Google rolls out ‘pay calculator’ explaining work-from-home salary cuts
nypost.com
nypost.com
This right here is the money quote. Google is rolling in cash while paying its employees $X, no matter where they are. Now, they want to say "Oh, because you live in $PLACE, we're going to pay you less."
Did the value to Google of the work these people are doing suddenly go down? No, and not even if they were previously working from San Francisco and now working from South Lake Tahoe, or even Bumfuck Nowhere.
Google knows this. That means this can only be either an attempt to force people back into offices (which are located in more expensive areas), or an admission that they're not willing to pay people for the value of their work -- literally, not paying people what they're worth. Either one of these is a really bad look, IMO, and not really a smart move for Google.
If the 1/100 Google employees that are actually hard to replace (and Google knows it) threatens to leave unless they keep their Bay Area salary, they won't get their pay adjusted.
With remote work becoming more of an option, the candidate pool is larger, and so the salaries they have to pay to get the workers they want are going to go down.
Companies have always paid people "market value", never what they can afford to pay (which for some companies is less and other companies a lot more).
I quite like the philosophy of "this is our remote pay, if you want to move to Bentonville, AR and live like a king have at it, but if you want to live in Manhattan that's on you."
I think the ethics (and legality?) of arbitrary pay cuts go hand in hand with arbitrary firings: cutting a salary to $1 is essentially the same as a firing. Legality then would logically depend on whether the employment contract is under a state jurisdiction with at-will employment or if there is a requirement of a just cause.
I'm a senior developer who has chosen to live both in expensive cities like New York, as well as rural areas.
I knew moving to the rural areas I'd make less in pay with the companies there, I accepted this because it also came with a lower cost of living. My skills grew but my pay was reduced. So was my rent.
Under your logic the local companies should compete with San Francisco salaries, because I "could" be making that much there. When I moved out of NYC I wasn't expecting other companies to compete with my former NYC salary, that would be absurd. The pay is high there because the cost of living is high, not because that is specifically what my talents are "worth".
Yes, the fact everyone is remote now is making everyone second-guess this assumption about pay and location. However, prior to remote work you got paid relative to the cost of living in your area. Programmers in Fargo, North Dakota made far less than programmers in Los Angeles, even with the same or greater skills.
Yes, this means there are many engineers in SF that are actually/currently paid MORE than they would be in an efficient market (and there are many software developers in developing countries that are paid LESS than they would be in an efficient market). Right now there's enough money going around that nobody cares about market efficiency, but if we have an actual, deep recession in the sector, I expect all the music to stop (and the efficiency of the developer market to go up on the whole).
In software we can pretend to ignore these discrepancies, but it becomes patently obvious if you've ever dealt with international companies who discriminate based on nationality for people doing the exact same job (and not in software, where you can argue talent - literally the exact same job - two performers doing the same act in the same show. I've seen pay discrepancies of up to 2.5X or more for an American Expat in Hong Kong and a worker from the Philippines, for example). It's all about what your individual alternatives are.
In a normal labor market, companies can pay based on geographic concerns because employees aren't mobile. In the case of engineers, designers, etc., these people can work from anywhere, including San Francisco. So, they always have the opportunity to make SF wages by working in SF.
But, the thing is, none of this changes when these same people move to Bumfuck Nowhere. The same companies are still competing for the same employees, who are capable of earning the same wages they were before. And, like it or not, SF is the place where a software engineer can maximize their net income after expenses. So, guess what? Companies in Bumfuck are now competing with companies in SF.
Remote work doesn't enable a truly free labor market, but it does significantly free things up.
Regarding people not being paid what they are worth, I know that. It's also bullshit, but that's another comment. And, as I said in another comment, you know that, I know that, and Google knows that, but there are lots of people out there who either don't know that, or just refuse to acknowledge it to themselves. And, if you're Google, you really don't want to open those peoples' eyes, because it reduces the information asymmetry about the process that you exploit in order to get people to work for less than they're worth.
