This is one of the things that's always bothered me.
Let's say you hire me for your company in San Francisco and pay me $150K. You've made a calculation: my value to the company is greater than $150K, and $150K is a price you're willing to pay to leverage that value. In other words, the company will (eventually) make more than $150K per year off my contributions to the company.
But now if I decide to move to Tulsa, OK, you want to cut my pay and reduce it to 90K, because of "cost of living".
Why? My value to the company hasn't changed! I am still worth the same amount as I was before! The only thing that changed is where I choose to reside. What difference is that to the company?
As remote working becomes more and more acceptable, we're going to start to see companies like Twitter and Facebook competing nationwide, not just in Silicon Valley. An engineer in Oklahoma will now be in a market that includes all of the big giants, and not just the local banks or whatever. Likewise, Twitter and Facebook will be competing against each other in the lower COL areas like Oklahoma! And not just SF startups, but competing against NYC and London startups as well.
This whole area is really fascinating to me, but the "you get paid differently depending on where you live" thing has always struck me as bizarre and one-sided in favor of the businesses and not the people in high demand, like good software engineers.
The $150k is not what your work is directly valued at, but rather an agreement of what it'll take for you to drag your ass to San Francisco, which is objectively a bad place to live if you're a human that has to make budgets, and come to work at Facebook.
Also yes, if Facebook starts to hire remote workers, then your value will drop because they now have the access to a pool of workers who don't want to drag their asses to San Francisco and can pretty easily settle for less since their rent doesn't require them to bleed money.
> The $150k is not what your work is directly valued at
Indeed, presumably you are worth more than that to them. It's a pretty naked cash grab to cut salary in response to a location move, and somewhat illogical considering they moved their HQ to the bay area in the first place. If it's objectively bad and expensive, why not move your HQ to Austin or San Antonio or Portland?
> if Facebook starts to hire remote workers, then your value will drop because they now have the access to a pool of workers who don't want to drag their asses to San Francisco and can pretty easily settle for less since their rent doesn't require them to bleed money.
For now. It remains to be seen if bay area rents are high because of tech salaries, or if tech salaries are high because of rents. Likely they feed back into each other. And as a worker in SF, you have access to all the same remote opportunities.
Amen. Anyone running a company who opts to put it in San Francisco or Silicon Valley at this point is issuing a big F-U to employees.
And this pay-cut policy is bullshit. If employees are allowed to work offsite, then that site should not be dictated. It's a win/win, because although the employee saves money, so does the company. And thanks to Trump and Republicans, employees can't even deduct the money they spend on electricity, office equipment, and rent.
I have heard so many people justify companies locating in the Bay are due to the talent found in the area. While that may be true I have a hard time believing that companies would not be able to recruit in cheaper large cities like Austin, Dallas, Chicago, Philly, Etc if they offered Bay Area money.
100% of the jobs I turn down are ones wanting me to move to the Bay area. I get paid the same already as my peers in the Bay and don't have to live there.
i'm kind of super interested (also scared) in the effects FAANG companies allowing remote workers will have. sure, maybe salaries at FAANG might decrease as supply/competition rises, but then all of the other companies that arent FAANG now have to sort of raise the lower boundaries of their pay since they cant just say "well you can go ahead to move to SF if you dont like it". Are we looking at lower high end of the spectrum but a higher median?
It seems like the top end would drop a lot more than the median would rise. Given the poaching it seems clear SF has a scarcity of developers that satisfy FAANG, and scarcity drives price up radically. If remote work becomes more widespread, the scarcity condition would presumably evaporate.
Socially speaking it could be a very good thing. Many of the big challenges we are facing (wealth disparity, political polarization, housing crunch) can be tied to the gross disparity in economic opportunity between places like SF, Austin, NYC, vs everywhere else.
Those companies already hire all over the world for the scarce, high dollar engineers. I don't think top end compensation will drop while those companies are monopolies. Most of those salaries balloon because they poach people from each other.
