
Facebook pay cuts for remote employees who move prove that labor market rigged? - pragmatic
https://philip.greenspun.com/blog/2020/05/22/facebook-pay-cuts-for-remote-employees-who-move-to-nevada-or-texas-prove-that-the-labor-market-is-rigged/
======
MrBuddyCasino
Don’t overthink this:

„ It's odd to see Valley types, in light of the FB WFH news, debating whether
comp should follow a 'cost plus' or 'fraction of value added' model.

In my experience it's always followed the Goldman Sachs bonus algorithm:
Exactly $1 more than your walkaway price as an employee.“

[https://twitter.com/antoniogm/status/1263586217183965184?s=2...](https://twitter.com/antoniogm/status/1263586217183965184?s=21)

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hn_throwaway_99
I've seen a bunch of these arguments recently, and they seem pretty baffling
to me. It's not "rigging", it's supply and demand, nothing more. As an
employee competing against other potential employers, you're going to demand a
rate of pay that you think is "worth it" to you. The issue is, many people
would be willing to work for less if they could stretch those dollars further
in a lower cost locale.

I've generally been a fan of Greenspun's blog, but this conclusion seems
nonsensical to me.

~~~
matthewbauer
I don’t think this is quite supply and demand. The remote worker is already
hired and then they move. The value Facebook gets presumably hasn’t changed
but they are now paying a different rate. If this were about starting
salaries, you might be right.

~~~
toto444
Facebook employees working in London are paid, say, half as much as the ones
in SV.

If we follow your reasoning, London employees are half as productive as the SV
ones.

~~~
SauciestGNU
If I knew my colleague in the same position as me was making twice as much as
I do just by virtue of physical location, I'd be pretty miffed. I probably
won't work at much more than half capacity, if even that much.

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m463
The future will be personalized pricing for everything.

I just wonder if it will work.

I've heard people say "folks in california are ok with their taxes and paying
more for things". Which makes me think of "people don't care about their
privacy".

Thing is, people do care, but they can do very little about what is done to
them.

~~~
goatinaboat
_The future will be personalized pricing for everything._

It will be a strange world with strange incentives. For example what motivates
me to earn more if I can’t buy more because my personalised price for
everything goes up by the same amount?

Airlines already use sleazy tactics to extract more money (perhaps they regret
that now), but will this go further down the chain and I pay more for say food
as well?

~~~
loopz
Why would they regret being bailed out? In these circumstances, society
requires safety valves where we can freeze financial activity to address more
pressing concerns. Such mechanisms need improvements. But the crisis do
highlight practices of ie. stock buybacks where short-term thinking is
encouraged and even _rewarded_. These are just prelude to the next financial
meltdown, unless mitigated beforehand.

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joshuamorton
Also this isn't new or unique. Amazon pays 10% more in the bay than in
Seattle. Google has pays more in Seattle than in Atlanta, and more in SF/NYC
than in Seattle.

~~~
jzl
Agree with your point but the 10% discount for Seattle is super easy to
justify: no state sales tax. So there's no cost of living adjustment for
Seattle, just an equalization due to the tax situation.

~~~
ido
Why should the benefactor of the state's tax policy for employees be the
company and not the employee?

~~~
ferzul
because the powerful party is more powerful

------
roenxi
Heh, this certainly isn't meant to happen in theory. If Facebook manages to
carry this decision it suggests something really odd is happening in the
programmer labour market - the buyer shouldn't have enough power to do this in
a competitive market.

Companies just don't pay people high salaries because of 'need'.

~~~
qqqwerty
Its probably too early to tell how this pandemic will impact software
engineers. There have been plenty of high profile layoffs, but there are also
plenty of companies that are going gang busters right now (zoom, netflix,
etc..).

However, I would not be surprised if Facebook did some internal polling of
their employees and saw really high levels of interest in leaving the Bay
areas[1]. So its possible that the salary adjustments were brought up as a way
to counterbalance the interest levels. If 2/3 of company decides to just pick
up and leave the Bay area, that could cause some problems.

[1] [https://www.sfgate.com/living-in-sf/article/2-out-
of-3-tech-...](https://www.sfgate.com/living-in-sf/article/2-out-of-3-tech-
workers-would-leave-SF-15289316.php)

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cscurmudgeon
Yes. But that market that is rigged is the housing market in California.

Too much NIMBYism has resulted in a highly distorted market that then spreads
to other related markets.

