I think this misses a possibly very important effect: agglomeration. Programmers in the Bay Area were not all born there, many (most?) chose to move there, some from elsewhere in the US, some from abroad. If those programmers who are more skilled tend to move to this area then the resulting greater productivity could explain higher pay. So why might more skilled programmers move to the Bay Area? Perhaps because other skilled programmers live there, and programming skills are complementary. A highly skilled developer may be worth more to a company with other skilled developers who can work together to create advanced products. Note that local PISA scores are irrelevant if people were not educated in the place that they work.