may be willing to pay us. I don't believe it's based on what I can offer.
The next argument is on market salary demand. I live locally in a market that makes no use of my technical skill set. If I need to keep cash flowing I find any three month contract to keep the lights on. But then I go back to being remote, and compete on a remote pool.
Now we're on a remote pool set. America, or another cheaper to live country. If it's an external firm, do we have a middle company that can handle that tax implications. So we can hire a developer in Southern Asia or Europe. That role can now be filled for a drastic monetary reduction. But at the cost of management over head. Time zone difference, communication lag, better remote processes / documentation, etc. I've helped a few teams acclimate to these off shore changes.
As an aside I always found it odd companies that outsource a majority of their development to an off shore firm. That will never be on site. But if a full time, on site, employee asked for a wfh to watch a sick kid, they had to burn a PTO day.
Compared to an off shore developer there is one thing a country local developer may offer. Better communication with stake holders. Working in the same time zone. Communication especially remote is a big deal. I've seen a number of teams not be able to adapt to the time zone difference or communication differences.
I went to work for a FAANG company several years ago. I took a 35% pay cut off my last local job, while my rent increased by about 60%. I did it for the experience. I've never seen the high FAANG salaries people talk about, but that's just me. I'm also horrible at leet code / hacker rank so there's that, and I studied for over a year on hacker rank to get that job.
As to my experience with cost of living adjustment frankly they've been border line insulting. Locally, on site, if I find a role that uses most of my skills I'm looking 150/180(full time / w2 contract). I had a fully remote contract role, that used all my skills and challenged me. That paid me 245. I always look at my rate as what is the given task and job duties, because I generally work medium to long term contracts. Senior Software, vs Dev Ops, vs SRE, vs Product manager all have different salary bands. I don't have a blanket salary, it's always what's the role you're asking me to do.
When I first got a COL adjustment rate, I laughed. Then I became frustrated, and then I ignored COL adjusted salaries. Coming off a local contract role at 165, I was in talks for a more senior position, full time remote. A company out of a high cost of living area no less, started at 95. I'm not against being paid a bit less, but that drastic of a pay cut is insulting to senior staff. If you're going to pay me less, I want to know why.
Regardless of locale, I'm incurring more costs. I pay for better internet, stocking of coffee/pantry, electricity, and the big expense space. I still live in a city. Getting a second bed room can help a lot ensure a better work from home environment.
Globalization is going to become very interesting. I moved from New York for about a 10% salary reduction, while halving my rent. The determining factor is politics, and how people can adapt to working remotely.
> But if a company is fully remote, why should it adjust for costs of living at all? Candidate A lives in an expensive place and Candidate B has an expensive hobby. Neither is the company's concern, is it? The bottom line is that each is worth $X to the company and wants $Y in compensation.
Because if it wants to hire workers that live in SF, it has to pay SF wages. It doesn't have to pay SF wages to workers living in Tulsa.
Think about it flipped around a bit. Let's say that instead of hiring employees, you're buying candy bars. Someone running a bodega in NYC isn't gonna give you a discount just because you're going to have the candy bar mailed to Oklahoma.
The bottom line is not the $X value and the $Y compensation. It's a lot more complicated than that. Just like the company's bargaining position is a complex mixture of the value that different employees provide and the opportunity cost of leaving a position unfilled, the employee's bargaining position is affected by the salary the company is willing to provide and the opportunity cost of accepting this job offer instead of another.
> It doesn't have to pay SF wages to workers living in Tulsa.
Not yet. When Tulsa engineers wake up to their value, they hold the cards.
I’ve been on the hiring side for good senior engineers. They’re hard to hire, period.
They take a ton of time to properly screen and by the end of the interview process, the company has wasted so many resources that could have been used for development if they don’t land that person.
I work for a company based in a major west coast city from a non-major city in the southeast.
My employer has different buckets it puts cities in and then limits your base pay based on those buckets.
Even with that limitation, my compensation is much higher than what I would make at a local company but not the rate I would get in a 'premium' market.
The most impactful benefit for me is I get to work on $big_city problems with $big_city talent. $Small_town problems and the $small_town talent are mind-numbing and deeply frustrating to work with
Short reason is because the market is driven not only by what value you provide, but how strong your negotiating position is.
