The author makes the classic error of bringing the economics textbook to the real world: with no location based pay, surely some of that chunk of money the market assigns to wages will be spread to the underpaid people in other places?
In the real world company A tries to squeeze wages in one place and company B obviously tries to hire at local wages in the other place. There is no built-in fairness, it's just a negotiation strategy. The new equilibrium could be that everyone earns less.
I'd rather have that employees around the world can take home a western salary if possible, putting that money into the local economy and raise salary expectations among their peers.
I don't understand your reasoning, how does the rise of the corporate sector in developing nations put deflationary pressure on developed countries? Wouldn't competition from new economic centres dilute the value of development in Western countries thereby causing inflationary pressure?
It's not about "how good we have it", it's about logical compensation policies.
I literally just left my job today, because they refused to give me a raise due to my location (and pay level). I got a much better offer in a slightly more expensive location (I can move).
It makes no sense to tie pay to location when you aren't competing solely in that location. Your employees can move to places with better pay and benefits too (or companies that don't strictly tie compensation to location).
People have spouses, children, families, responsibilities. Not everyone can just pick up and move. Also, not everyone wants to move - some are very happy in a given location for various tangible reasons.
It is so trivial now for companies to source talent from anywhere on the globe that the days of employees negotiating salary based on location are pretty much over. You are competing at a global level now.
I'm the first to admit I have it good, but I'm pretty sure that even at the FAANGs, where all the children are above average, salaries are not squeezing the bottom line.
It's not entitlement to want a fair share of the value you create.
It's about cost of living too. I was offered a job literally across the street from where I live, but their wages were probably based on cost of living from a few years ago; I bluntly said I cannot afford to live there from what they were offering, and the one minute commute does not pay for said mortgage.
At the moment I make a decent amount of money for where I live, but at the same time, cost of living has gone up while my wage has stagnated. I'm very tempted to bite the bullet and look for a job in e.g. the Amsterdam region again, hopefully I can negotiate WFH conditions and the pay will be significant enough to warrant spending the extra time in the commute (once the 'rona is over, of course).
Just to be clear - because it took me a minute to grasp this myself - cost of living is your concern, but not an employer’s. The question they are asking is not “can Johnny pay the mortgage” but “Johnny wants X - can we fill this role for 2/3 X? Can we offshore this role for the savings?”
But cost of living should be a concern of the employer. Ignoring it, saying "but we should just get the absolute cheapest we can", is essentially claiming that the employer does not exist within, and rely on, a society. It's socializing their costs in order to make more profit.
The idea that employers should, as a principle, seek to pay the least possible for the best work, is predicated on the idea of a free market, which is a theoretical construct. It requires a lot of things, like perfect information on all sides, and externalities being properly priced in, that don't actually exist in the real world.
Given that profits are unpaid wages it absolutely does make sense to erect a logical framework that justifies suppressing wages. It would be a mistake to think fairness or moral comes into play as long as it is legally acceptable to discriminate certain people.
Location pay reduction is fair to the rich. Simply put, our "chains" are designed in such a way for us to stay in them as long and possibly - contributing to society, whatever that word could mean.
Basically, with the current state of property prices and overall prices, the UK average is struggling equally as a person from Eastern Europe - as someone said: "majority is one month salary far from bankrupt".
What I am trying to say is real income is what is left after your expenses.
Our system is profit-centric, and most of the profits go similar to snowballs, always to the bigger ones.
In our world those big ones have additional supper power, they can change rules so that they can become even bigger...
Romania for example has a 96% home ownership rate meaning that lots of people don't have a monthly rent or mortgage payment. This takes quite a lot of stress out of life that is universal to people with both a low and a high income.
However if that home is in a rural area where there aren't any jobs anymore that means you'll have to move to the city and rent an apartment. Because a normal rent is higher than a normal salary this can be problematic. So if you're in this situation then moving West somewhere is a much better option.
My impression is that both your statement and OP's statement can be true at the same time.
No, it can't be true, I believe many in Eastern Europe actually have it much better than their UK counterparts. At least if you're in Engineering, Tech etc. I'm talking about the ability to afford a house on an engineer's salary, which is simply not doable in the UK.
> I'm talking about the ability to afford a house on an engineer's salary, which is simply not doable in the UK.
