I am personally not a fan of this: early in my career, a colleague moved from the Bay Area to Boston to try to save his marriage (which sadly didn't work) -- and our employer adjusted his salary down accordingly. As you might imagine, the difference between the Bay Area and Boston is minimal -- they adjusted his salary down something like 4% -- but I just recall how dispiriting it was for him to have this massive, stressful (expensive!) life transition exacerbated needlessly. Employers don't factor in other elements of cost-of-living (can you imagine giving someone a pay bump when a kid goes to college -- or a reduction when they graduate?!), and I don't believe geography should be factored in either: pay people for their work, not their ZIP code.
Whilst I completely understand your viewpoint, I have a more nuanced take on it (understandably, as I work there). Firstly, we don't pay peanuts. We have never taken outside funding; it has always been a company goal to grow organically. As such, we don't have as much cash to go throwing around like VC-funded startups. However, as I said we still pay well; yes I could make more by taking a job in London (I'm in the UK), but then I sacrifice so many intangible things. Working remotely has allowed me to be present whilst my 18 month-old grows up, and a 4 day work-week has helped even more too. Unlimited holidays, very flexible working hours and being treated like an adult about how you organise them, a flat company structure, a company which genuinely cares about employees and their wellbeing - all of these things add up. Salary isn't everything. Whilst no job will ever be perfect, this company is by far the best place I have ever (and will likely ever) work. Employee satisfaction is always very high and salary is rarely even a factor (let alone the main reason) if people decide to move on.
