The Wage Gap 2(elsajohansson.wordpress.com)
elsajohansson.wordpress.com
The Wage Gap 2
https://elsajohansson.wordpress.com/2022/09/16/the-wage-gap-2/
43 comments
I am the original poster from the post linked in this article.
I know these as a fact that a comparable property in my city would cost me much more than what you're paying. All the while I'm getting payed less than half of my colleagues living in your area.
And there are many other costs that are comparable eg. electronics, vehicles and education.
All this is to say that location based pay is not about cost of living, its about getting away with paying as little as possible.
I know these as a fact that a comparable property in my city would cost me much more than what you're paying. All the while I'm getting payed less than half of my colleagues living in your area.
And there are many other costs that are comparable eg. electronics, vehicles and education.
All this is to say that location based pay is not about cost of living, its about getting away with paying as little as possible.
Can we see some sources for those "facts" please?
A comparable sized property listing https://www.nobroker.in/property/buy/4-bhk-apartment-for-sal...
For electronics and vehicles you are free to google iphone and mercedes prices in India vs Us. Its especially higher if I want specific items to import like framework laptop, fairphone, tesla car
Private education can get very expensive very quickly too. Public schools are not even an option as they don't even have furniture sometimes.
You might say remaining costs are low, but they are low only if we use uncertified, unskilled, low quality services/labor. For even decent quality of work the prices will be in multiples.
About my comment about being payed half, the pay scales are visible to everyone in the company so I know that the least in the US also gets payed 2x of my location
For electronics and vehicles you are free to google iphone and mercedes prices in India vs Us. Its especially higher if I want specific items to import like framework laptop, fairphone, tesla car
Private education can get very expensive very quickly too. Public schools are not even an option as they don't even have furniture sometimes.
You might say remaining costs are low, but they are low only if we use uncertified, unskilled, low quality services/labor. For even decent quality of work the prices will be in multiples.
About my comment about being payed half, the pay scales are visible to everyone in the company so I know that the least in the US also gets payed 2x of my location
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If you're paid 50% of what your HCOL breathern are being paid, and living in a higher cost of living than myself, then perhaps it's not location that's the culprit here.
I don't know any company that has a location based pay differential that ranges into 50%.
I don't know any company that has a location based pay differential that ranges into 50%.
I get exactly 45% percent of SF rates. Just to be clear, this is an international company
People very much miss why they are getting paid so much. It is because they are in HCOL area with lot of competition. Thus employers are forced to pay a lot to get warm bodies there. For some reason they have wanted them there...
Now, if work can be done else where, magically the supply increases, go figure. So they don't need to pay so much. Instead they can pick someone else for less.
For me, I consider the high pay a payment for living somewhere I don't want to or cost lot to live. If I don't live there I get less.
Now, if work can be done else where, magically the supply increases, go figure. So they don't need to pay so much. Instead they can pick someone else for less.
For me, I consider the high pay a payment for living somewhere I don't want to or cost lot to live. If I don't live there I get less.
Hey I’m in KY at a FAANG too! Happy to take the pay cut, I don't see how I could have the life I want in the Bay even at 100% pay.
I’m buying later this year, really thankful I grew up in a place where I can easily settle down, and I’m looking forward to passing that on someday.
I’m buying later this year, really thankful I grew up in a place where I can easily settle down, and I’m looking forward to passing that on someday.
Arguments against location-based pay generally assume that all employees would be given raises to match the company's most expensive market.
Realistically, most companies aren't interested in paying everyone more just because some of their employees are in an expensive location. I would expect any location-independent compensation programs to move toward median compensation across locations, not upward toward maximum compensation in the most expensive location.
Existing companies like the FAANGs don't have a choice because they have a lot of customers in those locations, but younger companies adopting location-independent pay would absolutely be targeting median compensation rather than paying everyone top of market in Silicon Valley just because that's the maximum possible compensation they might need to pay someone.
Realistically, most companies aren't interested in paying everyone more just because some of their employees are in an expensive location. I would expect any location-independent compensation programs to move toward median compensation across locations, not upward toward maximum compensation in the most expensive location.
Existing companies like the FAANGs don't have a choice because they have a lot of customers in those locations, but younger companies adopting location-independent pay would absolutely be targeting median compensation rather than paying everyone top of market in Silicon Valley just because that's the maximum possible compensation they might need to pay someone.