As an analogy, imagine someone from NYC traveling to Mexico City to get tacos from a cart on the street at 9 pesos a pop (about 50¢ US). Those tacos are better than the tacos in New York, so why aren’t they paying $4 each?
The market is / will be self-balancing in this case. If companies can't hire people they'll have to come up with more than you're offering. If you're unemployed, you'll have to accept less than you're asking.
It depends. Many engineers will run elsewhere once they start getting paid less than they deserve, and the company is cutting paychecks for profits. The more extreme the difference, the crazier it will get.
Not forever, but it'll be longer than most people think.
We've tried to make a vaccine for the original SARS. It's been 12 years now and there's still no successful, safe vaccine for it. For COVID-19, if a vaccine is released within the optimistic 18 months, how safe will it be compared to vaccines that went through all the trials normally?
I believe rconti was not talking about the duration of COVID19 issues, nor the duration of WFH. Rather, the evolution of economic norms given the assumption of sustained normalization of remote work.
I think you're mistaken, since WFH gained massive adoption due to the COVID-19 outbreak. It's also what I believe he's referring to by, "Yeah, it won't last forever." I don't appreciate the downvote either for a reasonable comment.
The same reason they didn’t hire someone from the Texas suburbs rate in the first place.
An employee’s rate depends on how much they would be going for in the market, and living costs are part of the employee’s expenses—not that of the company’s.
There's a bit of a spectrum. Companies have learned to have employees working from home, but they're all in the timezone they were in before, they already got to work together in-person before being in this situation, and entire teams were put into the same situation at once. That's a step toward full support of remote people all over the globe, but the further you get the more you have to factor in legal overhead, cultural and situational differences, time zone difference, etc.
To be clear - I'm a big fan of remote work, I'm just saying that companies have been forced to solve only a subset of the problem they face before the market really can scale to be that large for everyone.
"Remote work" is globalization of white collar jobs. It is baffling to me highly paid tech workers do not see it.
"Work from home" is the first step. If a company embraces work from home, it embraces completely asynchronous communication. As soon as that becomes an acceptable way of solving problems, Vlad making $50k/year in Ukraine who will do 65 hours a week will become a contender to replace Jackson in SF, who is making $250k/year and refuses to work more than 40 hours a week because of work/life balance.
I do not know if its my non traditional background (no degree in computer science, big emphasis in history and philosophy since middle school) but I'm baffled by how politically naive many people in software can be. I understand why you might not like it but in pretending politics do not matter or won't affect you, you are letting other people decide and most importantly, think for you.
How many people think tech companies are just completely well-intentioned in everything they do? Curb your enthusiasm, a healthy chug of skepticism is needed.
I chose CS as my major in 2001. Yeah, during the dotcom crash and the outsourcing frenzy. I was told I would never have a job.
I'm not saying it will never pass. But history has shown it's much harder than you're making it out to be. We already had a great outsourcing attempt 20 years ago which had questionable results. And now pay is higher than ever.
Maybe they will be successful this time. But I'm not going to lose sleep over it. I haven't based my life around earning an SF bay area salary. My retirement is already paid for. My house is 80% paid for. College funds for children are mostly paid for.
I think this is, as usual, specific to the Bay Area and maybe NYC, and also limited to the top 10% of developers at tech companies.
I don't think tech salaries are all that great even in other big cities like DC or Denver, especially as home prices have also passed their 2007 highs, while salaries were stagnant and bonuses or equity are nothing like in FAANG companies. This is especially true when non-managers salary cap at about 40, which is when many professionals in other industries are just getting started making good money.
A lot of small cities might have no real tech companies and only a few large Fortune 500 companies that employ half the software engineers in the whole city. All it takes is one or two of them to decide to offshore half the IT department to Bangalore while signing a big deal with Cognizant or Infosys for the other half in house (i.e. H1Bs brought in from India). If you're stuck in that city, you're looking at wage stagnation for a long while.
It's still okay if you're a good developer - top 25% - at age 27 making $90K in a low COL city, while most of your peers are barely out of grad school. But it's not when you're 40 making $120K and all your peers - nurses, government workers, sales, lawyers, entrepreneurs - have caught up, often with far more stability and better working conditions. I think software engineering has gotten to be a dead-end career for a lot of us not working at tech companies in big cities, and globalization and H1Bs have continued eating away at the industry for the majority of us working as contractors and at big corps.