~~~
raverbashing
It would be too good if the NIMBY landlords would suddenly loose a good amount
of tenants.

> “We’ll adjust salary to your location at that point,” said Zuckerberg,
> citing that this is necessary for taxes and accounting

Well, he's not wrong (on the tax/etc calculation on the salary) though even
with a change on the base salary to non-SF salaries the move might be worth
it.

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gorgoiler
Salary based on an individual’s needs is quite the “hmmmmm” moment.

It is one of the reasons Violet Newstead — Lily Tomlin’s character in _9 to 5_
— is given when she furiously demands to know why she was passed over for a
fair promotion.

The guy who got the job instead? Well had a wife and kids to support. He
needed it more.

~~~
luckylion
Regarding having a family: that's also a signal for stability. If you have a
family and have settled down, there's less risk for the employer that you'll
quit. I don't know how large the difference is for men and women with children
and who's family planning is complete.

For young women who have no children, the "risk" (from the employer's
perspective) of pregnancy and motherhood is another large factor.

~~~
telesilla
You'll quit as a young, single anything if you are treated without respect...
Besides, the line in this film was to point out the sexism in society where
women work for free - in this case, the man's wife who is at home with the
children while the boss is able to take advantage of this situation to get
more out of his worker. On top of, the obviousness that the worker is less
likely to quit because of the family 'burden' where, back to the circular
sexism, the wife cannot be the one getting the job because she is a woman..

Remote working hugely serves to balance the possibility of everyone regardless
of gender and nationality to access the jobs that best fit their talent and
work ethic. I'll be very very interested to see what happens to traditional
gender and nationality roles once it's fully entrenched.

~~~
luckylion
I'm sorry, I don't know the movie, my comment wasn't on its story.

The "has family" checkbox isn't so much a sexist thing, I believe. A woman
with children is also much less likely to just pack her bag and move to India
on her search for enlightenment, she has more things tying her down, making
her more predictable. If you want a long term employee, you'll pick a woman
with children over a single man without children, all other things being
equal.

Remote working _might_ have an impact there. But if you believe that there are
hidden biases holding some people back, they won't just go away, and remote
working isn't going to change that, unless you completely anonymize any
communication between the employees and the company. Would be a fun
experiment, but I don't know how practical it is.

------
neilwilson
Of course the labour market is rigged. It's a power struggle.

Facebook will only pay what they have to. You'll take the best offer you can
get - there or elsewhere. That's how it works isn't it?

If you're in the gig economy the employer has the power since they have plenty
of alternatives to go for. If you're in the talent economy then the employer
either takes your price or doesn't do the thing they want to do and you go to
one of the other people after your services.

And that's the difference. Workers tend not to have a a 'no deal, I'll not
bother option'. Because if they do that eventually they starve. The lower down
the tree they are the quicker they starve.

I think it was Beveridge that pointed this out originally. Essentially
companies only hire when there is a chance of a profit, whereas workers have
to get hired or they starve. That's the asymmetry of power which Beveridge
hoped to correct by ensuring there were always more jobs on offer than people
who wanted them.

Right at the moment Facebook knows you don't have too many alternatives -
given the state of the economy. Zuckerberg is taking advantage of that to
reduce his costs while still appearing to be magnanimous.

Welcome to the gig economy.

~~~
op03
On the flip side thanks to the way Zuckerbergs mind works, he will attract
only certain sections of the 'best and brightest' spectrum.

Nothing new in what he is doing and we have seen what trajectories companies
take - you just end up becoming either a Yahoo or an Oracle.

------
gpapilion
The competitiveness of the job market sets the price. Looking at the Bay Area
vs really everywhere else in the us you’ll find less liquidity in tech which
depresses the price.

Conversely, you’re paying for access to the labor market with your rent, so
good markets have high rent.

