Canadians working from home permanently should expect salary changes: experts(theglobeandmail.com)
theglobeandmail.com
Canadians working from home permanently should expect salary changes: experts
https://www.theglobeandmail.com/business/article-canadians-working-from-home-permanently-should-expect-salary-changes/
34 comments
> But the arguments I see from Facebook and in this article are about cost of living. That's wrong. Price it based on value created by the employee.
Salaries aren’t based primarily on the value created by the employee and never have been. Salaries are based on supply and demand. Workers are in a market and they sell their time and skills to the highest bidder. They’re in competition with other workers capable of doing the same work.
Of course not all workers are equally capable of doing the same work, so in that sense the value created by an employee does come into play when determining what they’ll be paid. But if two equally skilled and competent workers are competing for the same job, the one who will accept a lower salary will get the job. This will tend to favour employees living in an area with a lower cost of living.
Salaries aren’t based primarily on the value created by the employee and never have been. Salaries are based on supply and demand. Workers are in a market and they sell their time and skills to the highest bidder. They’re in competition with other workers capable of doing the same work.
Of course not all workers are equally capable of doing the same work, so in that sense the value created by an employee does come into play when determining what they’ll be paid. But if two equally skilled and competent workers are competing for the same job, the one who will accept a lower salary will get the job. This will tend to favour employees living in an area with a lower cost of living.
You should take this argument to the H1-B thread.
Would love to see the reactions.
Would love to see the reactions.
Herein lies the basic problem: you are an expense to the company and will be paid as little as possible for the output the company wants and the cost of replacing you. Usually this means of course the going market cost of an engineer at your skill level, seniority, etc.
The negotiating power is on the company’s side, save for some wiggle room. You can indeed negotiate that you provide more value than you’re being paid, and may successfully get a raise, but the cost of replacing you is always a factor.
The negotiating power is on the company’s side, save for some wiggle room. You can indeed negotiate that you provide more value than you’re being paid, and may successfully get a raise, but the cost of replacing you is always a factor.
Cost of living is a red herring. The market-clearing price for your labor is lower because you cut yourself off from a lot of competing non-remote employers.
But if most employers were to go fully remote, at that point the shortage-driven Silicon Valley wages would drop near the national average, regardless of how much more it costs us to live here.
But if most employers were to go fully remote, at that point the shortage-driven Silicon Valley wages would drop near the national average, regardless of how much more it costs us to live here.
>you cut yourself off from a lot of competing non-remote employers
Just because you're working remotely doesn't mean you wouldn't consider a non-remote job at any price. So the fact that you're local geographically does not reduce to a value of zero, even if you are currently in a remote arrangement. The employers are competing for people too.
Just because you're working remotely doesn't mean you wouldn't consider a non-remote job at any price. So the fact that you're local geographically does not reduce to a value of zero, even if you are currently in a remote arrangement. The employers are competing for people too.
> But if most employers were to go fully remote, at that point the shortage-driven Silicon Valley wages would drop near the national average, regardless of how much more it costs us to live here.
Yes, and, using the same reasoning, at some point the cost of living in Silicon Valley would also go down so as to approach the national average.
Yes, and, using the same reasoning, at some point the cost of living in Silicon Valley would also go down so as to approach the national average.
Tech workers are only 7-12% of the population. Unless other industries also go remote and move away, the Bay Area is still going to have local and foreign speculators cashing in on a severe housing shortage.
It's not an excuse by the company to pay less. It's an excuse by the employee to earn less. Employees will accept a lower income for the advantages that come with working remote.
For instance, I would need a much much much higher salary to be convinced to move back to SF for work. I will voluntarily agree to earn less for the same work if I am able to work from my home office.
To a company, paying me less may be more attractive than paying someone in else SF more. Remember, you are bidding against other applicants when you apply for job.
For instance, I would need a much much much higher salary to be convinced to move back to SF for work. I will voluntarily agree to earn less for the same work if I am able to work from my home office.
To a company, paying me less may be more attractive than paying someone in else SF more. Remember, you are bidding against other applicants when you apply for job.
I have a hard time swallowing that the pay for remote workers should be based on the employee’s cost of living. My degree is in business and I very clearly recall the lesson on if it was ethical to pay someone with kids more (ie, at raise time) than someone without. The conclusion was that the value the employee brought was consistent and you can’t price in their financial decisions; that it was an old school thing to give a raise for having a kid.
If I am a remote worker and I work in downtown SF or in a flyover state does not change the value I bring. If the bean counters are not giving a raise when you have a new kid, they shouldn’t be cutting your pay when you move to a lower cost area.
It is all smoke an mirrors to improve the financials of the company. I’d be more for it if they just said so instead of lying and hiding it behind other reasons.
If I am a remote worker and I work in downtown SF or in a flyover state does not change the value I bring. If the bean counters are not giving a raise when you have a new kid, they shouldn’t be cutting your pay when you move to a lower cost area.
