I hear you, and I think there's some truth in what you're saying, and probably the truth is somewhere between our statements, but I suspect it leans closer to my own position (although of course I'd think so...).
I think making an accurate comparison is very complicated, and if we looked at a large number of factors the wage arbitrage advantage would shrink. I think the seeming "wage arbitrage opportunity" is partly due to mis-assessment of the "sameness" of the contractors being compared.
For example, the average software engineer on the US coasts is much more likely than a software engineer in the US midwest to have gone to a top tier university, and although that doesn't guarantee they are better, there may be some advantage. The extra depth of knowledge or extra grit to grind through a slightly harder education might not show up in an interview or even on an average day's work, but might show up sporadically in ways that save or create significant amounts of money.
(To use a more obvious example, if a bootcamp coding school graduate and a graduate from Stanford both pass a coding interview, and both write a similar amount of "similar-seeming" code on an average day, I still suspect that when hard problems arise, or more sophisticated architecture or algorithms are needed, the Stanford or other top-school graduate is going to more reliably solve the problem and in a long-term better way.)
Similarly, they might live in a tech hub where they are constantly learning new technologies, or the general pace of their life and work might be ever so slightly higher. They might spend more of their free time getting better at their profession. Anyway, I won't try to provide an exhaustive list of possible differences, but these are some things I see that aren't usually accounted for.
I think making an accurate comparison is very complicated, and if we looked at a large number of factors the wage arbitrage advantage would shrink. I think the seeming "wage arbitrage opportunity" is partly due to mis-assessment of the "sameness" of the contractors being compared.
For example, the average software engineer on the US coasts is much more likely than a software engineer in the US midwest to have gone to a top tier university, and although that doesn't guarantee they are better, there may be some advantage. The extra depth of knowledge or extra grit to grind through a slightly harder education might not show up in an interview or even on an average day's work, but might show up sporadically in ways that save or create significant amounts of money.
(To use a more obvious example, if a bootcamp coding school graduate and a graduate from Stanford both pass a coding interview, and both write a similar amount of "similar-seeming" code on an average day, I still suspect that when hard problems arise, or more sophisticated architecture or algorithms are needed, the Stanford or other top-school graduate is going to more reliably solve the problem and in a long-term better way.)
Similarly, they might live in a tech hub where they are constantly learning new technologies, or the general pace of their life and work might be ever so slightly higher. They might spend more of their free time getting better at their profession. Anyway, I won't try to provide an exhaustive list of possible differences, but these are some things I see that aren't usually accounted for.