>if they are absolutely rockstar talent and can be just as good remotely, then why wouldn't they command the highest salary?
because this isn't how market economics work. You're not payed for being a rockstar, you're payed for the least amount of money you're willing to work for. Indian rockstar coders may be as productive as American ones, the difference is their cost of living is lower, so they're willing to do the same work for less money. Same reason your barista in SF makes more money than the same barista in Podunk Idaho despite serving just as much coffee.
For example, when many people have children, it locks them in to their current job, at least for a while. They have to depend on the parental leave, they need stability and insurance coverage while dealing with a newborn, and their time is taken up with new responsibilities so severely that there’s no way to study, practice and prepare for intense interviews.
If market compensation was truly based on some notion of all the external factors that make a person willing to accept a certain amount of pay, then you should see people getting pay cuts when they have children. But you don’t. In fact, having children is historically correlated with raises, one theory being that it communicates fealty to your employer that you are accepting a life responsibility that yokes you to that employer more strongly - but this affect varies across different cultures and different types of companies.
The same is true for working remotely. There is no “market rate” for a person already working for you aside from what you already pay them. There is no comparable substitute person in the new geographic market that you can swap in for them. They already work for you.
Any salary arbitrage by location would already have to have been priced in when you hired that person in the first place. Them moving to a new location doesn’t suddenly mean they are fungible with a new local substitute - and in fact it’s quite the opposite.
The end result will be a huge equalization in pay. People in low cost of living areas will become a lot richer and those in high cost of living places will become a lot poorer.
Likely those high cost of living places will quickly drop in cost as most people spread out.
It's interesting because that equalization would only affect people in certain industries which are already fairly well compensated. If people making tech salaries move to overlooked parts of the country, I wonder to what extent their wealth would trickle down to benefit their new communities?
It would be interesting if a bunch of people leaving the Bay Area ended up congregating in certain low-COL communities. I wouldn't be surprised if a sort of rural gentrification occurs in the handful of Midwestern towns that have gigabit fiber. Would those areas remain low COL? Would the existing inhabitants become a sort of underclass?
> I wouldn't be surprised if a sort of rural gentrification occurs in the handful of Midwestern towns that have gigabit fiber. Would those areas remain low COL? Would the existing inhabitants become a sort of underclass?
You'd see something like that, but keep in mind that outside of dense urban cores, you mostly don't have the same constraints on available real estate that drive existing residents out by rising prices (and the SF Bay Area's lack of housing inventory is largely self-inflicted, unlike, say, Manhattan).
So, yes, some competition from well-heeled newcomers will drive prices up a bit (encouraging new construction), but without a constraint on housing inventory that drives the newcomers to compete with each other, what you get is just a bit of urbanization, rather than gentrification per-se.
The other way around, they are being paid as little as companies can get away with because remote is not a protected class. Profits come from unpaid wages. Imagine a hypothetical(?) scenario where market economics say you can get away with paying less for marginalized individuals. Disability, gender, religion, age, race etc. Would it be OK?
because this isn't how market economics work. You're not payed for being a rockstar, you're payed for the least amount of money you're willing to work for. Indian rockstar coders may be as productive as American ones, the difference is their cost of living is lower, so they're willing to do the same work for less money. Same reason your barista in SF makes more money than the same barista in Podunk Idaho despite serving just as much coffee.