> I'm not saying it will never pass. But history has shown it's much harder than you're making it out to be. We already had a great outsourcing attempt 20 years ago which had questionable results. And now pay is higher than ever.
The technological barriers in the last 20 years prevented effective outsourcing of tech jobs. Since the technology did not work, the cultural acceptance of it did not matter.
I did one of the first live streaming events over the internet in 1995. It involved a convert venue, a dedicated T1 line to the data center hosting the web server, a Cisco 2501, a computer camera that i rigged to a frame grabber, and a "beefy" web server running on Sparc10. After we got the telco to install the line it took about 2 days to do the rest. The "broadcast" lasted between 11pm and 3am. I think it had about 9 concurrent viewers at its peak and 12 total. The promoter of the venue paid ~$4k to do it. That's the accessible "telepresence" at the time.
I was at a company that had offices on the West Coast, NYC, DC and UK in 2000 or so. We had a video conference system and IP phones. It was possible to do a "meeting" with the other offices and it worked pretty well -- sound was fine video a bit jerky. It helped that we had our own network. Someone tried to take a headend home and use the his at home cable connection. It sucked. The video barely did 5-10 frames a second.
Today I can walk into most of random coffee shops and do a professional quality video call. The technology is here. The only blocker for leveling playing field is cultural. The circumstances are forcing companies to remote the cultural barrier. Would they put it back when the lock downs are over? I seriously doubt, especially if they save $200k/year per high paid employee.
And an employee in the Texas suburbs will generally be "going for" less, given it's a different market. Sure, as more people are working remotely, the gaps will close more, but someone living in a cheaper area is generally going to be willing to accept less pay. As such, the going rate in the cheaper area will generally be lower.
That is a conflation of cause and effect. Employees in general may be paid less in Texas, but that doesn’t mean the location is the cause.
As companies go remote, they will depress salaries as a side effect of no longer having a locality-sensitive hiring constraint. But again the cause is the hiring constraint—not the location the employee is in.
A straightforward legal fix is to make location one of the things you can't ask about during hiring, like age, marital status, or disability.
All they should be able to ask is what fraction of their work hours you're available for. It could be that everyone must be online 9-5 PST, or there're a few hours of overlap, or there's no expectation of common work hours as long as you "get your work done."
If that really happens, the next order effect will be cheaper rents in the bay area.
Even now, there are some good rent deals. I moved to a new apartment a couple weeks ago (mainly because I needed a better WFH space to work effectively) and got 6 weeks free on my lease, which isn't normally seen in the bay area.
When the pandemic passes though I do hope to be able to return to working from an office, if just because it's less lonely and there is usually better sunlight in business spaces than what I get at home. Maybe 2-3 days a week in the office and 2-3 days from home would be a nice balance, when it is safe to do so. Employers may also see the value in at least providing some additional financial incentive for living closer to the office and being willing to come to the office (if safe), although enabling full remote work for those who choose it is something I also fully agree with.
At a certain point people will move to the bay area for the higher paycheck, so that keeps it adjusted pretty high. Companies are not competing against local-to-the-employee employers, they are competing with all employers globally.
Even with regional adjustments, the math usually works out in your favor to not be in the bay area.
"What's the guarantee" - There is no guarantee. Then again, there is no guarantee that the person who bought my drink didn't spike it with molly either...
The problem is that I've seen the pay difference be far larger than that. I worked in the midwest and people getting paid $100k moved to the bay area for $300k+
No, it doesn't. Or, rather, it doesn't while also leaving the same amount of money for savings and discretionary spending: which is the same thing. It may get you a bigger house, but you pay for that in terms of opportunity (not just jobs, but savings, culture and recreation).
Maybe Indianopolis isn't the perfect example for everyone. Portland, perhaps. Better proximity to great nature, still a lot of things to do, great weather (and getting better every year thanks to climate change, while California gets drier and drier), somewhat lower cost of living, etc.
Portland sees the same cost of living trends as the Bay Area, so enjoy the arbitrage while it lasts I suppose. (For what it’s worth, so does every similarly desirable metro area in the USA outside of Houston.)
Agreed. We jokingly (and sometimes not jokingly) talk smack to Californians moving north to Portland in hopes they won't come, because along with the steady influx of people comes steadily increasing housing prices. As much as I have said for years I never want to live some place like Seattle, I have to admit that Portland isn't really that far behind.
