
Zuckerberg says employees moving out of Silicon Valley may face pay cuts - SREinSF
https://www.cnbc.com/2020/05/21/zuckerberg-50percent-of-facebook-employees-could-be-working-remotely.html
======
dang
Related ongoing thread:
[https://news.ycombinator.com/item?id=23261394](https://news.ycombinator.com/item?id=23261394)

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koheripbal
Can we consolidate?

~~~
dang
It seems like they're divergent enough to keep separate. Last I checked, at
least.

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Jemaclus
This is one of the things that's always bothered me.

Let's say you hire me for your company in San Francisco and pay me $150K.
You've made a calculation: my value to the company is greater than $150K, and
$150K is a price you're willing to pay to leverage that value. In other words,
the company will (eventually) make more than $150K per year off my
contributions to the company.

But now if I decide to move to Tulsa, OK, you want to cut my pay and reduce it
to 90K, because of "cost of living".

Why? My value to the company hasn't changed! I am still _worth_ the same
amount as I was before! The only thing that changed is where I choose to
reside. What difference is that to the company?

As remote working becomes more and more acceptable, we're going to start to
see companies like Twitter and Facebook competing nationwide, not just in
Silicon Valley. An engineer in Oklahoma will now be in a market that includes
all of the big giants, and not just the local banks or whatever. Likewise,
Twitter and Facebook will be competing against each other in the lower COL
areas like Oklahoma! And not just SF startups, but competing against NYC and
London startups as well.

This whole area is really fascinating to me, but the "you get paid differently
depending on where you live" thing has always struck me as bizarre and one-
sided in favor of the businesses and not the people in high demand, like good
software engineers.

~~~
enitihas
> You've made a calculation: my value to the company is greater than $150K,
> and $150K is a price you're willing to pay to leverage that value.

You are in for some surprises then. Companies don't pay you just in relation
to the value you deliver. Most companies pay _the least_ amount required to
get the value you deliver. Now if you are competing against engineers who are
willing to accept lower salary due to low CoL in another area, the company
would offer less.

Offcourse, that is not how things _should_ be.

~~~
matz1
That is how thing _should_ be.

Let say I shop for a gadget. I pay for that gadget not because the value it
deliver but the least amount required to get the value it deliver.

~~~
enitihas
Sure, if you think human beings should be treated like disposable gadgets.

~~~
renewiltord
Well, if your labour is not, in fact, fungible it won't behave on the market
as if it is fungible. You'll see this often for people paid a lot doing a
single role for 30 years. Given the probability of a good replacement hire,
they can't actually be replaced. Given their unique knowledge of that company,
they're worth 50% to another. You'll also see this at startups where people
will move from place to place keeping their income. But the median Facebook
engineer's labour is fungible. It doesn't really matter which engineer is
there so long as there is an engineer there.

And human beings are not being treated as disposable gadgets. Their labour is
behaving like any other good in the market. There are some specifics but for
the most part it is true.

There's no should to this. It's merely observational truth.

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nostromo
People should be warned that working remotely has been career suicide for as
long as I've been in tech.

Being "out of sight, out of mind" from management generally means you're
passed over for promotions, and often the first to get cut during layoffs.

It's just human nature. It's easier to layoff the person that's been working
from across the country (or another country) than it is to layoff the person
at the desk next to you that you've worked beside for years.

~~~
somebrody
It is only suicide for in-company promotion tracks.

