A key nuance often lost in this discussion is that most companies have a mix of engineers along an interesting dimension: those competing locally and those competing globally. When everyone is local, it easy to conflate the two. When everyone is remote, you suddenly have a bimodal wage distribution if you are in a tech hub.
Some people are paid a lot for where they are (like truck drivers in the North Dakota oil fields) and other people are paid a lot for their skills (like professional athletes), and most are paid for bits of both. Some skill sets are rare and in high demand globally, concentrating in places like Silicon Valley and Seattle because that was where you could get the best compensation if you happen to have those skills. There is no implication that a large pool of cheaper but similarly skilled people exists elsewhere — professional sports would look very different otherwise.
Ironically, I’ve lived in Seattle but worked remotely for European companies for years. It has always been highly competitive with the best that FAANG/unicorns have to offer in terms of compensation, which surprises people but I’m not compensated for where I live — that is incidental.
I will make an observation based on experience I’ve seen few people make: there are many companies not located in SF/Seattle/NYC that would pay almost anything for a rare-skill engineer but they are located a long way from a major tech hub and they would never be able to convince a rare-skill engineer to move there. If you have these skills and the world goes remote, that suddenly becomes part of your buyer market. It works both ways and this isn’t theoretical. There are a lot of opportunities in places few engineers look because they don’t want to move there.
As an engineer, positioning yourself to operate in the global market does not imply a race to the bottom. For the highly skilled, it can often imply the opposite.