I doubt you'd be able to keep that current compensation, though. Most people I've talked with who have moved out of the bay area (or another HCOL area) to somewhere with a lower cost of living have either gotten an immediate pay cut, or their company has told them that they won't be getting pay raises until their pay is in-line with their new local market.
Companies don't do this. They will adjust your salary down based on your city of residence. Square is one example of this. You're not compensated for the value you provide, you're compensated for the cost of living near the office.
You're also now competing against a national talent pool vs locals only
Some do. I've gotten this deal in the past personally and know others that have as well. Always for employees with tenure that they want to keep around.
Remote salaries in tech are typically well-above "local" rates, either way.
If you want to hire A, you have to compete with local SF company that pay high wages.
If you want to hire B, you have to compete with local small town companies which pay low wages, plus a very small number of remote companies which are in the same position as you from a game-theoretical perspective.
I think it's obvious that in the long term, if remote work becomes widespread, wages (and thus cost of living) will level out, but in the short term if few enough companies do it they can beat the prisoner's dilemma and keep remote wages lower than the ones in Silicon Valley.
I meant that a lot of the top talent in Canada is already working in the US. There's a skill gap between top talent in the US and top talent in Canada.
Well, they may lose their jobs to folks still in Canada then. You can get a seasoned dev in Canada for less money than a fresh grad in San Francisco. If the company switches to be distributed a-la GitLab, there's no reason not to do it. The reason why offshoring nearly always failed in the past is because teams weren't fully distributed/remote. If a company re-tools around distributed, it can operate just fine as long as there aren't any "hallway conversations" remote workers don't have access to.
Remember that in this case it'd be "offshoring", not "offshore outsourcing". That is, the company would be able to maintain the hiring bar at that reduced cost.
Spent 20 years WFH on various personal projects, earning money on my own, and now I am hired and working from office. Too much freedom can be hard to cope with. A little bit of structure can be great.
Largely the compensation in SV and NYC was high because those were the cultural centers, it is expensive to live there but "everyone" wanted to be there.
Make no mistake - work from home means the salaries are going to regress to the midwest level of pay.
I would imagine salaries might dip because your new "competition" would be anyone in the same timezone (with the requisite skills). However I'd also imagine, if you are good, the offset would be well in your favour.
I got covid and was (and still am) as sick as hell. I'm going to live (not sure if I will get back to 100% yet), and I never thought this kind of sorely needed decentralization would happen in my lifetime. It almost feels like a fair swap, as this is going to be so, so good for humanity. If we can get a decent handle on covid, I'm actually feeling optimistic for my children, for the first time in years.
I want to live in a city with an abundance of arts organizations; but it does seem a bit odd to live in a place that has those things, but can't be accessed.
My understanding is that this has big tax implications (since presumably said low cost of living areas are outside of California). I would love to understand better what sorts of complications WFH bring to the table for those cases (and how they can be mitigated).
The company needs to do payroll in a different state and you, as an individual, now pay taxes in your state of residence which isn't where company HQ is.
From a tax perspective it's mostly no different than if they had a small office in that state.
For big companies, in particular, it's not that big a deal as they're probably using a payroll service like ADP anyway. There may be some paperwork--and certainly more so if other countries are involved.
You’re vastly underestimating the work of “setting up an office” in a new state. Every state has a bunch of paperwork, like setting up your company as a foreign corporation in that state. Then there is state licensing. Also every state has its own worker’s compensation requirements and some have other requirements too.
Your payroll provider generally tells you that you’re on your own for all that stuff.
For every additional state there is a ton of overhead.
I’ve had employees in California, Washington, and New York. It took two years to unwind Washington after the one employee there left, and it took a year and 20 hours of lawyer time to unwind New York, who was trying to charge us $5,000 as a penalty for missing paperwork we didn’t think we had to file (we ended up being right after paying the lawyer).
Payroll companies handle all the workers comp and payroll related duties for all different states and they do it for near nothing.
The only thing you are on your own for is tax filings and registration as a foreign entity. And that is only in some cases in some states. In most states, having a few remote employees is not enough to even trigger a filing requirement. In CA, which is probably one of the most draconian, we had to register as a foreign entity and then we have to file corporate taxes there and allocate taxes proportionally according to percentage of revenue that comes from CA, I believe.
