To answer your thought experiment: salaries aren't dictated by justifications or fairness.
Silicon Valley firms don't pay high salaries because employees have to pay a high cost of living, they pay the high salaries because if they don't, some other company will pay it and the employee will leave.
They pay the salary that they need to get people to come work. The cost of living is an OUTCOME of this calculation, not the input. The CoL is lower in Morgan Hill because people living there have to commute further to get to their jobs, so fewer people want to live there. You can figure out the price people put on commute distance by comparing housing prices based on distance from work sites.
The really interesting thing will be to see how CoLs in the country change when commute distance is no longer a factor in home prices.
I don't think they are going to need it, because the actual problem is going to be the opposite; this will drive down developer salaries. Having to be local to Silicon Valley really limited the supply of good developers; only so many people can physically live in the area, so increased demand can't be met with increased supply indefinitely. This drives prices up. If everyone is remote, suddenly the supply of available developers goes way up for these firms. The supply of developers available to them goes way up. Sure, they have to compete with firms everywhere in the world now, but that is fine for them; the global market is not nearly as strong a seller's market for developers as it is in Silicon Valley.
Silicon Valley firms don't pay high salaries because employees have to pay a high cost of living, they pay the high salaries because if they don't, some other company will pay it and the employee will leave.
They pay the salary that they need to get people to come work. The cost of living is an OUTCOME of this calculation, not the input. The CoL is lower in Morgan Hill because people living there have to commute further to get to their jobs, so fewer people want to live there. You can figure out the price people put on commute distance by comparing housing prices based on distance from work sites.
The really interesting thing will be to see how CoLs in the country change when commute distance is no longer a factor in home prices.