They can also work in Bangladesh. And unless you are thinking of standardizing pay for software engineers globally in any reasonable timeframe, this argument does not hold up.
What is an engineer worth? I have offshored to skilled developers at rates 1/5th the US rate, and they can do the same work.
The actual answer according to the free market would be to take every engineer of equivalent skill, globally, and find the average. That is what a software engineer is worth according to the market all of us are in.
And that's not SF pay.
Maybe in a world where every software engineer is genetically engineered to have the same output then what you said about market efficiency would make sense, but this isn't that world.
The thing you said about price discrimination is not even related to what the OP said, and you simplified the problem a lot by reducing the problem simple monetary terms. The example you gave about expats is particularly flawed, because it's not unusual that expats are paid more for other values that they bring outside of the work they perform (for instance, academic institutions think of that as prestige in some Asian countries). We were all born unequal, if the market were so efficient there wouldn't be so many unjust things happening around the world.
I think the reality is the best engineers are probably worth on the order of multiple millions per year or more (assuming they are working at a place with leverage), and the average engineer is probably worth much less than they are making now. That's the power law we see with YouTube creators, for example. If people had reliable ways of identifying who is actually a really high performer, the pay bands might look more like that. The pay smoothing (since it's hard to make an accurate measurement of efficiency) actually benefits the average engineer over the super high performers.
No, but pay has never been about just the value provided. It's (value * leverage).
Janitors provide plenty of business value, because a clean workplace is important. They have low pay because they're relatively easy to replace, so they have no leverage.
If you move to an area with a weaker economy and fewer high paying job opportunities, you've reduced your leverage, so your pay going down isn't surprising.
When you move, it's not just the hassle and expense, but also the life changes. Especially if you have kids, those are big.
Experienced software engineers in general are capable of moving to practically any major metro if they really want to. By your reasoning, all of them should possess the same pay scale, the same cost of labor.
By Jove, I think you've got it!
Believe me, there are Russian programmers earning 1/3 of a U.S. engineering salary that are much more technically competent - the only thing stopping them from capturing the true "value of their work" is that damn market (and U.S. immigration system...)
I think in the long run the SF salary (for the average developer) will be a historical anomaly in a place and time - kind of like the California Gold Rush in the 19th century.
(If your argument boils down to SF having more strictly more competent engineers than other places and that being the cause of the pay discrepancy, I strongly disagree)
It's like Fintech; a black hole of talent away from actually important work that needs to be done. You get that much capital condensed under one company, and it starts to channel itself against overall societal interests as it seeks to ensure it's own survival distributed across jurisdictions, fueled more by ignoramt adherence to past performance predicts future results amongst the capital management class implicitly picking winners through retarded capital overvaluations through overly aggressive M&A's and purging of the competitive landscape.
Right. Such as their entire business model being "hire smart people to get other people to click on ads."
A Google employee that moves away both changes the pool of options that employee has (only companies that offer remote or local ones in his new place of living - versus companies in (SF, NY, whatever)), and the alternative options that the employer has (he is now being compared against a much larger pool of people who can work remotely). That is indeed decreasing leverage.
Well, yes, but we're arguing that they have the same leverage in their new place of residence as they did before the move. If they have to move back in order to exercise that leverage, their leverage is actually location-based, and they will have to choose between their old salary and old location and new salary and new location.
These companies are used to this sort of thing. Relocation costs are nothing compared to the cost of hiring. There is effectively no friction on the company's part. Yes, the employee needs to be willing to go through the process of moving, but, provided they're willing to pay those costs, their leverage in the situation is unchanged.
Yes, there is a subset of people that have disproportionate leverage no matter where they are at (by virtue of being really really good devs). But that represents only a minority of SF devs.
A family of four enjoying a large house in some suburb for a reasonable price may find the idea of living in a 2br apartment in SF, or paying a truly exorbitant price for a single family home in the bay area, unappealing.