The amount of remote positions FAANG offer is tiny compared to other companies. If they open up to hiring the majority of positions as in office or remote the salaries will drop a lot for the Bay area. They will be more inline with the other companies in the Bay that hire in office or remote as options for almost any position.
You have to consider that FAANG companies already outsourced work to companies that use both offshore and remote employees. Policy changes aren't necessarily as big a deal as they seem, or at least they aren't what they seem, because they concern the direct hiring practices only.
Greater supply of employees, and potentially greater attraction TO employees.
Sure, they have to "import" employees, but importing 10% of the workforce in the Bay Area at X cost is apparently more appealing than importing 98% of employees to Tulsa at Y cost.
(Relatedly; Tulsa's not exactly a small place, but if you think the influence of "big tech" is bad in a larger metro like the Bay Area, I'd HATE to see what it would look like to bring a deluge of 'outsiders' into a much less populous region)
Tulsa is not geographically limited and has enough empty space for practically unlimited build out (similar to bay area or LA in 50 years ago). Tech in Tulsa will cause construction boom but not bay area house prices.
> A tech firm in Boise might not be able to hire and Elixir developer at any price.
I think the timescale matters. If it became known over a period of years that some company was paying $1mm for Elixir devs in Boise, loads of folks would consider learning Elixir and moving to Boise.
You mean to tell me that companies in the Bay Area never pull employees from schools outside of the Bay Area? I get the feeling there is a much more valuable reason for being based in the Bay Area than that.
Of course, it's not so cut and dry. It's sort of cyclical IMO:
- There are already a ton of existing technology companies in the Bay Area, and also a ton of employees.
- Students from schools around the country who are interested in tech might plan to move to the Bay Area due to the number of companies there.
- If your company doesn't hire in the Bay Area, it may miss out on the chance to hire the employees in the groups above.
The end result is an abnormally high supply of technology workers in the Bay Area. I'm not saying that's something intrinsic to the location, it seems to me it's more a result of recent circumstances.
So no tax or media related incentives to being in the Bay Area? You don't think it's worth more to Google to say: "Our headquarters are in SF" rather than: "Our headquarters are in podunk MT"?
I wouldn't be surprised to find out that 90% of the reason FANG companies operate in large metropolitan areas has almost nothing to do with employees and everything to do with global image.
That does not make a lot of sense to me. Google did not open a Seattle office because it enhanced their "global image", but because the presence of Microsoft, UW, Amazon, and a generally thriving tech scene meant that they would gain access to lots of experienced engineers who might be unwilling to move to California. Now they employ thousands of people up here. Facebook did the same thing; they also have a large Seattle office, right down the street from Amazon. Apple has a Seattle office too, focusing on machine learning. Not quite up to a thousand people yet, last I heard, but they have plans to grow. Lots of ML going on in Seattle.
When Intel acquired the AI startup I worked for a couple years ago, they built us a downtown office, much bigger than our team currently needed. Why? Because there are lots of AI people in Seattle who will not move to California, and Intel wants a chance to hire them. But it's still a very small office compared to Intel's global footprint; it does not affect their "image" at all. It's just a practical way of gaining access to Seattle's engineering talent.
It is a simple virtuous cycle. The presence of good jobs draws people who want to work in the field, and the presence of people with experience draws the companies who want to hire them. Geographic concentration is efficient.
Would that image or media related incentive exist without the huge amount of tech work in the Bay Area? My point is that the pull of the Bay Area is cyclical - supply of tech workers fuels the SV image which fuels more supply of tech workers. I think it all started with tech workers though.
If Stanford or another incubator of tech innovators was in podunk MT, then we would be discussing that location instead.
Yes, look at all the AI growth at Carnegie Mellon, University of Waterloo, Tallinn, Estonia - any relatively well-managed metropolitan area can position itself as an "innovation hub", the US West Coast certainly doesn't have a monopoly on it.
That's certainly true at my parent company (Accenture) - we're (in a completely neutral way) a completely different animal than "Silicon Valley unicorn", but we still have a huge gleaming building in SF because it projects a particular image.
