Salaries aren't determined by productivity, they're determined by supply and demand. This comes up every thread where someone expects for-profit corporations to be magically convinced to pay more than they can because "but my productivity" or something.

And the willingness of workers to supply labor doesn't have much to do with expenses but their alternatives.

Cool, what are their alternatives? This is a trend that is sweeping across tech, starting with some of the highest paying employers in FAANG and trickling down to companies like Reddit. When the industry norm becomes permanent WFH, what alternative is there?

Seriously, what are you expecting workers to do exactly?

Their alternatives are the other remote companies! I'm expecting workers to do what they always have done, namely walk to the better paying employers. You earn the highest wages in any field in places where multiple employers are competing for labor, and the lowest in company towns.

Tech hubs like San Francisco are not "company towns", they already had multiple employers competing for labor, and workers already had the choice to go to these other companies that are becoming remote.

The only difference is the benefits of non-remote tech-hub work that have been driving the high wages in tech - concentration of talent, face-to-face communication/team-building, advanced urban infrastructure - are now gone. So tech workers will have the same amount of company choice, but can no longer benefit from tech hubs; tell me why companies are going to continue paying the same high wages again?

Your productivity, as measured by how much value you bring to the employer, does influence your salary, by setting a ceiling for it.

Concretely, if your work adds $300k/year to company revenue, it will at most pay you that much.

Of course, it prefers to pay you less, and to get close to that number it's best to be part of a big enough labor market that you can get job offers from several employers.

Here's the thing: In a mainly remote programmer labor market, that we seem to be entering, all employers in the entire US are in your local labor market, so that should work out fine.

What I just described is "supply and demand", with a bit of detail.

This is not how it works.

The bigger the labour pool, the worse deal you are going to get. You're now competing against the guy in Nowhere Town, this guy can do your job and he's willing to do it for less because he's never experienced an expensive reale estate market.

I run a small consulting practice. We are highly skilled and very experienced. We can often charge much less than our competitors because we don't have the overheads our competitors do. A 1 million dollar deal for my practice is worth a lot more than a 1 million dollar deal for Accenture. We can go down to 700,000 and still have over 90% profitability, Accenture will walk away at that price point because it's not worth their time.

> The bigger the labour pool, the worse deal you are going to get.

If this was true, big cities would pay the lowest wages, while remote rural places would be where to go for really high pay.

I think the main thing missing from your model is that the employer pool is also growing.

This is actually the case in certain industries and areas. You can, for example, make more money as a medical professional in a rural area than you can in cities, for example.

The main thing missing here is that this is the tech industry where there was previously no demand in rural places, which makes the low supply in rural places irrelevant. Before the aggressive lockdowns across the country, tech companies didn't care about rural areas because the increased labor pool wasn't worth the compounding gains you get from a concentration of talent, face-to-face communication, and advanced urban infrastructure. Now they literally can't have that, they will give you a worse deal because they have access to a larger labor pool.

It's kind of absurd to suggest that increasing the labor pool alone will lead to higher wages. It's strictly worse for city dwellers who already benefited from an increasing employer pool, which is now offset by an increasing labor pool.

Theoretically this is true, but most business has little to no idea how much value a given employee adds to the company, with the exception of some very specific roles like sale. Just think of any middle manager - what is their value add to the company? They are clearly needed to make sure workers have clear objectives, but how would you put a number on it?

For starters, it’s not possible to measure how much value an employee generates. When I worked as a consultant, I billed $x per year, is that how much value I generated? No. How much of that value did sales generate? How much did the secretary generate? How much did the cleaner generate? How much of my colleagues value did I generate by referring clients to them when I was at capacity? Or by helping them with their work when they needed it? Or vice versa?...

I think you’ve made a bigger over sight here though:

> In a mainly remote programmer labor market, that we seem to be entering, all employers in the entire US are in your local labor market, so that should work out fine.

What you would expect from this is a new equilibrium prices that is a) lower than the current highest paid region, and b) higher than the current lowest paid region. Which is a situation that doesn’t benefit anybody currently working in the large metros.

A worse (but likely inevitable) outcome would be if wages started trending towards a price somewhere in between San Francisco and Manila.