That's exactly what companies like Reddit do that don't have location based pay. They pay middle of the band nation wide and the excludes people from HCOL from working for them.
Might be true in some zero-sum sense if the highest salaries are already subsidized by the lowest ones, but let's say some company is already turning a profit on their highest paid employees, it should be theoretically possible to match those wages.
Assuming the value of a unit of work is the same no matter where it is produced.
I think this is part of the dilemma(and I am not arguing right or wrong here), but there will be a subset of employees who are okay with giving ground to the employer on this issue, in exchange for job security and some financial security. And this ultimately takes away some of the ground from the people trying to fight the inequality. I believe economics will have the last say in the long run.
Is it an inequality though? Everyone's seen the baseball game equality comic with the different high people. Equality is when everyone can see the ballgame, not that everyone gets the same height boxes to stand on. I'd argue that this is the same here. I'm the "taller" person because my cost of living is lower, if you give me the same size box (income) as the person in the HCOL area, they might not be equal to me, because I start with an advantage.
In the literal term, I think it is inequality if one is just comparing the salary numbers. BUT, once variables start to get added(location, personal preferences, the availability of replacements) then you start getting into murkier territory. There are also significant impacts of standardizing pay across regions. There will obviously be a flow of people from HCOL > LCOL/MCOL areas, consumption will increase, local inflation will happen...these things benefit some groups and hurt others. No idea how it would all shake out in the end though.
Ultimately, I'd be far, far more concerned about a race to the bottom. That race to the bottom is possible regardless of location-based pay or not. Once people discover how to navigate remote work across big timezone differences en masse and mentality shifts, things will truly get interesting.
Is this from a consumer or producer standpoint(or both)? A race to the bottom ultimately hurts everyone. In a simplistic world, if wages go down, people will consume less, causing decreased revenue. Its in the best interest for companies to have a competitive wage floor that still allows for quality goods and services to be created.
Remote work will certainly shift dynamics, I am quite interested in if the concept of 'hybrid' work will take off, and how that would shape cities/communities.
Remote work will certainly shift dynamics, I am quite interested in if the concept of 'hybrid' work will take off, and how that would shape cities/communities.
A race to the bottom ultimately hurts everyone.
It's already a race to the bottom. It's just the fact that "doing the job well" hasn't been the only factor in the race. Strip off "being able to move to and tolerate living in the right place" and the race gets a lot more fair in my opinion.
It's already a race to the bottom. It's just the fact that "doing the job well" hasn't been the only factor in the race. Strip off "being able to move to and tolerate living in the right place" and the race gets a lot more fair in my opinion.
Consumer. And frankly, I believe most producers do not realize it will hurt everyone, or are hoping some form of automation/AI will take off so they can massively minimize the downsides.
Thanks, you're one of the good ones I guess. You must be a mindreader, my (slightly negative) comment was NOT inspired by you :)
I talked about all the entitled rich boys that bought $50k shacks in Kentucky (for $300k), and are now whining that their pay is being clawed back.
Anyway, I got a bit of a kick out of that; what a coincidence.
I talked about all the entitled rich boys that bought $50k shacks in Kentucky (for $300k), and are now whining that their pay is being clawed back.
Anyway, I got a bit of a kick out of that; what a coincidence.
Fair enough, although being content and discriminated is not mutually exclusive. In fact, even if you are satisfied with your numbers you can sympathize with those who are not.
I'm not sure exactly what he's talking about here. Is he talking about people in other countries not getting USA pay, or different locations getting different pay?
At least in the US, things don't always look so unbalanced. Moving to <big west coast city>, New York, or Chicago has baggage attached to it. There's other costs an annoyances.
I would need a massive salary to consider even trying it. So how would it be unfair to expect more money depending on location? It really depends on the specifics, and seems to work out either way, depending on the situation.
Lots of people are leaving these high payed areas simply because they don't think it's worth it. Many might be retiring, but you're also seeing them take less glamorous jobs in small cities... I know many of them have already made their money, but it really looks like something else to me.
Or is this article backlash from salty SV employees that are now whining that they can't keep their SV salary, while they pay $300k cash for a $50k shack in Kentucky? Honestly, I would be a little pissed about that, since you didn't see them complaining about the decade they were able to make a half million dollars to move some GUI buttons around and attend meetings. Now they see dollar signs and are mad that they're being asked to make similar dollars to the rubes.