It has no effect on your career if you learn to not depend on in-company
tracks for your success.

~~~
SpicyLemonZest
That's not just a matter of learning. The kinds of things you can achieve are
different. If you want to become a director of some big engineering
organization one day, you'll need to build up your position within the
companies you work and not just your personal brand.

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librish
This shouldn't come as a surprise to anyone who knows the general compensation
strategy for all the major tech companies.

They don't pay based either on value added or cost of living (which is why
compensation is higher in the Bay Area compared to London).

They pay based on market rate where the target is something like 95th-
percentile based on market surveys they do. Presumably this hits some sweet
spot in acceptance rate vs cost. Employee compensation is a _big_ ticket item
for these companies on the balance sheet so they're highly incentivized to put
a lot of thought into their setups.

Additionally if we truly go fully remote salaries will almost certainly go
down just looking at the supply change alone. Previously these companies only
hired

* A) People who met the hiring bar

* B) People who were willing to relocate to one of office location

If you remove B you've massively increased the available talent pool.

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volkk
> If you remove B you've massively increased the available talent pool.

i'm not convinced this is the case. maybe by a bit...but massively? if you
look at all of the places that all of the top paying FAANG companies are
located--lets keep it within the US for simplicity's sake--you've got
basically all of the major cities with the top talent. I'm not really
picturing THAT many brilliant developers that fall under the bucket of: a)
really smart and able to pass FAANG interviews b) not willing to relocate if
they did get a huge offer

sure there are plenty of outliers, but my gut feeling tells me that MOST of
the talent that really cares enough and wants to be at FAANG are already
living in most of the tech hubs currently. i dont think the surge of competent
applications will be that meaningful statistically speaking.

not sure if i communicated myself clearly here, sort of rambled.

~~~
economicslol
>I'm not really picturing THAT many brilliant developers that fall under the
bucket of: a) really smart and able to pass FAANG interviews b) not willing to
relocate if they did get a huge offer

What about anyone that wants to own a home before they are 40? Even on FAANG
salaries its very difficult to buy when millionaires are snatching up fixer
uppers for $1M+ all cash.

~~~
dlp211
Every person I work with is under 40 and everyone that wants to own a home,
does. SF and NYC are not the only tech hubs in the US.

~~~
economicslol
>SF and NYC are not the only tech hubs in the US.

Also confused. I agree with your point. My comment was responding to a person
who couldn't imagine people who wouldn't move to SFBay for a FAANG level
salary/job.

~~~
username90
You can just move to any of the other big cities that have big offices. It is
easier to get a job in SF, but if you are good enough you will have no problem
getting a job there.

~~~
economicslol
I don't understand. I agree. What is your point? We're talking about why
people may not be interested in moving to the Bay Area...

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joshpadnick
We're a remote-first company and went through this same discussion when we
began hiring people in different cities, not just in the USA but all around
the world. What we found is that any approach to setting salaries has to
balance the following factors:

* Pay people enough to live comfortably

* Pay people enough that they accept our offer vs competition

* Pay people in a way that feels fair

* Pay people in a way that is transparent

* Pay people in a way the company can afford it

* Pay people in a way that there isn't a risk of huge fluctuations (e.g. currency fluctuations)

Without a doubt the best solution is to pay every employee as if they live in
San Francisco, what we call "single-city." That gives high marks on every
dimension above...except that it's extremely expensive for the company.
Basecamp.com can afford this but I doubt most companies can.

We ultimately went with a formula where we look up the average salary for your
title in NYC (the USA's most expensive city), multiply it by some multiplier
(to make sure we pay systematically above market), and discount it by the cost
of living in your city compared the cost of living in NYC.

When we can afford it, we'll move to a single-city model based on San
Francisco.

~~~
sct202
How do you do the cost of living adjustment? I've used a few just for fun
before and have gotten wildly different results for NYC vs Chicago (+21%,
+51%, +75%) from the first few listed on Google.

~~~
google234123
Take the median? Look in more detail how they calculate the values and pick
the one that makes the most sense?

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martythemaniak
I've been mostly reading the WFH debates here on HN and this seems to have
come as a shock to many advocates. You know, companies already had offices in
different places you could already move out of SF to elsewhere and this was
part of the deal. This isn't anything new, there was never the option of
taking your Bay Area salary and living it up in Laos.

~~~
whateveracct
It was an option to live wherever in the United States though. Every place
I've worked remotely based in SV/SF has paid accordingly despite me and the
other engineers not living there. Startups & BigCos alike.

~~~
gwright
The more interesting question is not whether that was your experience but what
the aggregate data might say about that.

It seems to me that companies that don't make that adjustment are spending a
lot more on labor than they need to, but it may be that for certain types of
businesses that it just doesn't make a difference in the overall financial
picture.

There are very few businesses/industries that have a revenue/employee (or
profit/employee) ratio like high-tech companies. And so fine-tuning employee
compensation geographically may just be lost in the noise of their operations.