The company is paying for your costs, plus providing you a margin. If your
cost are lower, your margin is the same but the absolute number is smaller.

~~~
luckylion
> The company is paying for your costs, plus providing you a margin. If your
> cost are lower, your margin is the same but the absolute number is smaller.

In that case, they'd look at your lease to see what you are paying. They
don't, and whether you live in a cheap apartment or in a luxury one does not
matter, even though it can easily change that "margin" by 100%.

You're right regarding the competitiveness setting the price. And once the
company is fully remote, the competition is no longer constrained by locality.
It does not make any sense to pay more or less because the remote worker lives
in some location, and unless there is no competition, somebody else will just
pay them more and you will not get the employees you were looking to get for
cheap.

~~~
erik_seaberg
Remote employers right now need to decide whether they want to hire the kinds
of people who relocated to the bay area to benefit their careers, because that
means they still have to compete with bay area offers. If remote work becomes
the norm, at that point bay area offers will no longer be higher (and some of
us will leave). Maybe American offers overall will no longer be higher....

~~~
gpapilion
The second part of this is to remember that moving to a large metro area is
good for the employee too. It makes it easy to find the next job, and easy to
get highend internet.

The candidate can always choose to relocate to make their offer make sense,
but I somehow don’t think we’ll see a lot of that.

------
jariel
2 things:

1) Buffer I think does this. Pay adjusted based on location/cost of living.

2) There's a world of difference between Montana and 'Palo Alto' where they
can come in once a week, or whenever needed, or for meetings, or to pick
something up, or for a 2-week crunch etc..

Basically: 'local remote' is different than 'really remote'.

Also, time zones matter, countries matter, languages matter.

------
nmzq
All it would take would be one other FAANG employer to not reduce pay based on
location for them to start losing talent.

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clairity
the underlying point, which isn't explicitly spelled out, is that labor should
be priced by the value it accrues to the buyer, regardless of the cost of that
labor (locationally in taxes, mortgages, etc.). it's hypocritical of facebook
not to price it's own products (advertising rates) on a cost-plus basis, if it
believes so strongly that its employees should do so. or, they should accept
that labor can be priced on value just as it prices its own products.

~~~
qqqwerty
Facebook could probably layoff half their staff without even the tiniest
impact on revenues. The vast majority of engineers in these companies are
replaceable. The high salaries are largely due to the competitive market and
the FAANG obsession of only hiring the best. While some employees have a high
enough profile/reputation that they can demand value based salaries, for the
average engineer, the pay is essentially a slight premium over what the next
lower tier of candidates would cost.

~~~
clairity
not sure what to make of your comment. you're simultaneously asserting that
the engineering labor market is cost-plus ("the pay is ... a slight premium"),
but with its "high" salaries, it's not.

that's incoherent--similarly incoherent to facebook pushing employees into
cost-plus pricing while enjoying value-based pricing for itself.

absent significant outside influence, markets, including labor markets, will
naturally drive prices down to cost-plus levels through competitive dynamics.
if a market has outsized value-based pricing, it's a prime signal of
inefficiency, and competitors should enter (not being a _free_ market is a
significant barrier, but a different issue).

~~~
qqqwerty
Not everyone makes FAANG level salaries. There is a very steep gradient of
salary levels in tech. At the top is FAANG, right below them are unicorns, and
a few more tiers down you get to the bottom feeders, underfunded startups
offering worthless equity and hopes and dreams instead of salary.

FAANG salaries are product of the hiring competition between each other and
their self-imposed selectivity. Lowering the interview bar would likely open
up the hiring pool enough where they could also get away with lower offers.

------
vl
FB should pay more to remote workers. Cost of having a worker in an office
(even in the tragedy of a city Menlo Park is) is very non-trivial. Now remote
work is the new norm, and companies make the worker pay for space, furniture,
internet, some equipment, parking, and, in case of FB, food. On top of that
worker doesn’t come to the office, and doesn’t consume these valuable
resources there. If worker moves out of the Bay Area, or even better,
California, FB doesn’t have to pay high local taxes. So FB should give bonus
for working from home, not tax it.

I joke with my friends working at Google/FB/MS/Amazon that soon company will
make them pay for the office - “want to come the office? Pay the rent
yourself”.

~~~
Cookingboy
>FB should pay more to remote workers.

All your arguments are about why FB _can_ pay more to remote workers, but just
because they can doesn't mean they _should_ and definitely doesn't mean they
_will_.

