From the other angle: There exist companies that do not do location based pay. If you're hired, you get a US level salary, whether you're in San Francisco or Poland or Indonesia.
These positions are phenomenally competitive. You have swung open the doors to the world, and said "Give me what you got!", and you reap the benefits by having a much, much larger pool of applications and talent to sift through, with a lot of truly exceptional people in there - mostly very intelligent, very driven people from poorer countries.
That's how supply and demand works. If you are offer to pay people more, you usually end up hiring a higher quality candidate.
Yeah those companies don't exist because they would be wasting money. Salary isn't "location based", it's "competitive salary based". It just happens that competitive salaries strongly depend on location.
If you were to forget about location and just say "we'll negotiate all salaries" then you would end with exactly the same result because people in NL are willing to work for much lower salaries than people in SF.
I don't get why so many smart programmers don't understand this basic fact of economics. Eh maybe they do understand it and are just jealous of insane SF salaries (I certainly am!).
I would be wary of demanding equal pay by location anyway because you'll end up with all jobs moving to India.
Those companies do exist. I can confirm specifically that at least when I had an offer from Supabase they paid everyone, internationally, regardless of location, the same pay bands. Being USA based it was one of the reasons that I turned down the offer because I was able to get a much higher salary elsewhere but it would have been extremely competitive had I taken the role and moved to some place like Vietnam.
I wish I could have taken the Supabase role because it was definitely my top pick otherwise. One look at the output and caliber of people they hire also indicates that they have little issue finding talent.
FWIW this was a couple of years ago and I have no idea whether they are still doing this equal pay band thing or not. But they were doing it for awhile at least
The fact is that location is irrelevant for some roles. If you are looking for top talent, you'll pay top talent value. If you constrain your hiring to a single location, you're simply reducing your own pool of candidates.
Today, most labor arrangements are more and more like companies. If you were to select top companies to contract for some job that doesn't really care about location, you wouldn't be choosing companies based on that. You'd choose based on how good they are.
It's the difference between trying to buy the cheapest versus buying the best. Of course if you're always looking for the cheapest, you'll always move towards overseas jobs. But if you're looking for the best, you can get the best from all over the world by offering a single solid compensation package.
It's all a transaction, isn't it? At the end of the day my labor is worth however much I can get for it.
Sure, you could squeeze even more profit by paying overseas workers less, but then you create all sorts of imbalances that can and will hurt your business in the long run.
I always joke that if you want to hire me (I am not from the US) and pay 50-60% less just because I live here, why wouldn't I work 50-60% less?
You're getting the 1% of a lower income country, for an average local developer salary. If you want the 1% of SF you'll have to pay a lot more, even if they are equivalent in the value they provide. The company still wins, and as a result you get happier employees.
You can always cheap out, but it's never without consequences.
> Yeah those companies don't exist because they would be wasting money.
Basecamp has been around for 20+ years and they publicly mention that they hire based on SF rates, not even SF but the top 10% of SF[0] for positions around the world.
When you have only 30 employees, and your people at the top are buying multiple supercars and planes, and your revenue is somewhere in the ball park of $5M+ per employee... you sure as hell better be paying salaries commensurate with that, or people are going to be bitter.
Indeed. I don't understand why a remote company would want to pay top dollar for a mediocre developer living in the US, while refusing to pay the same for an exceptional developer living somewhere else.
Because of marginal returns on applicant motivation. A $200,000 position sounds great to a person expecting $150,000. $200,000 also sounds amazing to someone expecting $40,000. But, the same person expecting $40,000 will also be amazed by a $100,000 position, and certainly not half as amazed as the $200,000 one.
You also know that companies are looking to optimize margin, so those US level salaries are only temporarily. Given enough good people in India, or other low-income countries, that pay level will drop significantly.
What makes you think US level salaries are temporary? Isn’t this the case for last 40 yrs? Why it will change now? Is it due to advance in remote work or more supply?
Sure, that's of course what we would expect. However - and I don't know about you - if my options were between getting paid $200 a month as a farmer with my dad, or earning $8000 a month as a software engineer in my room, I would probably still take the $8000 option, even if it only seemed like it would be around for 3 months.
I may even be grateful for the chance, instead of angry that it wasn't a deal that was going to last in perpetuity. I admit I may be in the minority here.
I recently visited some teams in India, they indicated quite a few coworkers moved back to India to be closer to family and friends. Not everyone is dreaming about moving to the US. And yes, I agree that I couldn’t see myself living in India, with all the pollution and overpopulation…
I've worked with teams from Bangalore who were staff of the bank I was contracting for -- they were amazing, but also not appreciably (if at all) cheaper than employing someone in London or New York.
Several well-known banks had large offices, and competition for talent was high. No race for the bottom there.
It doesn't particularly matter where you employ people, if you're trying to save costs by paying people less then you're going to have a bad time.
Good engineers will accept lower payment if their costs are lower. Similar to how amazon is operating, by lowering costs, minimizing margin, they can win over customers and win the market.
Conversely, if there is a shortage of known-to-be-qualified engineers then anyone who is any good will command a high salary regardless of their cost of living.
If you want to pay them lower wages, they'll work for someone else instead.
A consequence of that is that local companies, that have local economy level income, can't compete on salary with those foreign companies. So they can't get the top-tier workforce they used to have access to. Ever increasing the economic disparity between countries.