Anyway, what a rant, sorry, especially if that's not what the authors meant. If he's talking about US vs. eg. Mexico, India, China, ect. that's a really interesting question, though it technically has similar issues (eg. I know it's pride, but my Indian coworkers insist their quality of life is the same there, despite lower pay)
I doubt most rich people (ie. everyone in the US/EU) are really willing to deal with the realities of competing on a wider scale, with "fairer" pay.
At least in the US, things don't always look so unbalanced. Moving to <big west coast city>, New York, or Chicago has baggage attached to it. There's other costs an annoyances.
I would need a massive salary to consider even trying it. So how would it be unfair to expect more money depending on location? It really depends on the specifics, and seems to work out either way, depending on the situation.
Lots of people are leaving these high payed areas simply because they don't think it's worth it. Many might be retiring, but you're also seeing them take less glamorous jobs in small cities... I know many of them have already made their money, but it really looks like something else to me.
Or is this article backlash from salty SV employees that are now whining that they can't keep their SV salary, while they pay $300k cash for a $50k shack in Kentucky? Honestly, I would be a little pissed about that, since you didn't see them complaining about the decade they were able to make a half million dollars to move some GUI buttons around and attend meetings. Now they see dollar signs and are mad that they're being asked to make similar dollars to the rubes.
Anyway, what a rant, sorry, especially if that's not what the authors meant. If he's talking about US vs. eg. Mexico, India, China, ect. that's a really interesting question, though it technically has similar issues (eg. I know it's pride, but my Indian coworkers insist their quality of life is the same there, despite lower pay)
I doubt most rich people (ie. everyone in the US/EU) are really willing to deal with the realities of competing on a wider scale, with "fairer" pay.
I’m one of those people who already made their money and then moved to a LCOL area. It was supposed to be temporary, but I met my wife and she won’t move because of her family so we’re here to stay.
We have zero debt. I paid off our mortgage in about 5 years. I put money aside for my son’s education the day she told me she was pregnant. We’ve spent the last 10 years spending less than 40% of our combined income annually and now we’re reaping the rewards.
I am fortunate enough to not have to work at age 40, but I do need some kind of obligation to keep me content so I plan to have a remote web dev job by the end of the year.
I would be perfectly fine taking a lower wage due to my location. And that might make me more attractive to employers.
We have zero debt. I paid off our mortgage in about 5 years. I put money aside for my son’s education the day she told me she was pregnant. We’ve spent the last 10 years spending less than 40% of our combined income annually and now we’re reaping the rewards.
I am fortunate enough to not have to work at age 40, but I do need some kind of obligation to keep me content so I plan to have a remote web dev job by the end of the year.
I would be perfectly fine taking a lower wage due to my location. And that might make me more attractive to employers.
I make a 6 figure salary in one of the lowest COL cities in the US. I sometimes see people claiming to make significantly more in SV, NYC, and forth.
No way would I make that trade. My _PURCHASING POWER_ is probably vastly stronger than theirs. You say 40% but I could legitimately live off of 20% if I so chose. In fact, one of the problems I have is that I have absolutely no credit. As in, credit reports come back with zip, zilch, nada. And that can be problematic for people that don't trust seeing that.
If I'm being honest, it's a super power that I'm sad to see others are figuring out.
No way would I make that trade. My _PURCHASING POWER_ is probably vastly stronger than theirs. You say 40% but I could legitimately live off of 20% if I so chose. In fact, one of the problems I have is that I have absolutely no credit. As in, credit reports come back with zip, zilch, nada. And that can be problematic for people that don't trust seeing that.
If I'm being honest, it's a super power that I'm sad to see others are figuring out.
My wife and I both have damn near perfect credit scores because we make our money work for us. Everything goes on a card but we’ve never once carried a balance over or paid any interest. We have many vehicles because I like older autos, but I buy her a new Honda CRV every 5 years for her commute. I call a dealer in La Grange, GA and they deliver it to the house and I hand them a check.
If you don’t have credit I would recommended getting a card and using it for everything.
Our situation is 100% by design. I live in a neighborhood filled with people making $100K+ plus per year who are all leveraged like crazy and probably have no significant savings.
But the husbands all drive $50K+ trucks to go to their office jobs and their wives have the latest and greatest SUV.
In contrast, my pick up truck never gets used unless I need it for a specific task. Other than that it sits parked. My one “nice thing” that I allow myself is my Land Cruiser.
If you don’t have credit I would recommended getting a card and using it for everything.
