You have to pay SF rates if you want to hire SF level talent, even if you are hiring outside of SF. The average engineer is cheaper outside of SF because the average engineer is worse, not because you are getting the same quality of employee for the less money. Most of the good engineers move to SF to get access to better career opportunities.
I'm not saying all engineers outside SF are mediocre, but if you want the ones that aren't mediocre you have to pay them the same salaries the SF engineers are getting, so you're not saving any money.
If the average engineer in a non tech hub was just as competent as the average SF engineer at half the price, no one would bother paying through the nose to operate an SF office (but clearly many companies feel the compensation premium is worth the access to better talent).
I'd be curious to see if you have any evidence at all to suggest that the average engineer outside of SF is more competent than the average engineer in SF.
The simpler explanation is simply that Bay Area companies have more money to spend. There is a lot of evidence to suggest this, including the fact that Bay Area headquartered companies pay more in their remote offices compared to other companies.
> the fact that Bay Area headquartered companies pay more in their remote offices compared to other companies.
That just proves my point that companies pay a premium for Bay Area employees because that's where talented employees who can demand a premium congregate, and when they want to hire similarly talented employees in other areas they also have to pay a similar premium instead of downgrading their compensation packages to the local market rate.
Let's say the typical comp in the Bay Area is $200k/year and the typical comp in Nowhere, OH is $100k/year. The fact that companies continue to pay their bay area employees $200k when cheaper options are available means that either:
1. They are willing to pay a huge premium for geographic proximity to their HQ
2. The average developer in Nowhere, OH is not as good as the average developer in the bay area. Not because Ohioans can't code, but because a large fraction of the ones who can have already moved to the bay area to make twice as much money. The ones that are as good make as much as the ones in the bay area, but most are not and drag the average down.
If 1 were the case, then companies would cut people's pay by half if they moved out of the bay area, or offer half as much money to people working in their satellite offices. But many companies don't, so clearly option 2 is more plausible than option 1.
Again, you are making a lot of unsubstantiated claims here. Also, there are more options than the two you have presented.
The only thing you can definitely say about Bay Area developers vs others is that they’re paid more money - a result of there being companies with more money located there.
Finally, your entire premise is faulty as you perfectly correlate developer quality and compensation.
it’s neither. it’s just supply and demand. in the bay you can have offers from facebook google twitter square stripe etc... and they have to all compete for you.
The latter would seem insane if they are going to allow teams to be 100% remote. Why pay SF rates if you're getting a WFH employee?