If they did that then they'd have to give everyone at the company a pay cut. They don't want to do that. They'd rather use these pay cuts to bully individual employees. If they went after everyone at once then they'd have a problem.
why does it bother you? you're thinking like some individual laborer in a weirdly abstract sense, not like the person paying them. hint: you aren't paid based on your worth, you're paid based on, in general, the lowest that your employer can afford to pay you to not leave for a competitor.
capital on the aggregate always tries to get labor to work for the lowest possible price that they can. that's why negotiations go on between workers and employers. that's why if you don't negotiate, you get bowled over.
software engineers seem to think that they are this ultra elite labor class whose "value" is somehow tied completely to their intrinsic skills. that all goes out the window when software engineers begrudgingly accept massive pay cuts to take their insanely comfortable salary and lifestyle to a low COL area. that ought to tell you everything you need to know about your intrinsic "value": you lose immense power when you don't live in a place where you can quickly and easily get a job with a competitor.
if software engineers learn anything from this, it's that they are being paid a premium to essentially not change companies.
It's not about where you live. It's supply and demand. Those companies artificially limited their supply and provided a ton of demand within their narrow market. They are now opening up to new markets and spreading out the demand accordingly.
Forced analogy time: It's like if I decide I'll only buy peaches from the organic farm down the road. They charge $20/lb. I calculate that I get $21/lb worth of utility. The Farmer is happy.
A few years later I decide that purchasing organic peaches online for $15/lb fits the bill, and utility dropped slightly to $19/lb but still better in comparison. The farmer is no longer happy.
>The part that doesn't make sense though is keeping the employees that live in SF, or paying an employee more if they choose to relocate to SF.
The buyer (Facebook) may not be playing all their cards. They may very well intend to reduce SF employee headcount, but want to experiment, and so saying otherwise will allow them to do it in a slow, controlled manner.
Relocating for most people is actually a bigger deal than it may seem.
I personally have no problem with it and did just that at least once, but after returning I asked around and most if not all of my friends and family would not do the same even for - and this was especially shocking to me - 4x the salary.
Was that 4x the salary truly 4x, after subtracting out the costs of living?
I got an offer for an on-site job in London the other day, that would technically be ~1.5x salary boost - and ~5x the salary I had the last time I worked for a local company. But after subtracting out the costs of living, it turned out it would be effectively a 3x salary decrease, and at the same time a significant degradation in the standards of living. Turns out, London isn't a particularly friendly place for a couple with a toddler to move to.
Given that it was Zürich where CHF = PLN looking at sticker prices(with exceptions), my cost of living as a percentage of salary actually went down since I was renting a room instead of a whole apartment.
In terms of what I could nominally save every month the difference was enormous.
But yeah, with a child on board I would definitely have to get something larger paying somewhere in the order of 25-35% of my salary. But that's just CHF = PLN again, so no increase here.
Right. Bad phrasing. I meant X/3. I.e. after subtracting the essentials, I'd be able to afford 1/3 of good and services equivalent to what I could afford in my current location on previous salary.
The salary I referenced is high for the region in general (and I had it on a remote contract with an US company, though in hindsight, it was under market rate), but not necessarily for our industry, for the position I would be otherwise aiming for locally.
From my calculations, London works out quite well if you're single and willing to sacrifice heavily on the living space. It also works out a-OKish for two-income families with children at kindergarten age. Not so well with a toddler; I was shocked to discover that daycare costs more than rent on a two-bedroom flat west-side.
My friends in Warsaw are pulling anywhere in the range of $55-65k per annum before taxes - that's at corona rates, which knocked close to 8% off our currency's value.
Lowering salaries all of a sudden for a large % of their workforce who are currently very productive, would be a bad move, destroy value instantly that would take long to recover. It makes sense to pay to keep that value, at least for a while, and let market dynamics slowly do their thing.
This is a fundamental Microeconomics supply-demand pricing question: Do you sell an item based upon the cost to produce it, or the price customers are willing to pay for it?
