Software companies like Gitlab don't address a local market. They target a global market, which is the same no matter where you're based and no matter where your employees live.
If you can afford to pay San Francisco developers a given salary, you can afford to pay Des Moines employees as much.
Let the employees benefit from their cheaper location rather than taking that away from them. Otherwise where is the incentive to declutter cities?
> If you can afford to pay San Francisco developers a given salary, you can afford to pay Des Moines employees as much.
That’s not really true. There are companies with a few employees in expensive locations and many in low income regions. If you switched everyone to the same salary you’d bankrupt the company. I certain don’t assume to know what Gitlab’s financials look like.
What if a company is paying above market rates for all their employees in their chosen locations? As a thought experiment, assume each of those people was the most suitable employee in their field. You’d pay them what they wanted in order to make it work. What if one of those people had a special situation with say dependants? Would you pay them a little more to relive that so they could work for you effectively?
> That’s not really true. There are companies with a few employees in expensive locations and many in low income regions. If you switched everyone to the same salary you’d bankrupt the company. I certain don’t assume to know what Gitlab’s financials look like.
There's a slight of hand going on here, where you at first assume all employees are fungible, to mention it's not possible for some firms to pay all employees the same.
But then you ignore that, before someone is hired, when they're merely a potential-hire, they _are_ (basically) fungible with all the other potential-hires. If you can afford the most expensive one, you can afford the cheaper one.
No one suggested paying everyone the same huge amount. But if you are paying Huge Amount X, that can go anywhere.
But that is the reason why San Francisco has higher pays, there is a huge competition between employers. In practice what you propose is not to hire in expensive places.
Which is what many companies do in practice. Say there's a company that's not in the Bay Area and has some potentially remote openings. As a Bay Area resident, go in demanding a FAANG in-person salary and most of them will laugh at you unless you're someone very unique who they need.
I mean, I strongly encourage all people who, when presented with the option of getting a very good deal on an expensive and valuable thing, to take it.
In equilibrium, you'd expect someone's programming skillset not to massively drop in value because they moved slightly far away in essentially the same legal jurisdiction. Until we reach that equilibrium, there is money waiting to be collected by firms who hire American engineers to work remotely.
In my understanding when you move away from hot-spots like San Francisco it is not your skill that loses value, but you that lose power in asking for an higher salary.
Also it is not that devs in SF are especially good; I would guess that the distribution of skill is power law (specifically the number of devs in the global n-th percentile as a function of the total number of devs in the hiring pool) and it might be argued that the competitions is counterbalancing any positive effect of that.
In the end it is a position of which job market do you want to be in.
Are the employees in San Francisco required to be there? If so, yes they should get San Francisco wages. However for people who can work anywhere it should be the same wages - if you want to live in San Francisco don't work for us we will hire the cheaper people in Des Monies who are just as good. If they can't hire people in Des Moises cheaper that means they are not paying enough
I am making a more fundamental point, which is that the current developer salaries (in general, worldwide) would not be as high if the cost of living were not high in the specific places where software companies congregate. These high salaries would otherwise not exist, because they are not based on an objective skills or supply-based metric. It is not as if SF developers are 3x more skilled than Des Moines ones. Clearly the assumption that salaries should factor in the cost of living is a factor.
In a lot of ways, this extremely high baseline benefits everyone else in the industry, even if they don't directly work in SF/NYC/etc. The salaries of Des Moines developers are probably higher than they would otherwise be, as compared to other professions.
And while it's nice to think that companies should pay people the maximum amount of money that they can afford, this is unfortunately not a rational economic move and it will collapse the moment any financial difficulties come into play.
> because they are not based on an objective skills or supply-based metric
Then you have to ask why do these clusters exist - with high skills, high salaries and high costs?
In my view, that's because there is value created by proximity.
It is more productive to have people co-located in the same office.
Also if you live in a major university town, or high tech area then that accelerates the exchange of ideas, particularly outside peoples direct areas of interest. This makes for better networked, more creative employees.
Co-location of companies also increases the chances of collaborations and deals.
The context here is an all-remote company though. As such they have rejected the advantages of proximity. They should be searching out the great but cheap people who want to live elsewhere.
But if those great people have any sense they will be working for a company that recognizes and rewards their skills and not simply offers a rate based on the area of the world they are in.
ie great people don't want to be competing on cost for work, unless they can capture some of the value of their greatness.
eg price for work completed rather than by the hour - so if they finish it in the half the time then they keep that value.
On the other hand, people currently average skill or below ( half... ) are more likely to be better off being paid by the hour.
So if you take a pure economic view, and everyone was behaving rationally, then a cost based hourly recruitment model gets you average and below workers.
ie you get what you pay for at equilibrium.
Of course what they are hoping is to exploit not being at equilibrium - countries with relatively high skills and low costs.
However they are going to be competing with companies based in those lower cost countries ( eg India ), who have both the low cost environment advantage and the ability to recruit locally and better select and retain employees.
My experience of working with even locally based companies that compete on price is high staff churn ( as the good ones find better employment ) - which really damages productivity.
TBH, if I were running an all-remote company, I'm not sure how hard I would try in general to match comp with big Silicon Valley employers. It's actually not clear to me that GitLab really does either. The pay scales for other popular cities are only about 10-20% below SF.
The phenomenon where of Googles/Facebooks/etc. offering mostly very attractive comp in spite of Bay Area CoL is actually relatively recent. Going back a couple of decades I looked at some employment options in Silicon Valley and the comp uplift wouldn't have covered the higher CoL relative to Massachusetts. And the companies freely acknowledged this.
We are addressing a global market too at TransferWise and London developer salaries are way different than Budapest salaries. We are also not a remote company... until next week :)
If you can afford to pay San Francisco developers a given salary, you can afford to pay Des Moines employees as much.
Let the employees benefit from their cheaper location rather than taking that away from them. Otherwise where is the incentive to declutter cities?