It is all smoke an mirrors to improve the financials of the company. I’d be more for it if they just said so instead of lying and hiding it behind other reasons.
Employees working in the India/UK/EU office for an American company already make much less than their US colleagues for the same work.
If one were to measure the cost of living in real terms in a place like India beyond lower rent and cost of groceries(reduced life expectancy due to pollution and higher rate of road accidents for example), it's even worse.
On the other hand just getting into a FANG/unicorn in India is enough to defacto push you out of the middle class by any measure.
I guess my point is most folks never had it as good as some others for the same work even before remote took off. It all boils down to the local market for labour unfortunately. If your job doesn't require you to show up in a Bay Area office, you're competing with a much larger talent pool.
There are a lot more people who can solve inane Leetcode problems outside the Bay Area / whatever American $CITY
If one were to measure the cost of living in real terms in a place like India beyond lower rent and cost of groceries(reduced life expectancy due to pollution and higher rate of road accidents for example), it's even worse.
On the other hand just getting into a FANG/unicorn in India is enough to defacto push you out of the middle class by any measure.
I guess my point is most folks never had it as good as some others for the same work even before remote took off. It all boils down to the local market for labour unfortunately. If your job doesn't require you to show up in a Bay Area office, you're competing with a much larger talent pool.
There are a lot more people who can solve inane Leetcode problems outside the Bay Area / whatever American $CITY
You would now be competing with all the other people with the same skillset as you in the low cost-of-living area that you are working remotely from. If you ask for more than the local market rate, why would an employer not just pick one of them instead?
But of course, the salary of employees is not purely based on the value they provide. It's also based on availability of labor.
COVID-19 doesn't really change the equation. Remote workers are already paid based on the prevailing wages in their locality.
Someone who was working in the bay area and now has been given free rein to go permanently remote is simply new to the remote work system, and they absolutely should expect a lower wage if they decide to live elsewhere.
COVID-19 doesn't really change the equation. Remote workers are already paid based on the prevailing wages in their locality.
Someone who was working in the bay area and now has been given free rein to go permanently remote is simply new to the remote work system, and they absolutely should expect a lower wage if they decide to live elsewhere.
Supply and demand, of course. If you are in they bay area and already working remotely, how is that materially different if you move an hour away? Or 3 hours away? Or to the next state or two over? You were already in the “remote work” category. In fact, you were already working at that company at a given wage. I plain just don’t see the difference in the same remote worker in the next suburb over vs next city over vs next state over (granted similar working hours / timezones).
If you're in the Bay Area then you can take Bay Area jobs that are not remote.
Just to throw in a wrench, I live in a van and I'm only very rarely in the same place for more than a month.
My expenses don't really change depending on where I park.
My expenses don't really change depending on where I park.
How does it not? How much is a gallon of gas? How much does a dozen eggs cost? What's the cost of a Big Mac? How about a meal at a local restaurant? How much are you having to run your AC or a heater? It may not be the same comparison as India vs the US, which can differ by an order of magnitude, but with gas still more than $3.00 in San Francisco, California vs less than $1.80 in Jackson, Mississippi, I must be missing something on why your expenses don't change.
The only place I've seen fast food cost more is in mountain towns -- taco bell was about .50 more.
I have no A/C, run solar power and my heater is extremely efficient. Diesel usually sticks to 2.50ish everywhere right now, but California does get up to 4.00. so that's an extra expense of about $80 a month?
The cost of goods is so low, it barely registers. Housing tends to be the problem.
I have no A/C, run solar power and my heater is extremely efficient. Diesel usually sticks to 2.50ish everywhere right now, but California does get up to 4.00. so that's an extra expense of about $80 a month?
The cost of goods is so low, it barely registers. Housing tends to be the problem.
> that it was an old school thing to give a raise for having a kid.
The old school thing was to fire the worker for having kids, or even for getting married (see: 1950s-1970s air hostesses and business secretaries).
The old school thing was to fire the worker for having kids, or even for getting married (see: 1950s-1970s air hostesses and business secretaries).
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The bubble is deflating instead of popping.
First, lower salaries for remote workers.
Next, lower salaries for on premises workers.
Then, lower salaries for everyone.
What they're trying to say is that there's deflationary pressure on wages.
First, lower salaries for remote workers.
Next, lower salaries for on premises workers.
Then, lower salaries for everyone.
What they're trying to say is that there's deflationary pressure on wages.
Does this go both ways? Would i get an automatic raise by just moving to a more expensive place?
I suspect the answer is no, which shows employers are just fishing for opportunities to lower wages with this bulshit argument.
There's also the fact that companies will location-shop, pitting states/towns against each other to host a new headquarters etc. So if the company can seek to reduce their overheads for their own financial benefit, why not the staff?
Businesses pay employees the minimum it takes for them not to quit or lack motivation.
If the work can be done remote, and the employee values that, then they can be payed less.
