Hacker News Reader

Assuming $80k is market rate in the new location, if this person was paid $120k it creates another kind of risk: the person might be disgruntled and hate the job, but never leave, because they aren’t going to get $120k anywhere else.

As an employer the ideal is to pay at or slightly above the market. Enough to make money a non-issue, but not so much that people who secretly hate you still work for you.

Supply and demand.

MS could afford to pay more as you said... but why should they? Does your friend seriously consider leaving MS in India? If so, use that as leverage to negotiate. If not, then clearly MS should not offer more money

Not just India, tech salaries are pretty low even in the UK, much of Europe (except Switzerland) and even next door in Canada.