Employment is no different. There is a struggle between buyers of your employment, and you (the seller) of your time/expertise. If those prices overlap, then there is a spectrum of possible transaction prices that can occur.
As you can imagine, if there are many buyers, and few sellers, then the price is driven to an auction level where buyers must compete with one another for the employee. If there are more sellers than buyers, then the price is driven down towards the cost of that employee (and associated education).
Typically we exist in the middle where negotiation tactics dominate where within that range the price settles. That's why there are policies such as "don't share your salary" - to create information asymmetry favoring the employer. ...and why people with poor negotiating skills typically earn significantly less than those who demand more.
Generally, when demand for employees is high, companies try to make the market less efficient by creating hurdles to employees leaving (like the agreements between tech companies not to "poach" employees from one another), and bonus programs that vest over multi-year periods.
This is relevant today because allowing employees to work from home greatly increases the supply of potential employees (both domestically as well as internationally), thereby forcing employees to accept closer and closer to their cost-basis. By microeconomic principles alone, it would be surprising if this didn't significantly drive down tech wages.
This is exactly right. I'm surprised that so many people, who are otherwise highly educated and intelligent, struggle with this concept.
There's no universal rule of "fairness" saying how much a company should pay you. It's not dictated by COL calculations and logical questions of value.
The company looks at you and your competitors (alternative candidates), and puts forward a number they think is high enough for you to accept, but not so high that they could snag an "equivalent" candidate for a lower price.
You win that battle not by whinging about COL adjustments, but by eliminating your alternatives (metaphorically speaking, of course). If the company truly needs what you do, and you're the only one who can do it, then you set the terms.
Let me preface by saying this policy is a serious threat to my compensation - so I hear you loud and clear!
That said: this is the reality and, as unfair as it sounds from the employee's perspective, it makes perfect sense. Facebook does not pay Bay Area compensation to its employees in other parts of the world. It should be no different for those in different COL areas around the US.
Not only does this suck for current employees, but new hiring will be a nasty wake-up call. If a candidate in a different city thinks they'll cross their arms and demand Bay Area pay, there will be multiple other qualified candidates in that city & around the country more than happy to accept a competitive offer tied to their COL.
Exactly this. I work for a FAANG and live in Texas. If employees leaving the bay area could leave and maintain the same level of pay, I'd expect a bay area salary as well. With the lack of a state income tax and relatively low housing costs I'd be living like a king! According to NerdWallet's COL calculator I could pay off my house after a year with just my salary increase.
Edit: And if I moved to the bay area I would absolutely expect a COL increase
In the big picture, wages are set by how much it would cost to replace you with an equally-qualified worker.
In a location-agnostic situation, this would mean "how much it would cost to replace you with an equally qualified worker anywhere in the United States?" (Or world, really, but let's stick to US for now)
What Facebook is probably signaling with this location-based cut is that this is the direction they are headed. They can't afford to immediately cut their Bay Area workers' salaries to this US-average-number (because they would lose their current workers faster than they can replace them) but they are not going to give preference in the future to Bay Area workers and will not pay new Bay Area workers higher salaries unless their physical presence in the Bay Area is explicitly needed.
I always see comments like this from individual contributors. I'll give you the managers perspective.
You may be worth $150k, any one individual engineer could be worth multiples of that!
Look at your entire engineering team, from best to worst. Is not there some inflation of salaries in the SF Bay area? The bootcamper that is making $110k out of bootcamp? Are they really 73% as effective as you?
The marketing person down the hall? Do you contribute more then that person today? Yeah, probably. Without marketing to get the word out and sales to actually bring in the cash, how much would your contribution be worth?
You have to look at the whole system as a manager. And yes we pay the bootcamper $110k because we hope they'll grow into be a great engineer like you.
You’re acting like the company is assigning value to people and paying them accordingly. That’s not how it works.
Pay is determined by the labor market.
Substitute wizzle for “senior engineer”, and wozzle for “bootcampers” or “marketing”.
