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Comment by coldcode | Hacker News Reader

This is making finding people for our (large but non tech) company (not in a high tech area) very difficult; we never paid those kind of salaries (cost of living here is much lower) but now you no longer need to be local to work for us, so we have to compete with these high paying companies which our company cannot afford to. It takes the location requirements out of the picture entirely. This is going to kill SF and to a lesser extant, NY, to no longer have these high tax paying employees, but also ruin the work environment elsewhere with now super affluent employees living in low cost but desirable locations.

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> This is making finding people for our (large but non tech) company (not in a high tech area) very difficult; we never paid those kind of salaries (cost of living here is much lower) but now you no longer need to be local to work for us, so we have to compete with these high paying companies which our company cannot afford to

It's simple: Pay more.

Maybe it's time for a new funding round.

It sounds like you don't think people doing the same job you do don't deserve the same pay.

It comes across as classism to be honest, looking down your nose at people because they don't live in the most expensive areas of the country.

You do understand this wrong! The message is that any startup/company not in the valley will have a hard time finding employees. Until now every company paid a salary fitted for the locale the company is in: You are in an area with a low cost of living you are paid a lower salary than elsewhere.

But from now on you can get the inflated valley salaries from everywhere. They are so high because cost of living is very high and competition with other companies too.

But from now on your potential new employees can choose to work for your local company or some fang company for a much higher salary. And many companies will not be able to pay these high salaries.

There is a world outside of investor money burning valley startups and the most profitable software companies on the world. And they may have a big problem now.

Some business models would need to adjust if pay outside of tech centers started going up, yes. Possibly some will have to be abandoned entirely.

My instinct is that if a tech problem doesn't have a fairly high upside, though (5-10x), it already has a tenuous business model given how famously risky technology projects are. It's very hard to impossible to consistently complete them as estimated and budgeted. Not to mention actually getting folks to adopt the finished product.

> But from now on you can get the inflated valley salaries from everywhere.

You can't. Spotify are an exception and I doubt that they'll keep this up long term or that many companies will follow.

And I think that that people overestimate these effects in general - the most likely outcome is that the salary distribution gets smoothed over to some extent i.e. big-city salaries go down a bit (or don't rise as high and as fast), remote and lower-cost areas see some increase in salaries but to a limited extent. But at the end of the day SV and big cities will still offer the best compensation, just with a smaller delta between them and the rest of the market.

To the degree that true remote becomes more prevalent (a lot of people will be more in the 1-2 days/week commute camp), you probably see a new equilibrium over time as you say. Even if companies are hesitant to actually cut salaries, given how contentious that is, new hire offers in high CoL areas start coming in a bit lower and raises get skinnier while offers to people living in Little Rock are very generous for the area. You still have disparities but there's more of a nationwide equilibrium.

> But from now on you can get the inflated valley salaries from everywhere. They are so high because cost of living is very high and competition with other companies too

You have it backwards. Silicon Valley salaries are not “inflated” nor are they unreasonably high. In fact even at large FAANG companies, engineers are underpaid relative to actual revenue contribution, it’s just that competition drives those companies to pay closer to a fair value wage.

Across the US, engineers are massively underpaid due to specious rent-seeking policies by employers who tether pay to cost of living (treating it like an allowance for employees instead of an earned wage).

This change where remote employees can earn the same high salary based on their value instead of being a paternalistic allowance based on their employer’s opinion of where they live and what they should be allowed to afford, it is a good thing, because all these rent-seeking companies acting like vampires on low-wage suppression due to location are going to have to radically change, get rid of their paternalistic attitudes, and start being fair with employees.

> Silicon Valley salaries are not “inflated” nor are they unreasonably high.

More people need to understand this. Even here on HN most people appear innumerate. A round number like a $100,000 salary might have seemed like a large amount of money in the year 2000. There has been 55% inflation in the meantime.

What will happen to all the employees at companies who are not able to leverage them to create as much value as FAANG companies can? ie. every other company that isn't a global tech behemoth?

I deny your premise. All those companies can and already do leverage software engineering talent for the same multipliers or orders of magnitude impact on revenue that tech companies get out of it.

They are just using rent seeking opportunities to disingenuously pay uncompetitive salaries and reap surplus for executive pay.

Either those companies will get better management and leaders who successfully rebuild the business model to account for this, or else executive and manager pay will go way down to reflect the reality that competition for high leverage software talent takes away the cushy executive surplus, or else the market in general will deem the company to be unwanted and not useful and it will decay out of business or get acquired.

The company has no right or expectation for things to stay in the current unfair state. The “cost of living wage” free lunch is ending, so adapt or fold.

On what basis can you claim that other companies can leverage engineers to make as much profit as Google/Facebook/Apple? Those are some of the most profitable companies in the world.

It's true that companies might have to adapt or fold, but many business models will not be able to adapt to produce the kind of leverage a global advertising duopoly can.

No, I never said other companies make as much profit. I said other companies experience the same multiples or order of magnitude impact effect from software engineers that tech companies experience.