Our situation is 100% by design. I live in a neighborhood filled with people making $100K+ plus per year who are all leveraged like crazy and probably have no significant savings.
But the husbands all drive $50K+ trucks to go to their office jobs and their wives have the latest and greatest SUV.
In contrast, my pick up truck never gets used unless I need it for a specific task. Other than that it sits parked. My one “nice thing” that I allow myself is my Land Cruiser.
That's generally peoples reaction, I should get a CC with this technique or that technique. I don't need or want credit. And yes, sometimes people try to get smart and tell me my utility bill is credit. queue massive eye roll.
It's just not my thing.
It's just not my thing.
Credit may not be your thing but you’re effectively losing out on a good bit of money by not having one.
I don’t have an exact number in front of me, but I imagine that we receive at least $8k back annually in rewards from our various cards.
The only thing that doesn’t go on a card is the electric bill because they didn’t allow it until recently. But I believe they now do so my wife will change it soon.
In addition to the free money, it’s also safer. I would never use a debit card.
I don’t have an exact number in front of me, but I imagine that we receive at least $8k back annually in rewards from our various cards.
The only thing that doesn’t go on a card is the electric bill because they didn’t allow it until recently. But I believe they now do so my wife will change it soon.
In addition to the free money, it’s also safer. I would never use a debit card.
This kind of thinking is a fugazi. Most people (yes even you, who pays off the card every month) are bad with money. Credit cards reduce the friction between any given transaction. This will cause you to spend more money than you would have otherwise. Generally by much more than the 2% rewards your card offers. If you are actually receiving 8k back then you’re spending like $400k per year.
Nobody got wealthy by using credit cards. The “free money” is a cheap psychological trick. I don’t have the hubris to think I’m better at resisting unnecessary spending than the marketing department at Visa who wants every extra dollar in my wallet.
What many people find, after falling into the “but I fully pay my card each month” trap, is that turning off the card after this point is difficult with their current income, because they have effectively pushed their real wages a full month into the future. Depending how heavily you’re into credit it can take several months to build up a cushion to avoid dipping into emergency funds to cut the cards for good.
Nobody got wealthy by using credit cards. The “free money” is a cheap psychological trick. I don’t have the hubris to think I’m better at resisting unnecessary spending than the marketing department at Visa who wants every extra dollar in my wallet.
What many people find, after falling into the “but I fully pay my card each month” trap, is that turning off the card after this point is difficult with their current income, because they have effectively pushed their real wages a full month into the future. Depending how heavily you’re into credit it can take several months to build up a cushion to avoid dipping into emergency funds to cut the cards for good.
The card is issued by my bank and is covered under the same consumer protection laws as your CC. Several companies have learned this the hard way.
How do you not have a credit card? It seems impossible and pretty inconvenient to pay cash for everything these days. In many large cities cashiers will look at you funny when you start taking out cash to pay, a lot of things are self checkout and only work with cards, not to mention no credit card makes online purchases a huge hassle.
I have a debit card that can be used as a cash backed CC. There's a daily limit on it but if you call in and let them know it's coming through it's not an issue. The last time I had to do that was to pay for emergency surgery for my cat.
In addition, my debit card is attached to an account I use specifically for said card, and generally speaking I only keep enough money in it to cover what I plan on using it for, this limits the amount of damage someone can do by stealing my CC, and I don't have overdraft protection on it to further limit my exposure.
In addition, my debit card is attached to an account I use specifically for said card, and generally speaking I only keep enough money in it to cover what I plan on using it for, this limits the amount of damage someone can do by stealing my CC, and I don't have overdraft protection on it to further limit my exposure.
The previous article (linked at the top of the article) talks about "overseas workers." If you look at the blog in its entirety it seems to be a screed every year (or 2 or 4) railing against the "the ruling class."
I don't think there's a lot of value to be found here.
I don't think there's a lot of value to be found here.
The author (from their previous post) is primarily interested in US vs Rest of World comparisons.
I don't think it's fair, but the reality is that companies pay what it costs, and in Europe there are fewer companies willing/able to pay high salaries, so they are lower.
The thing that would bring about this change is more companies being willing to hire remotely, particularly in places like Poland.
Why are fewer companies hiring and competing on salary in Poland/etc than other countries? I have no idea, but that is the real barrier to higher salaries.
I don't think it's fair, but the reality is that companies pay what it costs, and in Europe there are fewer companies willing/able to pay high salaries, so they are lower.
