I am making a more fundamental point, which is that the current developer salaries (in general, worldwide) would not be as high if the cost of living were not high in the specific places where software companies congregate. These high salaries would otherwise not exist, because they are not based on an objective skills or supply-based metric. It is not as if SF developers are 3x more skilled than Des Moines ones. Clearly the assumption that salaries should factor in the cost of living is a factor.
In a lot of ways, this extremely high baseline benefits everyone else in the industry, even if they don't directly work in SF/NYC/etc. The salaries of Des Moines developers are probably higher than they would otherwise be, as compared to other professions.
And while it's nice to think that companies should pay people the maximum amount of money that they can afford, this is unfortunately not a rational economic move and it will collapse the moment any financial difficulties come into play.
> because they are not based on an objective skills or supply-based metric
Then you have to ask why do these clusters exist - with high skills, high salaries and high costs?
In my view, that's because there is value created by proximity.
It is more productive to have people co-located in the same office.
Also if you live in a major university town, or high tech area then that accelerates the exchange of ideas, particularly outside peoples direct areas of interest. This makes for better networked, more creative employees.
Co-location of companies also increases the chances of collaborations and deals.
The context here is an all-remote company though. As such they have rejected the advantages of proximity. They should be searching out the great but cheap people who want to live elsewhere.
But if those great people have any sense they will be working for a company that recognizes and rewards their skills and not simply offers a rate based on the area of the world they are in.
ie great people don't want to be competing on cost for work, unless they can capture some of the value of their greatness.
eg price for work completed rather than by the hour - so if they finish it in the half the time then they keep that value.
On the other hand, people currently average skill or below ( half... ) are more likely to be better off being paid by the hour.
So if you take a pure economic view, and everyone was behaving rationally, then a cost based hourly recruitment model gets you average and below workers.
ie you get what you pay for at equilibrium.
Of course what they are hoping is to exploit not being at equilibrium - countries with relatively high skills and low costs.
However they are going to be competing with companies based in those lower cost countries ( eg India ), who have both the low cost environment advantage and the ability to recruit locally and better select and retain employees.
My experience of working with even locally based companies that compete on price is high staff churn ( as the good ones find better employment ) - which really damages productivity.
TBH, if I were running an all-remote company, I'm not sure how hard I would try in general to match comp with big Silicon Valley employers. It's actually not clear to me that GitLab really does either. The pay scales for other popular cities are only about 10-20% below SF.
The phenomenon where of Googles/Facebooks/etc. offering mostly very attractive comp in spite of Bay Area CoL is actually relatively recent. Going back a couple of decades I looked at some employment options in Silicon Valley and the comp uplift wouldn't have covered the higher CoL relative to Massachusetts. And the companies freely acknowledged this.
In a lot of ways, this extremely high baseline benefits everyone else in the industry, even if they don't directly work in SF/NYC/etc. The salaries of Des Moines developers are probably higher than they would otherwise be, as compared to other professions.
And while it's nice to think that companies should pay people the maximum amount of money that they can afford, this is unfortunately not a rational economic move and it will collapse the moment any financial difficulties come into play.