I don't understand how people can think this.
Software engineering salaries is way above the median. Housing is difficult to afford for everyone right now, but definitely doable on even below median engineering salaries if you have a partner who works too
If you can get a FAANG position in London that will pay £100k+
The entire comment was about majority of people not just a handful of 70 million UK has.
As my initial comment was, system is design in such way to keep you in constant state of work, not allowing you to be free...
In Ukraine with average salary of $400 is equally difficult to afford home as in UK with salary of $3000, only difference is that from more expensive it is possible to find a way to reduce expenses (giving up comfort) and then move savings to a cheep/er place.
AAAH. But, are you talking about the UK /EE average, or the UK/EE average software engineer? Those are two very different populations....
In EE, as a sw engineer, you will do much better than your UK counterparts if you compare your revenue to the population average. That comes with some perks (e.g. it's easier to afford services, like say, getting a babysitter) and with some downsides (the general society around you is "broken" to a greater extent; I feel that too many people take for granted what they have. E.g. having well heated homes is not a guarantee that magically happens; if the city infrastructure breaks down, you may have problems even if you're otherwise rich).
Getting a house is not everything; if fact, if you're from UK, it's probably quite easy to go to EE and get yourself a house there.... but you don't want that, do you? Because, actually living in London might have some advantages that you're overlooking, and maybe those are reflected into the housing prices, too.
There are (nice) parts of the country where you can very easily. In Liverpool you can buy a 2 bedroom flat starting from £40k or a 5+ bedroom house for £200k. In London (and some other locations) pretty much nobody can afford a house, but that's a problem with house prices not wages.
Where in UK are we talking about London where all good things happen or Sheffield ?
And what is your salary ...
By the way, when we say "afford", I mean be comfortable, that if you lose your job you will not lose your home because you cannot pay 2 payments, and therefore lose your deposit and everything you have payed in until that point.
Buying home in UK is life under constant stress of "what if" and pandemic, Brexit and current economy have not done a good job of removing that fear...
I live in London, in a mid-range area of London in terms of property prices. My wife's income is very close to my own, and we don't have kids. We currently rent, but we've put some serious thought into buying, including talking to banks about how much we could conceivably borrow for a mortgage given our current income, credit histories (which are good but not superb), etc.. We've been saving seriously for the last 2 to 3 years and we concluded that if we save for another 1 to 2 years we can very realistically afford to buy in London. But we probably won't, because money goes so much further outside of London that it doesn't seem worth the extra expense.
I suppose it was a little disingenuous of me to say that "I" can afford to buy when I'm taking my wife's income to consideration too, but then I imagine most people who have reached the point in life where they're thinking about buying a home are thinking of doing it with a significant other.
> be comfortable, if you lose your job you will not lose your home because you cannot pay 2 payments
In what country is it not the case that you'll get evicted for failing to pay your mortgage on time? Also, won't you also get evicted for failing to pay rent?
As you said, those are two incomes, not one, and in this economy and state of things all I can say good luck.
Again, maybe thing is about being brave and just jump in without thinking about possible issues that may never happen...
Regarding eviction, I meant more, that you will be able to have some savings to bridge gap between two jobs or if it gets to unforeseen illness or event. Like what happens if you both lose jobs, or you need take care about your spouse ... (I hope that never happens). But, my only point was that system is adjusted so you are always on the edge (regardless where you are), so you always turning that economic wheel ...
I have few mates they have miscalculated amount they can borrow, forgot to include other expenses, service charges etc. now they really struggling as mortgage is eating most of their salary, they have very little room for any maneuver.
The system is adjusted not by nefarious, moustache-twirling bastards, but by the actions of other people buying goods and services, including housing, up to the point where they believe their outcomes are optimized.
If lots of people want to live in a particular area because they think it will help them live better, that area will have more people jockeying/bidding to live there. Since everyone wants food with their meals, food will get bid up. If vacations to a beach are enjoyable people will vie for them (and suppliers emerge to cater to that).
The treadmill effect is caused because other people are running their own lives on their own treadmills, resulting in a system outcome.
That is part of what gives rise to the FIRE movement among people with some freedom to choose to live on less than their max (not everyone can, and certainly not to the same degree). If you adjust the hedonic consumption treadmill to run more slowly than you are running, you can literally get ahead. I’m not choosing it, instead choosing the expensive mortgage and longer worker career, but I can see why it appeals to some.
