Your salary is only partially based on "the value created by employee" - most of it is the market forces of supply and demand. When you're remote, you're competing with a much larger number of people for the same positions.
Salary is always lower than the (expected) value of work. If the value of work was equal to salary, the employer would have to reason to do this transaction.
The price of everything is always between the value placed on it by the buyer and the cost to the seller. Not a revelation.
At the margin, they are all equal because trade continues until the gains from trade are exhausted.
In many countries and U.S. states, laws guarantee that the cost of an employee to an employer is almost twice as much as what the employee is paid. In those circumstances, the potential gains from bilateral trade are not exhausted and people engage in that trade outside of the dominion of the state.
That's it. I believe, like in any market the top earners, who are hard to get and hurt when they go will continue to get high pay. Since even if you include the world (and most jobs don't, they include some timezones, jurisdictions only) the market is still rather small.
But if you're just the average developer, like most of us really are - the higher competition will surely make it harder to negotiate higher pay.
> In many countries and U.S. states, laws guarantee that the cost of an employee to an employer is almost twice as much as what the employee is paid.
This might be true at the lower end close to minimum wage, but payroll taxes are a specific % (usually around 15% at the federal level, and the employee pays about half that) and insurance and other benefits are typically a fixed cost per head (15k to 30k per year at most of the places I've worked). The only thing that might be variable are things like 401k match. Once you get to six figure salaries, the fully loaded cost per employee is 120-130% of their salary.
> Your salary is only partially based on "the value created by employee" - most of it is the market forces of supply and demand.
Value created is the driver for the demand side. Yes, the supply side will differ regionally, but for a service that isn't differentiated by the region it comes from, that doesn't matter—the law of one price should, in a competitive remote hiring market, prevail equalizing wages for remote work. Firms trying to normalize location based pay are trying to short-circuit the law of one price—or at least slow the development of equilibrium by introducing friction—by way of creating artificial market segmentation, which can only work so long as the market is not competitive because of either a monopsony or an explicit or tacit agreement not to compete for labor.
The public discussion that passes for transparency and explaining to prospective workers isn't just about that, it's most signalling to other employers to get them onboard.
> Firms trying to normalize location based pay are trying to short-circuit the law of one price—or at least slow the development of equilibrium by introducing friction
Considering the firms lowering the prices are currently paying far above the median in global wages, they’re doing the exact opposite of short circuiting the “law of one price”.
The whole reason for paying higher than median wage was the friction of being geographically located in high demand areas.