Facebook pays $150k for wizzles because that’s what it costs to get good ones. It pays $110k for wozzles because that’s what it costs to get good ones.
People (reasonably) want a specific combination of wizzles and wozzles, for growth, different roles, etc.
At no point does Facebook assign a price for wizzles based on their expected individual contribution. Maybe there are some “market makers” in some industries, but I don’t think it applies in tech.
> I always see comments like this from individual contributors.
Tangent, but did I miss some trend here? Over the recent months, I've started to see the phrase "individual contributor" being used pejoratively, at times almost like a swear word. Is it now a label that's assigned to bad employees or something?
As an IC, I didn't read it that way. It seemed like a pretty clear case of "you are presenting an IC's perspective, allow me to present a manager's perspective". Two views of the same issue. It didn't seem to assign more value to one than the other.
That has absolutely nothing to do with what he said which is in no way linked to its status as an individual contributor.
The real point is it's not about what you are "worth" but about your market value. If you are away from Silicone Valley where you could find a similarly paid job, your options are more limited. That's a loss of bargaining power and Facebook thinks they can get away with paying you less.
I'm disappointed that all the replies to this sentiment are "lol, it's supply and demand". I mean, maybe that's it but it's not a very useful thing to think about.
As someone who's run two remote companies now, I have struggled with this dilemma as an employer. Because I agree with you, if a person is worth $x to the company, their location doesn't change that.
The flip side, though, is that I also want people to be on relatively equal footing. Not everyone can move to optimize their relative adjusted income, and the problem with a salary number is that it doesn't reflect status. An entry level SF salary will get you a house + a lake house in Oklahoma. A person who owns a vacation home is living an entirely different life than someone with a roommate in Oakland.
If you _don't_ adjust salaries for cost of living it makes that even worse, because suddenly you're probably paying less than someone in SF or NYC needs, more than what most people need in other states, and paying a crazy high localized salary to someone in Vietnam.
All that said, we're doing the same salaries regardless of location. And I'm still not sure that's the right choice.
"Not everyone can move to optimize their relative adjusted income"--
Yes and not everyone can get married, and have a partner to share the load with either. So does that mean a bachelor and a married man should be paid different salaries?
Not everyone can find the time to run a side business. So should those who can be penalized?
You pay your employees what they are worth to the company and forget entirely about what they are and are not capable of doing outside of the company because it's really none of your business. If that means you can't find employees because you aren't willing to value an employee correctly than your company will fail, end of story.
Single and married folks with families get paid differently. We pay ~3-4x more for healthcare for people with families than individuals.
You've sort of dismissed my point, though. The dilemma is that salary choices create friction within companies. It's not as simple as "pay what it takes to get someone" and "it's none of your business" because it does, in fact, have repercussions on how well a company works.
Without getting into what's right or fair, the reality is that it supply & demand that defines price setting behavior (in this instance, the company is optimizing for its consumer surplus)
Maybe another way to think about it is when some innovation drove the price of a car down by 10% (because production costs are lower, the car maker makes the same profit). Would you say "Hey I was happy paying the car full price for the value it provided me, so let me pay its old, full price, I'd be happy to do that"?
Of course, programmers in Oklahoma are not idiots either..
They know that not only does the company have a wider choice of employees - the employee has a
wider choice of employers.
They also know SV companies pay more then $90K, and if they already have a decent gig they will not 'settle' for what they could get at a small company. They may not ask for the full $150K - but they are going to ask for say $120-125k. End result is salaries will start to homogenize around the country.
P.S.
We've seen this in AZ as more tech comes in, salaries have been getting closer and closer to SF.
AZ salaries, when factoring in COL, are more than most tech jobs in California. This is leaving the allure of non-valued startup options but on average the salaries I’ve seen (yes, n=1) are in the realm of the upper curve of Bay Area salaries .
I actually haven't looked for a job locally in 3-4 years. I'm currently working remotely for a SV company.