Well, I would like to agree with you, but "moustache-twirlingnes" is in all of us; it is called greed and lust for power and money.
Our political and economic systems in the state of the things they are right now have not created on their own. All our systems are the human product - created through many iterations with a very similar theme and always done by similar actors - an elite that can influence those policies and the elite that have the right to invent and pass new policies, which is, to say the least, very corruption-prone process.
At this point, who is to blame for those policies?
And more importantly, when it becomes evident knowledge, who is to be blamed for keeping the state of things as it is?
Treadmill and the rules it runs on - are built by humans, and if we did built it, we could change it too.
True, even during pandemic prices of properties have gone 20-30% up, even with salary of £100K (£5.5K a month NET) which is above average for majority of developers, it is difficult to afford property in London.
And if you move outside, then you need to include traveling fees which are additional +(200-400) and lose of time each day about 2-4 hours (of course depending on location)
The need to be in London is slowly, softly, changing.
"London Money" has been good for a long time, but it's not just about location. It's a vortex effect that makes "London" a shorthand for "talented, productive and driven". If you're talented, productive and driven, you move to London where you can make more money (and work on more cutting-edge stuff). If you want those people, you set up in London and pay London Money to hire them.
It's not that you earn less in small-town Hampshire just because it's small-town Hampshire. The pool of talent there excludes the people who went to London to chase the big time. You pay small-town Hampshire money, you get small-town Hampshire people. And believe me, after nearly 20 years in UK software, those folks aren't great. Some are competent, but stuck in a technical rut. Others are just poor at what they do. This effect has been writ large in inter-country business - an Indian colleague told me a while ago that her opinion on why outsourcing was such a mess was that the best people leave for the US. The second tier leave for Europe or Canada. Who does that leave to work for outsourcing firms?
If the geographical vortex effect falls due to a change in working practices, companies are still going to need to pay to get good people.
Banks like JPMC and Starling know this - their offices outside London pay near-as-dammit London salaries because they want talented, productive and driven employees and if you want to attract them, you need to pay.
Issue is that really all in UK is in London, no offence to other towns, simply: museums, clubs, meetups, tech conferences, startups, theatre shows, multicultural vibe, amount of things you can do ... (please ignore pandemic and current lock-down state)
I have been in Manchester for a few days, and except for my friends and few exceptionally good food & club places town is simply unsatisfying (I do not know what word to use to describe maybe day time boring). For me I would rather take a StarLink and move to Scottish mountains ...
Don't get me wrong, I do not hate rest of UK, there are different towns, and they are quite different, some are nice and pretty, other look like post-communistic havoc...
Other towns have museums, some great ones. Only a minority of people give a stuff about conferences or meetups. "Startups" are moot when we're talking about the possibility of work diversifying away from London.
Yes, there's a lot to do there. The tradeoff is poor air quality, limited access to the natural world, bad smells, overcrowding, huge living expense.
You grow out of clubs. These days I like a pub I can sit down in. And most Londoners that I know stopped doing all the immense number of things at some point. Plus I can get to central London pretty quickly on the train if I want to. Usually I don't though.
I'm about 12 months away from leaving London, Leeds is the goal. It has a decent enough tech economy that I should be able to find an equivalent job for little to no pay cut and cost of housing/living is significantly lower.
It's probably partially my age but I know a lot of people who are on the verge of leaving, partially due to remote working opportunities from Covid but mostly due to being priced out. Even those I know staying "in" London are having to buy in Essex, Hertfordshire etc. due to the cost. London's housing crisis is only getting worse every year, in enough time the upside may be that it helps other cities develop instead.
Another thing is that those who migrate are looking for more opportunities, and also in comparison they decide to live in worse condition as they can save more working jobs local people do not want to do. In that way when they go back they can live significantly longer with those savings.
Person struggling to find job 500 EUR a month in Ukraine, (https://ukraineliving.com/the-truth-about-the-average-salary...) can in UK live in share bunk bad room eating noodles for a year and save £10000 working construction industry.
In London normal expenses rented 1 bed flat,food etc. will eat those saving in 3-4 month. Back in Ukraine same person can live out of those savings for 2 years.