~~~
ferzul
the arguments were about why they should. specifically mentioned were costs
transferred from the corporation to the employee

~~~
benhurmarcel
Which have nothing to do with how salaries are calculated.

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rainyMammoth
If you are a remote employee in the Bay Area, do you keep your Bay Area
salary? As a thought exercise, what would prevent someone to rent a very cheap
closet in a flat share and use it as an official address? What if you start
spending 50% of your time visiting your relatives in Montana?

I expect that a new US remote salary standard will eventually emerge out of
all of this. The company would pay you a certain amount and the free market
will help you decide which state/city you decide to go live in.

New York is expensive but is also seen as more desirable than Omaha or
Phoenix, individuals should pay more to live in more expensive and more
desirable areas.

Paying employees more to be remote in high CoL cities means that you subsidize
their rent or mortgage.

~~~
mdasen
I'm not a lawyer, but I'm guessing this counts as fraud. Facebook could
terminate you if they found out and try to recover wages from you. Nevada
might not care since it has no income tax, but most states would care if you
were actually resident there and not paying taxes. If you moved to Portland
for its lower cost of living, tax officials might not like that you aren't
paying taxes to Oregon.

It's a little weird, but most companies seem to want to vary salaries by
location, even for remote work. It might not seem fair or correct, but I do
think there are reasons you couldn't pull of a scheme like that. The IRS has
information sharing agreements with most states.

Let's say you pick Arizona. What happens when your car is registered in
Arizona and the IRS tells Arizona that you earned a lot of money and should
have paid them thousands? Do you register your car in California, keep a CA
license, buy car insurance at the CA address that it isn't garaged at? I know
that these are small things and often people don't change this stuff for a few
years after college, but at some point it starts adding up to more and more
evidence of one's intent to defraud. Do you set up a non-USPS mail-forwarding
scheme to make it seem like you're still in CA? If you get into a car crash,
will your insurance start looking into why you're always in Arizona?

For Facebook, it wouldn't be too hard for them to figure it out. You'll be
connecting to their servers for work from an IP address. Do you keep a server
in the CA flat share to proxy everything? What if the box goes down? Worse,
this shows real thought going into the fraud. It wasn't a casual, "oh, I
thought I was going to be spending most of my time in the $500/mo flat share
and just innocently forgot to update that I'm in Arizona basically always" and
rather something really intended to defraud.

To keep tax collectors off your back, you'd have to let FB pay CA and then
you'd have to pay AZ tax out of your pocket. Even a cheap $500 flat share eats
into the profitability of this scheme. If you're earning $200k in CA and
offered $150k in AZ, $13k of that will likely be eaten up by expenditures.
Plus, with roommate turnover, at what point do people think it's weird to have
someone on the lease that basically doesn't exist? How much time and money do
you spend on flights for administrative things like flying back to CA to renew
your license? Heck, do you vote in CA despite not living there?

It could certainly be profitable, but it does seem like there's significant
risk of being caught. I'm not a lawyer, but this feels like defrauding an
employer and different states handle background checks differently, but it
seems like something that might go on a record that wouldn't be great to
explain away. Like, "I was 19 and we thought it would be fun to steal the
University sign" is a lot easier to explain than "I thought the company should
pay me more so I defrauded them out of tens or hundreds of thousands of
dollars."

~~~
vkou
The simpler solution to all of this is to stay in state, even within a
theoretically possible commute distance, but in a low-COL area.

Unless they start giving people raises for moving to a nicer part of town,
they aren't going to lower your wages for moving to the next town over.

------
Thorrez
>Readers: Does the fact that Facebook can unilaterally set the price it will
pay for labor depending on the cost of housing from which the labor toils show
that the market for Silicon Valley labor is rigged?

I don't understand what he is asking. What does "rigged" mean in this context?

Is he asking if SV employers are rigging wages too low? This seems to be
evidence almost the opposite of that, because SV employers are paying remote
SV employees more than remote non-SV employees.

Is he asking if SV employers are rigging wages too high? What motivation would
they have to do that?

------
DarthGhandi
They should take it further and pay equivalent employees in the same office
different rates based on whether they live in an expensive neighborhood or
not.

Rent makes up the biggest expense living in Sydney by far but it can vary
wildly depending on which area. Pay those in rich areas more to cover costs
and watch the leaps of logic unfold.

------
tener
How is this even legal? FB signed contract to pay X amount of dollars and now
it can lower that amount unilaterally and without any kind of warning?

Mind boggling to me, but then again I live in Europe... So, how does it work
in US?