And actually, they want your corporate income tax even if you don't have employees there, just because you sell to Californians. But they have had a hard time collecting for those that have no employees or other presence in the state.
> Payroll companies handle all the workers comp and payroll related duties for all different states and they do it for near nothing.
I know for a fact this is wrong. Payroll companies don’t do worker’s compensation in Washington because the state runs the insurance program. You have to register with the state.
The state runs most workers comp programs as far as I know. How is Washington any different than say California? I may have had to follow some one time instructions to initially setup a workers comp account in California, but I haven't touched it since. And my $50/month payroll service handles all of the payments and filings for me.
All 50 states have a different process. Many require you to get a private policy but some have state run funds.
As an example, I have to deal with my insurance agent annually for my worker’s compensation in California and then deal with Washington separately for their scheme.
I admit to having been naive on the issue. I know that bureaucracies are involved but it still seems as if at least the 90% case would be pretty cookie-cutter/repeatable even if there are a lot of steps and potential gotchas.
Unemployment insurance, family/medical leave, workers comp, and health insurance are all different by state. That can be a lot of overhead for the first employee in a new state, but then the second is trivial.
I had two different scenarios in mind: one happened to an acquaintance, where they negotiated a pay cut (because presumably the company doesn't want to pay Bay Area salary to a remote worker in a location in an area w/ lower salary base), and there was the question of taxes involving part of the year in one state and part in another (plus the math for RSUs and options, of which the person had vested both in both states).
The other scenario involves visa workers. The I-140 is predicated on not being able to find local candidates that match a criteria. More broadly, the H1-B visa grant pertains to foreigners being able to work in the US at all in the first place. I'd imagine that if you had everything setup to be remote from the beginning it'd probably be fine to keep things humming along, but I imagine that switching surely must pose some sort of logistic challenge?
Absolutely! In that long comment, mitchellh briefly talks about the impact of employing folks in different states on potential corporate tax.
Now imagine you ran one of the big billion+ USD revenue tech companies, and you're not talking about different states in the same country but a distributed workforce in many countries and the political pressures on taxation of e-commerce or similar business models involving intangible goods. One of the key arguments in many a tech company's tax/legal toolbox (usually for arguing they should pay taxes on one jurisdiction instead of another) is in which countries their engineering efforts reside and to what extent.
It's really no wonder that employment legal & finance wins out on totally flexible work arrangements in that situation, for better or worse. Politicians aren't taking any hostages in this context, see eg. France.
To provide an example from sufficient years back: I had to represent the stance of a past employer on compliance with Russian privacy laws to Roskomnadzor[1] in their HQ in Moscow. Through a carefully planted trick they tried to get us to commit to establish just the right kind of representation to be able to tax our revenue from Russian customers. In many countries, the narrative would've been "you have engineers here, you therefore build your products here, you should pay income tax here". Curiously, there isn't really obvious right or wrong in all this since the goods are intangible.
(Disclaimer: experience entirely from prior to my current employment at Google, I don't speak for Google in any way and have no insight into these matters at Google.)
> The company needs to do payroll in a different state and you, as an individual, now pay taxes in your state of residence which isn't where company HQ is.
This is not always true.
I'm remote. I pay my state and CA taxes for my CA based company even though I have never set foot in CA for this job.
Like others have said, check with an accountant, I have worked remotely for the past 11 years in NC, for companies in GA, CT and NY, but because I'm 100% remote, I only have to pay NC taxes. None of them ever had an office in NC
I confess I don't know what the laws are then. Presumably you don't pay both your state and CA taxes on your whole salary?
I confess I've never been in the position of being officially completely remote. I certainly don't pay taxes to the state where my company's HQ is but then I'm officially in an office in my state of residence. (And maybe the existence of that office would make a difference even if I weren't actually assigned there.)
I've also heard of stories of people getting in trouble for "moving residence" to Incline Village (Nevada) and doing taxes in Nevada while working in CA.
I can imagine more companies adopting a cost of living adjustment. There’s also a non trivial tax burden complexity with an employee base spread around the country/world.
If you have great skills you can do that today. If you don't have great skills and a company has made itself amenable to remote work, then why would they hire you at a Bay Area salary instead of firing you and hiring someone already in that location for half your salary?