You'd be 100% correct a decade ago. Nowadays the difference is miniscule. Quite a few people are moving back because they can have better quality of life back home.
GitLab’s documentation points out very clearly that the ratios they use to pay less outside of SF are not “cost of living” adjustments, but “cost of market”.
What that means is that wherever you may live, you are competing against the lowest offer another worker of similar value anywhere in the world will accept.
If you look at the charts, you’ll see how low those offers may go.
In a world where people are not able to move all over, this may not be tested. But in today and tomorrow’s global, mobile workforce this is going to cause friction.
> GitLab’s documentation points out very clearly that the ratios they use to pay less outside of SF are not “cost of living” adjustments, but “cost of market”.
What does this even mean? The market will bear paying some of us top wages anywhere. If you offer me less because I'm in a different location, I'll just take the offer from the other SF-based company that offers me more.
Remember: if you can do your job from anywhere, then someone else can also do your job from anywhere. Folks who reject their location-based pay will eventually be replaced by others who are just as skilled but have until recently been shut out of the market, and will gladly take it.
It's amusing to observe "Location-Based Pay" just pop into existence and for the only purpose of lowering the wage of whoever's hired. Programmers have been capable of working from home since the internet matured. Value doesn't comes from location, instead it's from a programmer's skill and ability of simplifying the task needed to be completed by maintainable code. There's no serious argument for location-based pay. Yes, there's people all over the world. Nothing has changed recently besides programmers being forced to work from home because of the pandemic.
Bringing up points like the second/third world wages in a conversation about first-world pay will benefit neither first-world workers nor any other worker (which begs the question -- qui bono?).
Their arguments are not even consistent:
1. They claim that it is just about bringing an awareness to the issue.
2. It’s not about stiffing any worker (so-called first-world or otherwise).
3. You shouldn’t be a hypocrite.
4. But in order to be consistent (not to violate (3)) you need to also argue that you yourself shouldn’t be able to, say, work remotely for a Bay Area company and get the same pay as the locals. Therefore (1) can’t be true since you actually have to forfeit the negotiation on the altar of your own relative privilege (see (2)).
Then they close this new article by saying that:
1. We shouldn’t argue against location-based pay.
2. Then they approvingly quote someone who claims that “we should reject the notion of Location-Based Pay”. But that contradicts (1) since this means that you should actively combat the idea of location-based pay.
Regardless of fairness and cost of market I think it's not something beneficial for the companies when it comes to finding and keeping talent.
I live in Spain, and I'm in the same timezone as Germany, now let's imagine I'm percentile 99 when it comes to talent and an American company wants to hire me.
Because I live in the middle in Spain they offer me 75k euros a year, if I were in Germany I would get 110k instead. Now my current company pays me 70k and I'm happy where I am, I'm definitely not changing jobs. However if I was offered the 110k I would seriously consider moving because it's a lot more.
So instead of paying me the 110k they end up paying 110k to a worse candidate in Germany. Not only they pay the same to a worse candidate, if I were making 110k I would be kidnapped at the company because nobody else would pay that much here.
I don't really have much to complain about. I work remotely, and I've noticed a significant trend upwards in remote pay in messages from recruiters. If someone from another country can get those jobs, they should get the same pay. Needless to say, I'm skeptical that many can, because the skills are hard to find and take years to develop, and go beyond simply understanding the basics of coding.
Equal pay across borders just shifts wealth away from where it was created and bypasses regulations we believe to be important. Further, within local communities this can create enormous wealth gaps. Can’t argue with the righteous arguments here around rewarding talent and equal opportunity, but be careful what you wish for...
For high skill, scarce talent, cost of market > cost of living. For workers who by the nature of their job could work anywhere (more or less) cost of living is of almost zero importance.
High performance software engineers need to demand higher salary. More Compensation for use of home office space, internet, utilities, etc.
Learn to negotiate better based on performance impact to position. The demand for high performance software engineers are vastly greater than the supply.
I don't understand how people can say that demand is greater than supply or the other way around. Aren't they exactly matched, using the nifty concept of salaries? Anything else seems absurd. The demand for skilled software engineers working for free is infinite. The supply of skilled software engineers willing to work for one million dollars per month is much greater than the demand for such.
