A policy like this is basically saying 'we only pay you as much as necessary to compete with your other employment options', which are currently still mostly those near where you are living.
If more companies allow remote work and they don't all do the same thing, this kind of 'geopay' policy will have to be abandoned.
But I agree it's completely backwards, you should be paid according to the value you create for the company, and nothing else.
> you should be paid according to the value you create for the company, and nothing else
But, you need to subtract your pay from the value you create. If you create $1MM value but cost $500K, and someone in the Midwest can create that same $1MM value for only $150K, it's pretty obvious what most companies will choose.
FAANG companies somehow convinced themselves that paying $500K for talent in SV made sense even if they could get similar talent basically anywhere else in the US for less. This massive WFH experiment that we've all been in seems to have demonstrated to some of them that physical location doesn't really matter as much as they thought. The next logical step is that paying inflated rates to hire someone in a particular physical location doesn't make sense, if you're just going to have them work remote anyway.
WFH may just be the pin that burst the SV tech wage bubble.
> FAANG companies somehow convinced themselves that paying $500K for talent in SV made sense even if they could get similar talent basically anywhere else in the US for less
Could they? The market for 500K engineers is very different than 60K or 100K.
With remote work, you'll see a handful of organizations getting the top talent across all locales, and the local companies who won't be able to compete be stuck with the rest. It's a winner-takes-all situation that will now happen on a global scale.
My point is there is no such thing as a "$500K engineer" anywhere but SV (and maybe Seattle), and thus no such market exists elsewhere. Honestly even writing "$500K engineer" sounds so absurd to me because it's so far away from "normal"... I doubt anyone who lives within 500 miles of me doing software development as an individual contributor makes even half that. Maybe I'm badly misinformed though.
Believe it or not, there's plenty of smart, even brilliant people who do not live (and choose not to live) in California. I myself may not be FAANG-caliber, but I've known known a number of people who used to work where I do and now work for Amazon, Facebook, and Google. They moved to the west coast, but obviously prior to taking those jobs they were just as good and living in the Midwest working for a Midwest salary.
It's honestly rather shocking to me that people seemingly genuinely believe that there can't possibly exist smart engineers who live somewhere other than SV.
I don't think people are doubting their existence, but rather if they could staff a whole floor with engineers of that caliber anywhere but in these cities.
Partly because, as you said it yourself, a lot of great engineers simply move there.
Unfortunately the ability to quantitatively capture how much value you created is next to impossible for most knowledge workers. Sure you can approximate but that’s about it
If more companies allow remote work and they don't all do the same thing, this kind of 'geopay' policy will have to be abandoned.
But I agree it's completely backwards, you should be paid according to the value you create for the company, and nothing else.