Ultimately your business’s total revenue is a function of external demand for what you sell. Within that limit, some employees have a big impact on realizing that revenue, some have a small impact. What they are really worth to you is their share of contribution of revenue by that impact.

What I have said is that virtually all companies employing software engineers experience this impact from software engineering in similar ways (meaning the engineers’ value is much closer to their direct impact on revenue than some lower “market rate” wage floor).

It’s frustrating that you are misinterpreting this as me saying other companies earn the same profits, in absolute dollar terms, as tech companies. Because I never said that at all - and more importantly, that does not need to be true for my earlier statements to be correct.

A company doesn’t have to make the same profit as FAANG to justify that the fair value of one of their software engineers according to their revenue contributions within the company’s (much lower than FAANG) profits is already at a FAANG salary level (which they already have the ability to pay).

Remote work just takes away the greedy rent seeking mechanism (local “cost of living wage” excuses) that had been used to artificially suppress what should have been a FAANG-level wage (paid out of the current revenue) all along, based on the way the company leverages software engineers for their contribution to existing, current profits - not any hypothetical ability to generate future FAANG level revenue per employee.

>(which they already have the ability to pay).

I guess I just find it questionable that all or most companies can increase engineer salaries to FAANG levels and remain profitable. I am pretty sure this is not the case for my last employer, for example, looking at their recent earnings report. Remote hiring might push up wages in most places but there could still end up being a bi-modal distribution of wages, between high-leverage companies and low-leverage ones, as long as there aren't enough jobs for every engineer at highly profitable companies. It's already like that in some cities.

That doesn’t seem related to this discussion though. Whether a given business can afford to pay it or not is a reflection of customer demand for that product or service combined with good or bad executive leadership.

If the competitive wage rises but a company can’t afford it, that’s not the worker’s problem to accept a bad wage to help the company. That’s the company’s problem to hire better leadership or cut executive pay in favor of employee pay or get acquired / raise funding or go out of business. None of that changes the reality of competitive wages.

At the root it sounds like your question is more about aggregate market allocation of labor. But why should workers accept inefficient allocation at worse wages? That just seems like an aggregate market expression of “these businesses are unwanted by society” - the same happens to 90% of startups all the time.

>If the competitive wage rises

That's begging the question. The competitive wage will not rise to FAANG levels just because some FAANG jobs are available in every city. It's the worker's problem if they can't get the that FAANG job anyway, because the number of FAANG jobs hasn't changes and instead they've just been diluted over 100x as many cities and a much larger talent pool.

Affordability is relevant because it's one aspect affecting how much the competitive wage will rise.

I don’t agree. There are way, way more jobs than qualified candidates for San Francisco & New York level of salaried jobs across a bunch of major cities, and as the candidate pool increases, these companies are likely to just increase demand for more headcount.

My forecast is that prior to the pandemic there were X “FAANG-paying jobs” across ~5 big cities in the US. After wider remote work normalizes in the next two years, there will be 10X that number of jobs and the average wage will likely only go up.

There will be room for all the headcount there currently is across the ~5 largest tech hubs, plus nine times that amount in additional, new headcount. People from all kinds of regions of the US and the world will have much greater chances at these jobs. And it will create spillover effects where lesser tier employers have to raise wages to compete for the remaining candidate pool and so on.

Well I hope you're right. We have FAANG in London already and many tech jobs, and salaries haven't risen to FAANG levels. There still seems to be a bimodal distribution between big tech, high finance and some contractors, and everyone else. Of course it's a different country altogether and there are likely many different reasons for that.

The idea of a company paying based on the cost of the locale is just another way of saying “what’s the lowest we can pay people for these skills compared to what else they can get locally?” and divorced from how much value they bring to the company. Sadly, for these companies, local just got a whole lot broader and they will need to pay more to get the talent they need to stay competitive.

In your life, I’m sure you try to pay as low as you can for things. Have you ever said ‘no, I will pay more for this car because its value to my life is higher than $10k’ ?

Remote work is great, because it’s making a more free-market. It’s almost like we immediately recovered the mobility that the population used to have overnight.

This will also mean that you are competing with 10x more people, so wages may go down because of that fact.

I assume fair amount of these startups service Mexican market and local people. What do you expect them to do, charge locals the US prices? If you don't have that insane SV investor money to burn it makes them struggle.

It is already happening in Mexico (in GDL where I live at least): The city has been a "tech hub" for a good 10 to 15 years with growing presence of technology firms (Oracle, IBM, HP, Tata, HCL, Cognizant, Intel, plus several small startups), paying roughly 1/3rd of the price per talent. In the last year, we have seen an increasing number of employees moving to remote jobs for American companies that decide to pay 1/2 the price per talent. This is a lot of money for locals and still a 50% saving for US companies.

The bad thing is that, the start-up culture that was being formed here is starting to disappear. I know several CTO or CEOs friends who lost developers because they cannot compete with those salaries (paying in USD) when they are charging in MXN.

> This is going to kill SF and to a lesser extant, NY, to no longer have these high tax paying employees.

Sounds like a simple market correction, since those two cities have been extreme outliers for quite some time.

pay for value not area code

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