They allow brain drain to happen, without the barriers of having to move countries.
I'm pretty sure someone making 2-4x their local salary for a remote company and paying taxes is healthier for the economy than working your ass off (or not) for a local startup that wants to end up getting acquired OR doing the same remote work with 2-3 layers of management extracting the difference in pay. At least in Poland I can't think of any single company I'd want to work for.
There is also the factor of the country receiving hard foreign currency, which I understand is generally quite desireable. This is less relevant for EU vs US compensation, but for more developing ("3rd world") nations could be significant.
If they don't have to move countries, it's not really brain drain at all. It's exactly the opposite in fact.
If they did have to move, then they would, and you'd have brain drain. But because they can remain in their communities (while earning the globally-competitive income that they would otherwise have to move for), they now pay taxes to their local government, buy from local businesses, mentor local youth, and so on. When they've earned enough money from their job, they may quit and start a startup in their own community, or become an angel investor supporting startups in their area, rather than yet another bay-area based fund. These are all good things!
You might be right, if we assume that everyone who takes these high paying remote jobs also makes sure to never ever spend the money they earn locally, either.
However, if I was earning an order of magnitude more money than I currently am, I might want to pay a little extra to go to the really good barber, or to eat at the really nice restaurant at the riverbank. Or, hell, I might just employ a cleaning service every week, to save myself a few hours' time vacuuming my apartment. These necessarily local services will also see their revenues rise. To me that seems to be a more important effect on the local economy at large.
But how would you feel about working as a barber, chef or cleaner, when you could earn two orders of magnitude more making Internet thingamajings for people on the other side of the world?
New York never has a critical shortage of barbers, chefs or cleaners even though for many decades it’s been possible to earn 100x as a Wall Street bond trader or quant.
A healthy growth economy can tolerate income differences. But the balance is certainly precarious, as the example of New York or London shows. It’s constantly on the edge of driving out the remaining barbers and chefs because they can’t afford rents.
But the money stay in the country and increase the chance that the employee eventually starts their own business, possibly using the cheaper workforce as an advantage.
A smaller company can do it. The post links to a post by Bryan at Oxide Computer. The salary scheme for the generally senior people they hire is quite egalitarian. It's also pretty modest by senior-level Bay Area (and even many other locations) standards.
Probably. But some percentage of people who buy into what the company is doing are willing to take lower pay to work there because the pay is "enough" or whatever.
This may work if you are only hiring senior people, but imagine hiring some mid level or junior employee. if US junior salary is Poland senior salary, would you willing to hire the senior dev from Poland to junior position ?
The issue I see is that software engineering is a team sport. Having a bunch of intelligent driven people doesn't mean they will together act like an intelligent driven group. Work cultures differ greatly between countries including in some subtle unconscious ways. Even Western Europe versus the USA have a very different dynamic in terms of how ICs and managers interact with one another.
But when Indians, Germans, or Canadians move to the Bay Area for better pay, they don't immediately (or necessarily ever) become culturally Californian. They might put their complaints aside for the paycheque, but they'd probably have equally-happily done the same as a remote worker. Especially when their whole organization is remote anyway, so there's essentially no subtle cultural difference between a Canadian working from Canada, and a Canadian who just moved to Mountainview while zooming from their spare bedroom.
Furthermore, if the difference in compensation is really explained by differences in employee productivity caused by work culture barriers, then location-based pay must somehow maps to the productivity cost of that work-cultural barrier. There's no reason to think that this should map directly to cost of living, and it would change over time; if the workforce composition shifts towards Europeans for example, then now it's your workers in the bay area who are less productive due to missing subtle cultural cues from their German managers.
Now see that's an interesting problem space to be in. Keen eye.
To me it seems like a really exciting place to apply recent innovations in LLMs. If LLMs can chew through thousand page legal binders like toilet paper, there's no reason they can't chew through a thousand 1-page resumes and spit out "These are the ten most promising ones based off of our statistical analysis." Firms can specialize in the production, hosting and fine tuning of these LLMs, and even play both sides of the market by allowing candidates to see how good their resume looks for a given job description.
I think this is much likely to become a lot more common in the latter half of the 2020s.
Whether or not it is pleasant for the applicants, it'll happen if it provides a benefit for the companies. They don't care about the applicant experience because they have no incentive to.
The flipside of this is that there will be an asymmetric advantage available to firms that are capable of finding excellent candidates that fall into the ML blind spots.
This is the dystopian future that is likely already happening. Slowly but surely we will lose control over our own labor. As the name implies, we're just human resources.
> you reap the benefits by having a much, much larger pool of applications and talent to sift through
Interviewing/hiring is incredibly noisy though. If SF engineers have a much higher average skill than the rest of the world then you might still end up with better people if you just hire from SF rather than the world in general, even if the latter has a much wider pool with more top people in absolute numbers.
To be clear: we don’t only hire in the US. We have employees in at least the US, Canada, and Europe at the moment.
We do want some overlap in working hours with the US, so it is true that we cannot realistically hire anywhere just yet, but not being in the US is not a dealbreaker.
These positions are phenomenally competitive. You have swung open the doors to the world, and said "Give me what you got!", and you reap the benefits by having a much, much larger pool of applications and talent to sift through, with a lot of truly exceptional people in there - mostly very intelligent, very driven people from poorer countries.
That's how supply and demand works. If you are offer to pay people more, you usually end up hiring a higher quality candidate.