I doubt that practice is consistent across other business types though and it
also suggests that employees at these businesses should be asking for even
higher compensation!

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tzs
Many comments have pointed out that pay is determined by the cost of
replacement.

For employees at an office in SF (or Seattle or NYC or London or anywhere
else), the relevant cost is how much they have to pay to get someone else in
that same city. Hence, for non-remote workers the pay has to be high in high
cost of living places.

Many people seem to think that when the same principle is applied to remote
work, that means the pay should depend on the cost of living where that
particular remote worker lives.

Is that actually the correct application of that?

If a remote worker in, say, Tulsa, OK quits and the company wants to replace
them with another remote worker there is no reason they need the replacement
to be in Tulsa, OK. It should be fine from the company's point of view if the
replacement lives in Boise, ID (which has a lower COL than Tulsa), or Salt
Lake City, UT (about the same COL as Tulsa), or Spokane, WA (higher COL than
Tulsa).

So why should they offer more for workers that happen to live in Spokane,
about the same for those in Salt Lake City, and less for those in Boise?

It seems to me to make the most sense from the company point of view to
consider all remote workers to be essentially in the same location, and how
much they pay should be what it takes to attract the number of qualified
remote workers that they want to hire.

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iamcurious
Cue to the horde of new startups that will be 100% remote and eat Zuckerberg's
lunch. Remote will be the new open space, with all the buzz words, feel good
stories and even the blind eye towards its obvious defects.

Seriously, everything is documented, you can grow without worrying about floor
space, you get access to a larger pool of talent, you are probably imagining
more.

Current managers may not like it, but hey it is okay to be old, leave it to
the young to innovate.

~~~
maerF0x0
They dont have to buy $30 a day worth of food/snacks. No foosball table
maintenance costs. Air conditioning/heat on and on it goes.

Working remote for less money is probably a fools game once you consider the
cost of your home office and lost perks.

Companies know this and are playing it smart by saying it's a benefit and
therefore should pay _less_

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subsubzero
This is no surprise, I commented earlier on this with another company but
figured I can re-use it here:

Both me and my Wife's company have pay bands based on geographical region(most
employees know nothing about this and most companies employ these salary COL
changes for relocation) and certain regions you can take a big pay cut. Say
your salary in the bay area is 100k for example, move to the South, say
Florida and it typically drops 30%(typically as low as they chop your salary)
so your new salary is 70k, Denver area is 15% paycut etc. These numbers change
somewhat from company to company but they do exist for most companies and
should be factored in.

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floatingatoll
Facebook and Palantir both used to pay people up to $10k/year to live within a
mile or so of the office, since the cost of living in SF & Palo Alto & Menlo
Park was _so_ much higher than the rest of SFbay. I don't know if they still
offer that perk, but I can attest that the increased costs of rent within a
mile of those offices would, at that time, burn up that entire $10k and then
some, relative to the rest of SFbay.

Are they right to do this, given that it's probably a contributing factor to
increased rents? Probably not. But I bet it was negotiated with the cities to
try and reduce emissions and parking requirements, too.

~~~
nikhizzle
This perk at fb was halted in 2008 precisely for the reason you mention above
- it raised all the rents suitable for employees at the time within that
perimeter by $1000/mo.

(Source: I worked for fb)

~~~
shuckles
Henry George had something to say about this!

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rmason
In other words you can work remotely but stay close to home base? Imagine how
a Facebook developer could live in a place like Detroit or New Orleans?

Have you seen the house you can buy for under a $1 million in Detroit!

[https://detroit.curbed.com/maps/most-expensive-homes-sold-
de...](https://detroit.curbed.com/maps/most-expensive-homes-sold-detroit-2017)

~~~
abledon
the unit tests I could write from home there... oh my god.

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mikedouglas
Solve for the equilibrium. Market salaries at the top hubs will eventually go
down, and salaries outside them will rise.

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huangc10
Always two sides to the same story. As a software engineer, of course I think
I should make the same regardless of I'm on-site or remote. As a founder, of
course I'm not going to pay someone who works on-site vs. remote the same.
It's a never ending debate.

~~~
rukittenme
> I'm not going to pay someone who works on-site vs. remote the same.

Sound like you'll be bringing lower quality remote engineers into a lower
quality remote environment. Don't be surprised when that strategy blows up.