The thing that would bring about this change is more companies being willing to hire remotely, particularly in places like Poland.
Why are fewer companies hiring and competing on salary in Poland/etc than other countries? I have no idea, but that is the real barrier to higher salaries.
I don't think there's any way to take a reasonable position here, because the underlying situation is irrational. In a rational economy, each city would adopt an urban form that could efficiently support its population in a reasonable land footprint, and would change that urban form as the city evolved. This would mean that housing costs would be broadly similar across all cities. This hasn't happened, so housing costs are absurd, which results in absurdity in other areas.
*2. People are paid what a replacement would cost
Let’s suppose for a moment that employees are interchangeable resources without discernible differences and companies are profit maximizing entities. How is it possible under such assumptions that 2-5-10x salaries exist when 1x replacements are readily available elsewhere? To argue that people are only paid what their replacement would cost also requires an explanation why a garden variety remote employee (or a team of four experienced veterans) is not a replacement for locally grown organic talent? So far there is no convincing explanation to back that up. *
Because companies don't always go for the cheapest labor. There are other factors...
Let’s suppose for a moment that employees are interchangeable resources without discernible differences and companies are profit maximizing entities. How is it possible under such assumptions that 2-5-10x salaries exist when 1x replacements are readily available elsewhere? To argue that people are only paid what their replacement would cost also requires an explanation why a garden variety remote employee (or a team of four experienced veterans) is not a replacement for locally grown organic talent? So far there is no convincing explanation to back that up. *
Because companies don't always go for the cheapest labor. There are other factors...
I'm not sure what you are getting at, could you please elaborate on some of those factors?
Sure to name a few:
1) Managing remote workers is a harder task than managing in office employees.
2) Time zone differences can slow work.
3) Cultural differences can cause problems with team cohesion.
4) Tax differences add to the cost of distant employees.
1) Managing remote workers is a harder task than managing in office employees.
2) Time zone differences can slow work.
3) Cultural differences can cause problems with team cohesion.
4) Tax differences add to the cost of distant employees.
Thanks for the clarification. I agree that these are valid points, but subtle differences at best and mostly solved for multinational companies. Not something that would justify such disparity in wages. On top of that there are obvious advantages to having a distributed workforce as well.
1) With hybrid work on the rise managing remote is already a task, granted there are different levels to it
2) Similarly time zone differences can be taken advantage of, there are people to handle on call during normal working hours and cover national holidays for example. Also, some kind of work not depending on cross timezone collaboration can be done faster e.g. answering customer inquiries.
3) Also there is strength in diversity. A diverse set of experiences and backgrounds can help not to be blindsided by a monoculture for instance
4) Indeed, taxation can add accounting overhead, but even if we take that into consideration local wages will still dwarf the full cost of remote teams in some cases.
While I find it plausible that someone would put more value in having local employees even in a multinational setting, I would argue that is the exception rather than the rule.
1) With hybrid work on the rise managing remote is already a task, granted there are different levels to it
2) Similarly time zone differences can be taken advantage of, there are people to handle on call during normal working hours and cover national holidays for example. Also, some kind of work not depending on cross timezone collaboration can be done faster e.g. answering customer inquiries.
3) Also there is strength in diversity. A diverse set of experiences and backgrounds can help not to be blindsided by a monoculture for instance
4) Indeed, taxation can add accounting overhead, but even if we take that into consideration local wages will still dwarf the full cost of remote teams in some cases.
While I find it plausible that someone would put more value in having local employees even in a multinational setting, I would argue that is the exception rather than the rule.
The author needs to learn some basic economics. Supply and demand.
I imagine they would also change their tune a bit if there was really no location based pay, so developers in Silicon Valley got paid the same as developers in India or China. Don't complain about how good you have it Americans.
I imagine they would also change their tune a bit if there was really no location based pay, so developers in Silicon Valley got paid the same as developers in India or China. Don't complain about how good you have it Americans.
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My employer pays me less because of that, and you know what? I'm okay with that. My discretionary income after housing and basic living expenses are removed is way higher than that of someone in a HCOL area.
I have a 3300 sqft house that was built in the last 10 years and a quarter acre of land. That costs me $1400/month. If I wanted a comparable standard of living in SF, the wage gap between here and there would need to be many thousands more that it really is.
So pay me 20-25% less, it makes me more employable and I have a better standard of living than you do.