I think it just sets up some pretty weird incentives for employees, especially when you consider that cost-of-living calculators are often wrong. I don't think this model will work in the future.
Let's fast-forward 5 years and assume many companies have taken on this model and are now remote first. COL adjustments will have occurred, and COL is a very reasonable proxy to "desirability of living location", because as you mention these cities are based on supply and demand. When there's a high demand, COL goes up and as such so do the salaries of the folks living there.
So now employees are basically at a junction where they can live wherever they want. However, their employer will cover the expenses of living somewhere better (if we take this high COL = desirable line of thinking). So employees will go to these places, effectively costing the employer money!
The fundamental outcome of this change is employers are offering a giant "live somewhere expensive" stipend that can only be cashed if you choose to live somewhere expensive. It's just odd. I know for a fact if I was at one of these companies I'd move to wherever I could get the most money, because I think COL often overrates how expensive cities are.
Whats to follow is completely anecdotal. I had a job at a decent/high salary in an expensive city. I moved and took a pay cut, to about an average salary in a much cheaper city. I feel significantly "richer" then before.
I think the "more money is always better" is simply false. Its ultimately about how much money you make _after_ rent/mortgage. where rent should be equalized for equivalent housing. My $300k 5 bedroom house would be > 2mil in SF. A 2x or even 3x salary doesn't even begin to bridge the gap.
Let's fast-forward 5 years and assume many companies have taken on this model and are now remote first. COL adjustments will have occurred, and COL is a very reasonable proxy to "desirability of living location", because as you mention these cities are based on supply and demand. When there's a high demand, COL goes up and as such so do the salaries of the folks living there.
So now employees are basically at a junction where they can live wherever they want. However, their employer will cover the expenses of living somewhere better (if we take this high COL = desirable line of thinking). So employees will go to these places, effectively costing the employer money!
The fundamental outcome of this change is employers are offering a giant "live somewhere expensive" stipend that can only be cashed if you choose to live somewhere expensive. It's just odd. I know for a fact if I was at one of these companies I'd move to wherever I could get the most money, because I think COL often overrates how expensive cities are.