I did do a few interviews with AWS for a TAM/Engineering type role earlier this year. They
had no quibbles with $175K. I actually lost interest when I found out it was a 25% on-premise
role at client facilities. If I had known everyone
would be working remotely now, it might have been
different.
yeah - I honestly think phoenix metro is a great place to live. Salaries are good, CoL is still fairly low (though its gone up quite a bit in the last 10 years), and there seem to be more opportunities all the time.
TMSC dumping $12B into the phoenix economy over the next 9 years would only make things sweeter...
> You've made a calculation: my value to the company is greater than $150K, and $150K is a price you're willing to pay to leverage that value.
You are in for some surprises then. Companies don't pay you just in relation to the value you deliver. Most companies pay the least amount required to get the value you deliver. Now if you are competing against engineers who are willing to accept lower salary due to low CoL in another area, the company would offer less.
> if you are competing against engineers who are willing to accept lower salary due to low CoL in another area, the company would offer less. Of course, that is not how things should be.
Why shouldn't it be? The market uses prices to signal things you should and shouldn't do. This particular price signal is saying, "move away!" If you don't have another, stronger signal that overrides it, it is not an efficient use of resources, and society suffers a dead-weight loss.
Why should all the software engineers all have to cram into Silicon Valley, pay California income taxes, and bid up the prices on a housing supply which remains wholly inadequate for the region? If tech stopped paying the California premium, the companies would see higher profit, their customers would see lower prices, their engineers more disposable income.
I would love for programming jobs to be available in every major city in the nation. Sure, the Mission is pretty cool, but there's hundreds of other cities in the US that have some pretty cool stuff too.
Well, if your labour is not, in fact, fungible it won't behave on the market as if it is fungible. You'll see this often for people paid a lot doing a single role for 30 years. Given the probability of a good replacement hire, they can't actually be replaced. Given their unique knowledge of that company, they're worth 50% to another. You'll also see this at startups where people will move from place to place keeping their income. But the median Facebook engineer's labour is fungible. It doesn't really matter which engineer is there so long as there is an engineer there.
And human beings are not being treated as disposable gadgets. Their labour is behaving like any other good in the market. There are some specifics but for the most part it is true.
There's no should to this. It's merely observational truth.
I think it is a mistake to conflate the intrinsic value of a human with their point-in-time value as labor in a business relationship. They are very different things.
In a business relationship both parties need to find a price point that is mutually satisfying. If there is no agreement that doesn't mean that either party is treating the other like "disposable gadgets".
And the system is not static, value from both parties perspective changes over time, which means the mutually satisfactory price point can also change or even evaporate.
This is the difference between being an owner and an employee.
As an owner, your work is valued by the income it brings to the business. As an employee, your work is valued by the amount it cost to replace you with another qualified worker.
What's the insight here? Since customers pay the business (read the owners) the least amount it costs them to replace the company with another qualified business.
If you do work as an owner, your work is valued by the market value of the result of your work.
If you do work as an employee, the only thing that matters is the market value of your labor, regardless of the result. It doesn't matter how much business value you add.
How can it be otherwise when it "should be"? I get that it is vexxing to the workers in the high COL area but why would it be done otherwise? How could it even work otherwise within the constraints. The only reason to pay more for higher COL jobs is if they get more utility.
You pay the extra cost to hire people in an expensive market (e.g. a high CoL locale) because you want a part of the talent pool. Now, is the talent pool in SF uniquely amazing, full of 10x developers compared to the 0.5x developers everywhere else in the world? Or is SF simply such a large talent pool that it's hard to staff your business without an office in SF? I'll let you decide.
I kind of understand where you’re coming from and as an employee I agree... but on the other hand when you relocate from TUL to SFO you expect a COLA, right? Why would COLA only apply one way?
If the company honestly didn't care where you lived and you took it upon yourself to move to SF, you wouldn't get an adjustment.
But if the company needs you in SF, then they'll need to pay what it takes to hire someone in SF, regardless of where you lived before.
It's only a cost of living adjustment to you. To the company, it's what they have to pay to get an SF worker. It just happens to be higher than what you were making before.
