
Stripe Employees Who Relocate to Get $20k Bonus and a Pay Cut - siftrics
https://www.bloomberg.com/news/articles/2020-09-15/stripe-employees-who-relocate-to-get-20-000-bonus-and-a-pay-cut
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notyouravgdoge
What's missing in some salary discussions on HN:

Compensation Trajectory: Sure, I can relocate from [HCOL city] to [LCOL city]
and come out ahead today after factoring taxes, home prices, etc. What happens
in the long term? Will I have a harder time getting promoted because of lower
visibility? Will my annual raises and stock refreshes be lower than my
counterparts who did not relocate? In tech-dense areas like the Bay Area, I
can switch jobs and negotiate a substantial salary increase. Will LCOL areas
allow me to substantially increase my salary when I switch jobs?

Home Prices: Folks often cite cheaper housing as a reason for leaving HCOL
areas. I generally agree with that. But housing is an investment, not
necessarily an expense. You might be paying seven figures for a small
townhouse in the Bay Area. However, you'll get your money back when you sell
your home in the future (assuming a sufficiently long time horizon and the
ability to wait out dips in the housing market). Like any other investment,
there are risks associated and ROI is not guaranteed, but my point is that
spending $1M on a house is not the same as spending $1M on a luxury car.

Purchasing Power: Earning more money in a HCOL city (relative to earning less
in a LCOL city) goes a long way once you leave your local economy. Want to
send your kids to a private university? Most tech employees won't qualify for
financial aid regardless of where they live. In that case, tuition for
[private university] is the same regardless of whether you live in San
Francisco or rural Oklahoma.

~~~
kingnothing
Historically, nationwide, housing is not an investment. The average house in
the US appreciates at approximately the rate of inflation, perhaps a bit
better. And you always need somewhere to live; unlike stock or a business
investment, you can't sell your house without needing to buy or rent another
one. Your money should be put elsewhere for investment purposes. There are
certainly some hot markets where this isn't true, however.

~~~
djhn
But they offer 10x leverage with the right first time buyer incentives. Invest
50k, earn 4-12% in appreciation on 500k.

~~~
brianwawok
Or lose 10-20% or more (see Vegas 2008)

Also the average cost to sell a house is around 10%. So 10% appreciates means
you walk away with what you put in.

~~~
lbotos
for those curious, here's Vegas data:
[https://fred.stlouisfed.org/series/LVXRNSA](https://fred.stlouisfed.org/series/LVXRNSA)

~~~
brianwawok
I am shocked at how much it has recovered since the bottom.

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Traster
Doesn't this just make it a little too obvious that the company is more
interested in paying you as little as they can get away with rather than
paying you for the value you bring. The employee equivalent of this is
accepting the wage they're offering and then optimizing to do as little work
of value to the company as possible.

~~~
jo032
Maybe not at Stripe, but a lot of big tech employees (especially at Google and
Facebook) would get substantial paycuts if they got paid for the value they
brought to the company rather than the market price ("as little as they can
get away with").

the average FAANG engineer does a shockingly small amount of work that has any
impact on revenue

~~~
mrkstu
The average FAANG engineer is partially being compensated for NOT working at a
competitor- i.e. the best talent is also the biggest threat and if there isn't
a salary cap then the NY Yankees are sometimes going to sign redundant players
just to keep them from improving competitive teams.

~~~
robocat
This arguments fails on so many dimensions that it must just be a meme. I’ll
use Google as the example. For it to work Google has to be able to monopolise
the buying of talent. Most damning, the premise itself is self defeating.
Somehow Google is picking the most talented people (delivering far in excess
of say $1M marginal returns), yet somehow it is paying well below that to
steal that talent and furthermore Google is then wasting that talent (employee
delivering value below their pay+overhead). To assume Google chooses to waste
talent merely to achieve some low value outcome (damaging a competitor by $1
doesn’t magically enhance Google’s returns by $1 so the factors are way out
here) seems to assume the Google is somehow acting against their best
financial interests. I don’t think Google is as poorly run as that.

Also:

1\. Occam’s razor: Could it be that a Google is actually getting good value by
paying very high salaries?

Yes. The average revenue per person for Google is about 160G$ /
115kiloemployees = 1M4 per employee. I do note that using an average is silly
because the value distribution is not flat, but neither is the employee salary
distribution flat. But the figure is so large, average does say something
useful for back-of-envelope calcs.

2\. Can Google monopolise by buying power alone?

No. Other companies have similarly high returns per employee (Apple is
260G$/160kiloemployees, Netflix is 20G$/20kiloemployees) so for Google to
outbid them, it needs to outbid above the marginal revenue per employee, which
clearly is well above a 600k$ salary.

3\. Can Google corner the market for talent by restricting supply?

No. We know that there are plenty of talented developers because Google isn’t
the only company making over $1M revenue per employee. Google employs about
115000 people. Let’s say 50000 of those were “overpaid“ to remove them from
the competitors. If the total pool of equivalent talent were as small as
250000, then Google couldn’t monopolise talent. Yet other companies with high
revenues per employee have a sum total of employees higher than 250000.
Furthermore Google’s returns per effective employee become ~$2.8M/employee, so
Google can obviously afford to pay $1M for talent it really wants!