~~~
huangc10
I am actually not a founder of any sort. I just mean if I put myself in the
shoes of a founder. But true story, I am working at a successful startup that
started from a Wordpress blog with a bunch of remote workers from Prague.

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newfeatureok
Funny how no one was complaining when they got a 50 to 200% raise by moving
there. It just makes sense - why would you pay more than necessary?

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NotSammyHagar
I have a job in a tech center and I make a great salary because of competition
for my services, in NY or Seattle or SF or where ever. Right now I'm working
from home entirely. If I'm in Seattle and I work from my cabin 100 miles from
Seattle, no one will know assuming I have internet. Taxes are the same too
afaik (no local or state taxes). Presumably this is okay with everyone.

How much working away from my supposed seattle job (that doesn't even exist
right now) do I get before I am not working in Seattle?

Suppose I saved so much money from my seattle job that I bought a weekend
condo in another state, in Oregon. If I go there many weekends, I think I can
still keep my seattle lifestyle (there's some matter for the oregon tax court
to decide I guess). But am I still "working in Seattle"? Now suppose I go from
my cabin near Seattle to a cabin on the other side of Washington state. Or I
go spend 40% of my time in my Idaho cabin (boy, I have a lot of cabins, they
are so cheap with my Seattle salary ;-)). When do I stop being a Seattle
employee and become a whatever employee?

If I have 3 houses in states with the same "no income tax" like in Seattle can
I live 51% in Seattle and split time in the other places and still be a
seattle employee? Obviously I'm trying to point out the arbitrariness of these
policies.

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whateveracct
I've been getting paid SV salary to work remotely for SF/SV companies for a
while now. This is just companies treating engineers as a cost center -
showing true colors.

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InvOfSmallC
I mean, it's not something that isn't expected. I also think it's fair in a
way.

I'm curious to see how many engineers will be interested. For example there is
a company, quite famous, already known for the remote working that wanted to
make me an offer, but it implied me opening a company in my country so that
they can pay me because it was to complicated to have me directly in the
payroll.

What I mean is that the law is still not prepared to support this worldwide.

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Klonoar
This feels like a "welp we need to cut some pay, let's see who takes the
bait".

Cost of living should not dictate your value to the company. If you're an
engineer supporting x number of users worth y dollars, it literally does not
change what you bring to the table whether you do the job in SF or Birmingham.

Yes, they could hire cheaper in Birmingham, but they can't hire _you_. If you
have a proven track record of doing incredible work, then you should be paid
accordingly. What you pay in rent/mortgage/etc is none of the company's
business.

I would argue that if you're a SWE and you go along with this, you're
complicit in the wage fixing that this industry has had to grapple with for
ages now. Demand to be paid what you're worth or walk.

(And yes, I get that some people can't afford to be choosy. Those of us who
can, should be, though.)

~~~
jedberg
> Yes, they could hire cheaper in Birmingham, but they can't hire _you_.

Unless you move to Birmingham. Now they _can_ hire you. And if you want to
live there then you'll probably take the offer because it will still be better
than the local options in Birmingham.

Employee pay has always been about "what does it take to get them to work
here" and not value to the company.

If there is something in Birmingham that you value, then you'll be willing to
take a pay cut to be there.

~~~
Klonoar
_Some_ people will do that, like the aforementioned "can't be choosy" cohort I
noted in my original comment.

For all the talk about abundance of engineering talent, talk to anyone who's
actively had to hire in the past six months and it's a complete slog of
unqualified candidates. I would find it hard to believe that engineering
talent (_especially_ at FAANG level) is in a market position that doesn't
afford them negotiation power. One or two people doing this is certainly
nothing, but if enough do it, then it makes a potential difference.