You are appealing to a concept of justice. Zuckerberg sees it a different way: how little can he get away with paying? If he can make a profit paying you $150K, he can make even more paying you $90K. He'll take it if he can. Whether he can depends on whether you have competing offers. If the economy tanks, maybe you won't.
If all their employees work from home, that's going to tend to equalize the salary levels across regions, and the number they settle to likely isn't going to be the SF Bay Area number.
You're not being paid based on your value to the company. You're being paid based on the minimum they can pay you to get you to work there.
If you move to Tulsa, you're minimum goes down because they know there are fewer opportunities for you to work in Tulsa.
As remote work becomes more prominent, then your salary would probably go back up as there will be more jobs for you in Tulsa. But it probably won't go back up to SF levels because everyone else has that opportunity too.
employers pay their employees based on supply and demand, not based on value. the supply and demand is historically based on a geographic locale.
one could argue this is how you make your own purchasing decisions.
now, with remote workers, this becomes interesting and not as clear cut.
i'm not making a judgement on whether this is fair or not (that's a whole other topic), but rather just pointing out how the calculus is generally made today.
> Why? My value to the company hasn't changed! I am still worth the same amount as I was before!
Do we have stats about he difference of hours between remote and non remote employers? I thought the main goal to have those big tech campus is to have dev stay longer at work.
If you are remote you will work less and then your value decrease
Wages aren't set based on a calculation like "how much is this person worth?" — that just sets the max salary. Companies want to pay their workers as little as possible; they can just get away with lower salaries in other markets than they can in San Francisco.
> You've made a calculation: my value to the company is greater than $150K, and $150K is a price you're willing to pay to leverage that value.
Part of that value calculus was that you are willing to relocate (or already reside in) the Bay Area. In other words, if the company offered only $90K and still required you to live in the Bay Area, you and most other qualified candidates would balk at the offer.
> The only thing that changed is where I choose to reside. What difference is that to the company?
Clearly the company is betting that if you walk away instead of accepting the pay cut, they will be able to find another qualified candidate among the now much larger talent pool they are able to court with remote work.
Salaries are mostly driven by how hard it is to find an employee, not the value they produce. If the model is to hire someone to be in the office, you obviously need to pay based on your location and local cost of living to be attractive. Completely logical to pay $300k in SF and $90k in Tulsa.
Now, if you really go all in with distributed workforce, the problem becomes "why pay $300k for the guy in SF while I can hire the 'same' guy in Tulsa for $90k?"
Instead of the guy in Tulsa being upset that they're not being paid as much as their buddy in SF, it's the one in SF who should wonder if they'll be able to keep their salary at $300k for long.
> my value to the company is greater than $150K, and $150K is a price you're willing to pay to leverage that value
Now change the second "is" in that sentence, to "was".
Offer and demand are (largely) what determine your salary. The value you create is what sets a ceiling to that price.
It's that simple. FB becomes willing to hire people who live anywhere, and stops believing that candidates in SF or other expensive locations provide more value. They will have a way larger pool of candidates, and they will likely find people who provide just as much value for FB (sorry to burst any bubbles here) but are willing to do so for less money than currently happens.
This just shows that companies are on the look to exploit their workers as much as possible, i.e., to make them work for the lowest salary possible for that particular job. It really bothers them that you may take home more money than they can possibly get away with paying you.
I think that some people in SF aren't probably worth SF salary. They are viable due to people used to working in co-located env and to having some superior peers. Also laws require equal pays for similar position in many countries.
Opening remote might make market more competitive. Speaking for myself, living outside US: I am able only to command 1/3 of SF salary(top in my market) although I could easily replace many people working in FB, earning much more than I do. Only if they were hiring in my city. (Pretty sure as had offers from Amazon, Gooogle etc. but they would require moving or local projects weren't interesting).
That's one way to give the middle finger to your employees, lower morale, and have them underperform. Businesses do stupid things like this all the time, against their own interests just to save a little money. Another example is not giving even inflation adjustment raises. The employees will respond accordingly and lower performance, work less, try less. Not enough to get penalized, just enough to stay in the boundaries. Or they'll leave. It's especially stupid to do this to remote employees for obvious reasons.