If the work can be done remote, but the employee does not value that, they could still be payed less if the company is willing and able to potentially replace the worker with one that does value remote work.
In any case, renegotiating wages downward is a strong demotivator, so businesses might opt to leave that work to the grindstone of inflation.
If the work can be done remote, and the employee values that, then they can be payed less.
If the work can be done remote, but the employee does not value that, they could still be payed less if the company is willing and able to potentially replace the worker with one that does value remote work.
In any case, renegotiating wages downward is a strong demotivator, so businesses might opt to leave that work to the grindstone of inflation.
I wonder what effect this will have on remote comminities. The places that are ghost towns now, and you can buy a house for peanuts because there's nothing there. If the average remote worker can move there, take a huge pay cut and still have a reasonable lifestyle (because no mortgage), then they're going to be irreplaceable.
"yeah, Bob's a bit lazy, and he doesn't do all the hours, but at his rate we can hire two of him for the cost of a decent worker somewhere else"
Of course, eventually this will even out, and arbitraging remote locations won't work any more. But then there will be people living in all the little towns and villages we left 100 years ago. Not a bad thing to happen.
"yeah, Bob's a bit lazy, and he doesn't do all the hours, but at his rate we can hire two of him for the cost of a decent worker somewhere else"
Of course, eventually this will even out, and arbitraging remote locations won't work any more. But then there will be people living in all the little towns and villages we left 100 years ago. Not a bad thing to happen.
I don't think they's a problem with hiring workers based on market wages, but we're talking about these companies who seek to disincentivize existing remote workers and take advantage of the current situation to decrease worker salaries while keeping them on board. If your worker is remote, their location doesn't matter so long as they have a good internet connection. This all comes across as opportunistic and bordering on coercive. Honestly wage decreases in general seem exploitative since the worker doesn't really hold much bargaining power especially in an economic downturn.
In theory, if every job went remote, employees would have more bargaining power, as they have more options, which gives leverage.
In reality, most people aren't skilled negotiators, and become significantly less motivated to negotiate salary once they reach a number that they feel is "fair". And "fair" seems to be a correlated with living expenses.
Furthermore, if most engineers are willing to take a pay cut, this would impact those who are skilled negotiators, for the obvious reason that industry trends are an anchoring point for salary.
In reality, most people aren't skilled negotiators, and become significantly less motivated to negotiate salary once they reach a number that they feel is "fair". And "fair" seems to be a correlated with living expenses.
Furthermore, if most engineers are willing to take a pay cut, this would impact those who are skilled negotiators, for the obvious reason that industry trends are an anchoring point for salary.
Surely a key change would be a home office subsidy, say, split the difference on the cost per employee for footprint?
That would also be benefiting the lowest paid employees proportionately more than the highest.
That would also be benefiting the lowest paid employees proportionately more than the highest.
So, employers are going to finance wealth accumulation for people buying a house in a high cost of living area?
[House ownership rate in Canada is 65%. Mortgage payment are not tax deductible.]
[House ownership rate in Canada is 65%. Mortgage payment are not tax deductible.]
This is all rather beside the point. If you can get a better offer elsewhere, take it. Ideally, develop two or three good offers and take the best.
So what if I chose to live in an area more expensive than what the company is in? would they then increase my salary accordingly?
for arbitrary rules, people will start exploring things at the margins. like that gitlab link can help figure out the best real estate properties where you stay at the edge of a zipcode which pays the most but is next to a zipcode which offers better quality of living.
The article is poorly edited and researched.
For example:
"Its co-founder Sid Sijbrandij wrote in a blog that the calculator was dreamed up because every time he hired someone, there was a conversation around reasonable compensation.
The negotiation would usually revolve around what the person made beforehand, which was dependent on what city they were in. Gitlab scrapped that model in favour of the calculator and also started letting workers know if they move their salary could change."
"what the person made beforehand" is rarely disclosed, so I really question the article.
For example:
"Its co-founder Sid Sijbrandij wrote in a blog that the calculator was dreamed up because every time he hired someone, there was a conversation around reasonable compensation.
The negotiation would usually revolve around what the person made beforehand, which was dependent on what city they were in. Gitlab scrapped that model in favour of the calculator and also started letting workers know if they move their salary could change."
"what the person made beforehand" is rarely disclosed, so I really question the article.
Just pay people for the value they provide. I think there's some room to argue that a remote only employee provides less value. Everyone in the same timezone, lack of face to face time, hallway encounters, going out to lunch, etc. have tangible value to the employer that is lost in the transition to remote work. But the arguments I see from Facebook and in this article are about cost of living. That's wrong. Price it based on value created by the employee.
If the permanence of remote work indeed turns into a long term trend, I think we're going to see some bumpy road ahead while individuals grapple with first moving and then local supply and demand in their new location. Fix your location, and then consider that if given the same pay, and same work, would you rather work remotely or in person? I would rather work in person for a couple of reasons including socialization, removal of distractions in a workplace environment, etc.