~~~
jsdwarf
I guess the work contract also said that the Facebook employee has to show up
for X hours per week at Facebook HQ to fulfill their duties. In other words:
the permanent home office arrangement requires a new work contract anyway.

~~~
jbn
there is no "work contract" for employment in the US. It's at-will employment,
the employer can change the terms at any time and if the employee doesn't like
it, he can go elsewhere. Not saying this is a good thing (European countries
do have work contracts for instance), or even expressing a preference (I
personally think having a contract would be a good thing), just stating the
state of affairs in US employment.

------
neonate
Doesn't this just boil down to externalities like colocation preventing the
market from being efficient? I don't understand why people regard this as such
a puzzle.

------
negamax
It might still be worth it to move away from monopoly landlords and rogue city
governments existing on bad housing policies

------
Consultant32452
Most of my friends are blue collar workers. It's absolutely delicious to see
valley types express concerns that "poor people from somewhere else will steal
their jobs."

~~~
rainyMammoth
EDIT: What I was trying to express (without being snarky) is that
stereotypically what you see in the bay area is very rich successful people
moralizing others on liberal values from their high horses. I have a hard time
to put this together with people earning a fortune, doing minimal things to
actually help others and feel threatened when there is a risk that other
people might benefit from opening bay area jobs to a wider audience.

~~~
CuWj67GF3y
I don't understand how one can make such broad stroke judgements about tens of
thousands of engineers, their opinions, their morality and their political
affiliations all at once.

What's even more amazing is these engineers that live in the bay area, many of
them are from diverse backgrounds around the world, not just the US. I have no
idea how one can bundle all that up with one generalization. Must feel good to
think you're looking down from a higher horse.

~~~
rainyMammoth
You made a good point, I edited my comment. I didn't mean to be snarky about
it.

------
s_kilk
No, it just proves that Marx was right about the nature of the wage/salary.
The value of labour power is the cost of reproducing/maintaining that worker
at a particular standard of living, not some particular fraction of the value
generated at work.

~~~
erik_seaberg
Marx was a crank who speculated about work and value but never tried to hire
anyone. Why would they know or care about your standard of living? _Supply and
demand_ determine the wage they need to offer to keep you. If you move to a
labor market with lower local demand, you now have fewer potential employers
making offers that Facebook must outbid.

------
loraa
This is what most companies do. I worked for companies 20 years ago that would
let you move to anywhere they had an office but you would be paid according to
that location.

------
ggm
yUo

KNow

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_Only

_Needs saying once.

------
RNCTX
Zuckerberg's failure to graduate and build his enterprise via his former ivy
league institution is showing.

Most of them have the same perceptions of their workforce: that employees are
indentured servants who owe the company their time. The difference is
Zuckerberg is willing to 'mask-off' admit this disregard for everyone but
himself.

------
claudeganon
Of course it does and the only force strong enough to counterbalance
Zuckerberg would be a Facebook union. This is why organized labor has always
pressed to set a floor for wages and other terms. Otherwise, the people who
run the places will always try to pit different groups of workers against each
other like this.

------
onetimemanytime
They are sides to the coin, as they say. Salaries are X in San Francisco and
NYC because its competitive and cost of living is high. So are taxes. But then
,if Facebook hired 12000 people in SF it means that they are worth the (say)
$250K each a year and then some. If they work from Vietnam or Small Town,
Georgia FB still gets the same benefits but the employees would have like a
triple or quintuple salary.

I don't have an answer to this, but I'm almost certain that people in a
foreign country office don't get paid the same as those that work in SF or
NYC. But then, FB, Google and the likes are already super-profitable so it's
hard to argue in their favor.

~~~
TomMarius
Maybe the value is in having the employees nearby?