Employment is a market, similar to many others. As long as there are a significant number of companies that want you to show up in an office, choosing to live in an area with fewer employers puts you in a different cohort with a lower market-clearing price.
Also, the value you deliver to your employer will change whenever there’s a substantial shift in your working relationship. To the extent that your job requires collaboration, working in the same timezone as your peers has obvious benefits, for example.
Maybe presence in the office, to teach others in the office, is (supposedly) work $60k in the example above? (Seems silly to me, but that's what the management could claim.)
They can’t pay you less than your worth as a remote engineer. I’ve contemplated moving back to the valley but keep getting offered nearly as much money to work remotely from Arizona. If Facebook wanted me to work for less the answer is .. no.
On the other hand if I worked for Facebook I would strongly consider taking a payout if it meant I didn’t have to work in their open floor plan from hell environment.
Actually no one can precisely predict how much an employee is going to net for the company - companies lose a lot of money in bad hires. You are being payed according to a scale that works out to keeps costs down, as much as possible for a specific cost center.
Your value to the company is relative to the job market you are competing in.
You might be worth 90k in the SF market, but in a global market, competing against cheap labor and other regional bureaucratic regulations, your value will be less.
Someone probably used the argument that "you can reduce costs due to salaries" when pitching this to Zuck. They should have cited the rental savings instead.
> Likewise, Twitter and Facebook will be competing against each other in the lower COL areas like Oklahoma!
The market should recover when this new reality matures. Lots of engineers are currently willing to relocate and the current market is still incredibly competitive. Good talent is hard to find and easy to lose. That will not change.
The dev in Eastern Europe may do well to be reminded that the dev in SF is losing almost all of that on costs of living, and may actually be worse off in terms of disposable income (relative to its purchasing power in the area).
That might be true for someone that spends most of their income, but if you're attempting to save (to FIRE or something else), you'd be much better off in SF, since your post COL-adjusted take home is still significantly better.
10 years of working in SF and saving frugally, and you can go to the aforementioned places in Eastern Europe to retire for life. The engineer in Eastern Europe cannot do the same.
> But now if I decide to move to Tulsa, OK, you want to cut my pay and reduce it to 90K, because of "cost of living".
See if it makes more sense going the other direction. Imagine you started in Tulsa making $90K. After a few years facebook wants you to move to SF. Would you still be happy with $90K in SF since that's what your worth to facebook? Of course not, you'd want cost of living adjustments.
The $150K is so you can have certain lifestyle there but not save enough to leave and become competition, it's the cost of labor reproduction. In Tulsa your cost of reproduction would be lower, paying you too much might allow you to leave the shackles of capitalism.
thats not how the free market works. im not sure where people got the strange concept they are paid what they are worth to the company. or that they are paid based on how hard they work.
its literally just supply and demand like everything else.
Let's say you hire me for your company in San Francisco and pay me $150K. You've made a calculation: my value to the company is greater than $150K, and $150K is a price you're willing to pay to leverage that value. In other words, the company will (eventually) make more than $150K per year off my contributions to the company.
But now if I decide to move to Tulsa, OK, you want to cut my pay and reduce it to 90K, because of "cost of living".
Why? My value to the company hasn't changed! I am still worth the same amount as I was before! The only thing that changed is where I choose to reside. What difference is that to the company?
As remote working becomes more and more acceptable, we're going to start to see companies like Twitter and Facebook competing nationwide, not just in Silicon Valley. An engineer in Oklahoma will now be in a market that includes all of the big giants, and not just the local banks or whatever. Likewise, Twitter and Facebook will be competing against each other in the lower COL areas like Oklahoma! And not just SF startups, but competing against NYC and London startups as well.
This whole area is really fascinating to me, but the "you get paid differently depending on where you live" thing has always struck me as bizarre and one-sided in favor of the businesses and not the people in high demand, like good software engineers.