Even if one assumes the engineers in the expensive markets are all better, there's nothing a company like Reddit does which requires a bunch top level engineers. Some of their scaling and site reliability stuff, maybe, but it'll be a small portion of their employees.

They can solve that by paying accordingly more for their top technical positions to make those jobs competitive in expensive markets.

[I'm not arguing in favour of this, btw. - just pointing out it's an easy problem to solve]

The number of companies this would be a problem for is tiny.