This is not the same as discrimination on race or ethnicity. Most of the legally protected attributes are not something you choose to be or can change. Even religion, while being a choice, is protected because a person's religion is regarded as a strong moral conviction and is widely accepted as a concept.
Within the United States, the choice to live in a low cost of living area could easily be changed by moving. Millions of people move each year in the US, many of them due to work. In fact, I had to move from a low-cost area that is considered depressed in order to find a job.
Now I can see that living outside the US can bring challenges to moving, like visas, and national origin is a protected trait. But if their policy is to pay local rates, then that does not discriminate based on anyone's individual traits and is wholly based on the market.
Does it suck? Sometimes. I would have gladly stayed in my low-cost depressed area if there was a job for me there. The best play for me would be to move to an expensive area (done), make a lot of money (I wish), and move back to the cheap area to retire early. But my wife doesn't want to ever move.