Your sports analogy fails because sports are designed to be _zero-sum_ where
there can be only one winner, so the best player can capture more of the
winnings.

~~~
jo032
Current employees are not the only revenue generators within a company,
especially in a high margin monopoly business. Most of the value in Google was
created over a decade ago when they achieved market dominance so revenue per
employee is an unhelpful metric in their case.

I don't disagree with your other points, just the first.

~~~
robocat
I agree.

However making the argument that the marginal gain from an employee has to
exceed the marginal cost is much more difficult, so using an average is just a
fair proxy for making the point.

My assumption is that Google are smart enough to know extremely well their
marginal gain, which must be an upper bound of what they would rationally pay
for an employee (salary plus overhead plus opportunity cost plus variance).

Anyone that thinks a Google is employing people at a loss to cause damage to
other businesses is a double plus badthinker IMHO.

~~~
mrkstu
Key word was 'partial'\- in no way do I believe that they want valuable
employees completely sidelined- just that if they are paying slightly above
market and are carrying slightly more employees than they really _need_ , it
ends up being neutral or a net benefit to Google to do so.

~~~
robocat
That seems like a weasel-word, and “partial” was not the gist of your comment,
and I have seen similar comments to yours like it is a meme.

Your implication is that the pool of talent is limited and that there is some
sort of zero-sum game being played.

The pool of talent is clearly not limited and there are multiple indications
of that e.g. a rockstar developer would be employed at rockstar prices of
millions (or signed on at millions as per your sports analogy).

If Google were to take a talented person out of the pool, the loss to the
competitors is the marginal difference in talent to the next lower talented
person.

Put simply, the variation in measurement of talent is large, and training can
make huge differences to talent levels. Your premise can’t work without some
sort of perfect oracle.

That isn’t to say it doesn’t happen at some microscopic level, or that it
doesn’t happen with some particular individuals... Edited: there are just too
many sensible reasons why I think it couldn’t happen systematically.

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Waterluvian
I don’t get why where I live is any of their business. Why on earth does it
matter what it costs for me to live the life I want? All that should matter is
what they need to pay me to compete with other companies who want to hire me
too.

If the act of paying remote people differently based on where they remote from
is successful then it means the free market isn’t working right and engineers
for these jobs are commoditized.

~~~
shajznnckfke
If you live in SF, your job market includes non-remote SF jobs. If you live in
Idaho, it doesn’t. Therefore your market wage is lower in Idaho even if you
are doing the same work. Seems pretty clear-cut to me.

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NetBeck
Will employees who stay have the option of paying Stripe $20k for a 10% raise?

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jlizzle30
In the context of a 100% remote company, 'where I live' feels like it's none
of the company's business. The parallel is a non-remote company paying you
less to commute from Oakland than San Francisco.

Tying pay to location makes sense in the short-term as the industry
transitions, but I don't see these policies holding over the longer-term.

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kdamica
Cost of living adjustments are nothing new, so I'm not sure why people seem
surprised by them. If a person moves somewhere with lower taxes or housing
costs, they'll easily come out even after a 10-15% pay cut. Also it sounds
like only salary is affected, so it's an even smaller percentage of total
comp.

~~~
jlizzle30
So should Oakland residents be paid less than San Francisco residents?

~~~
GhostVII
Oakland residents and San Francisco residents are in the same job market, so
they have the same salary.

~~~
jlizzle30
Exactly. And now with full-remote work, NYC & Tulsa the same job market too.

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bleah1000
It's weird that nobody talks about what it means when you relocate. For Stripe
it might not be an issue, but large companies probably have people in all
different locations. This means that if you relocate to a place where someone
else is already working, is it fair if someone moved there and is now being
paid much more than you?

Also, what about if you had all women at a location and a man relocates there
and gets to keep their higher salary. I think the women would feel that this
is not okay either. This applies to any other protected categories where legal
issues can come up.

There are other considerations when talking about salary, and whether people
can keep higher salaries when they relocate from a place where there is high
competition for employees and a high average salary to a place with lower
competition for employees and lower average salaries.

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viraptor
Even though this is the same thing as pay cut, it makes more sense to me when
described as: company pays you averaged living expenses + extra depending on
position. It's in company's interest that you live in a low cost area. It's in
your interest to make sure the "extra per position" doesn't go down when you
move. As long as both sides are happy here, I don't see an issue.

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tempsy
good deal if you were looking to quit soon so long as there’s no vesting
period but i’m guessing there’s a one year term on it.

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hevelvarik
I’m reading on hackers news that in SV engineers are making 200-400k, geez,
suck it up, stay put and get paid, my friends

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rdtwo
If you move to a non tax state then you might come out ahead. Cali taxes are
killer

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Hydraulix989
You can come out ahead if you relocate to a lower taxed state like NV or TX.