I'll be very curious to see how FBs staff handles this come Jan 1. Probably
disappointed, I'm aware... but curious nonetheless.

~~~
jedberg
> talk to anyone who's actively had to hire in the past six months and it's a
> complete slog of unqualified candidates.

That's always been the case. When I did interviews at Netflix, people who had
resumes that said "Senior Engineer" for five years couldn't do fizzbuzz in
their favorite language.

Yes, if enough really talented people all get together and demand higher
wages, they might stay high. And some stellar performers will demand high
wages regardless of where they are.

But the truth of it is that most people are not stellar performers. They're
good engineers who can get work done. And they will demand median salaries.

Median salaries will probably shift towards an equilibrium below SF salaries
and above {pick your favorite small town in middle America}.

------
MattGaiser
[https://news.ycombinator.com/item?id=23261394](https://news.ycombinator.com/item?id=23261394)
in the other thread, there are a myriad of people thinking that there won't
be.

Excitement about moving to Iowa while making 150,000 was very premature.

~~~
sb52191
I will gladly take some amount of a pay cut to move out of the Bay Area, but
obviously it's very dependent on how much that is. 15% less to live in Lake
Tahoe? Yea, I'd probably do that. 50% to live in Seattle? Obviously not.

------
zuhayeer
An interesting thing about Facebook comp thus far has been that their pay
bands for engineering were the same across the United States assuming wherever
they had an office (unlike other large companies like Microsoft and Amazon).
For reference check out
[https://www.levels.fyi/company/Facebook/salaries/Software-
En...](https://www.levels.fyi/company/Facebook/salaries/Software-Engineer/).
Pay cuts would come as a pretty hefty change to those who have already moved
or relocated.

At the same time, this is now an employers market. With remote work taking
stride, pay cuts feel inevitable – why would companies pay top dollar for
talent they have broader access to and who are willing to accept less. We'll
have to wait and see how new offers start looking come August.

~~~
jarjoura
That won't change if you're an employee working in an office with a local
team.

Remote only roles will be billed differently.

------
j45
The thing about remote work is.. it could become a global marketplace now for
talent.

The big companies could get to off-shore again in a global remote-first re-
jigging.

~~~
dudul
It will already take a while for companies to absorb the change of distributed
organization in the US. Opening to the world brings yet another set of
challenges: taxes, employment regulations in each country, timezone
differences, cultural differences, etc.

I know FANG are really good at propaganda, but I don't see them going
overnight from "good work can only be done with everyone in the office" to
"well sure, one guy in SF, one in London, and a third in Sydney", no big deal,
just jump on the zoom" without looking completely ridiculous.

~~~
erik_seaberg
I keep remembering how we'd just meet over video rather than shlep all the way
to the other end of Google's Mountain View campus.

------
6gvONxR4sf7o
All the justifications of "salaries are just supply and demand" are evil to me
(not that I'm saying facebook's choice here is evil). Yes, they'll often pay
you the least they can get away with. They'll also treat you as badly as they
can get away with.

Treating people as badly as you can get away with is _not_ good, even if it's
a natural product of supply and demand.

------
Nasrudith
I suspect that eventually we may see a realignment to "utility" based pay
rates as opposed to location. The old rates of SV may wind up their own tier
in Work From Home who can demand that rate successfully.

Of course that depends upon proper judgement and valuation of employees and
prospective employees.

------
Ericson2314
How do new hires get trained remotely, and will it be as effective? It's a
problem I just thought about.

~~~
grumple
At my company, they fly you out to train with your boss/senior dev for a week-
long intensive. After that, it's easier to get the rest of the knowledge
transferred remotely. But I have no doubt you could train someone remotely if
you put a little more planning into it (automate environment setup, good
written documentation, good video chat software).

------
zebnyc
If this is a leading indicator that remote work is going to become mainstream,
I am anxious at the prospect of new grads / junior engineers' ability to get
their foot in the door.

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RyanGoosling
The Administration owns the land and property. They need the high salaried
employees to stick around town to pay the exorbitant rents.

I hope that helps tie things together for you.

~~~
scintill76
Which administration?

------
xchip
Companies that sells Hardware sell it at the same everywhere despite the cost
of living.

Why isn't this the same for employees? We need to call out this bullshit.

~~~
maerF0x0
Many companies will have different pricing models in different countries.

See [https://steamdb.info/sales/](https://steamdb.info/sales/) as an
interesting exercise in arbitrage

------
switch11
Interesting. Thought Facebook didn't screw over its own employees

seems they are getting inspired by Amazon

------
coronadisaster
Just drop the salaries further and force them to move to the poorest areas of
the country?