Although I truly don't know the details here, what you are saying is not logically consistent with how these types of things are typically implemented. It's just "you live $HERE, so you make $THIS_MUCH," with no actual regard for expenses.
There are a lot of idealizations in that explanation, as I said it roughly works out this way.
their families are their own business.
I’d say it’s a safe bet that corporations that had an easy out of their office footprints would likely have less of this type of return to office “encouragement”. Consequently companies like Google and especially Apple that have created these corporate owned campus monstrosities (err I mean “flagships”) would not want to have a billion dollar real estate asset on their books that sat around 75% empty.
It may not be what it once was…but employee hostile? Hardly.
Worker compensation in Corporate America has a cost of living adjustment (COLA) multiplier. It’s calculated as part of the salary base and takes into consideration the location of the worker, among other things, in adjusting up or down offered compensation.
Google is simply making this transparent to workers. Just because someone was hired in a high COLA multiple location doesn’t mean they’ll keep that multiple when they voluntarily relocate to a low COLA area.
This is standard HR practice across all of Fortune 500.
And it's gross.
It’s an approach to effectively price human capital in disparate markets.
By example, it’s unfair to expect workers in New York to work at the wages of workers in Des Moines.
But I agree we may be headed towards a future where pay is no longer a function of location. If you can't tell where an employee is physically it's a lot more difficult to have location based payments. A remote employee can be anywhere. When I worked remotely (way before the pandemic) I spent some time working from Hawaii and my employer did not even know.
However, I suspect that one reason the housing market has gotten so crazy (California perspective here) is that many Silicon Valley tech folks bought houses in Sacramento/Tahoe/$CHEAP_PLACE while also keeping their houses in SV but renting them out. As long as the rent payment covers most of the mortgage, they build equity and eventually own the house, while also having a nice big house to work remote from. And perhaps they quietly keep using the SV house as their official residence for HR/tax purposes.
Facebook will also scale salary by location; I have never and almost certainly will never work there but they said they will check VPN logs, and in the past have used IP and geo data from their app to determine locations of employees and users who were potential security risks. Regarding VPN and remote work:
https://fortune.com/2020/05/21/facebook-permanent-work-from-...
<quote> Facebook said it would enforce the new work-at-home policy mostly by the honor code, but that it plans random checks of employee VPN addresses—the tool used to securely access the company’s network remotely—to confirm their locations. Any employee that is caught lying will face “severe ramifications” as it could affect some of the company’s tax filings, Zuckerberg said, adding, “You may be breaking the law.” </quote>
I don't want to second guess them but random spot checks seem like more work than an automated job that looks at all vpn connections and matches to primary employee location.
This seems silly to me. That CT employee likely commuted to the NY office pre-Covid (a huge percentage of people who work in NYC have always lived in NJ or CT for COL issues). If they choose to work from home, how are they any different from an employee living in NYC who chooses to work from home? This is not at all the same thing as someone moving from SV or NYC to rural Wyoming to arbitrage COL differences as a remote worker. The CT worker is capable of actually being in the office within an hour if something came up requiring them to be, the guy who moves to WY is not.
You’re in the business of selling labor and Google is in the business of buying labor.
They should pay workers (and workers should demand) based on how much they are worth to the company. Remote workers should even get a 'rebate' since they no longer need the company to pay for expensive office space for them.
it goes without saying that a company will cut wages as much as they can. if google paid its workers the value they created, then google would have no money.
Of course, there is an argument that the workers should indeed get all of the profits, after costs, including founder's IP, reasonable return to investors, etc, etc, since they are the ones creating those profits.
Maybe this is another area where government needs to step in and mandate all employers over a certain size allow work-from-home with no pay consequences.
Probably not, since it seems to encourage suburban and rural sprawl?
There's commutes to factor in too, true, but I don't know if that's enough.
> especially in the big cities like SF and Seattle?
Big cities are good for the environment precisely because they keep large numbers of humans within a small area. Imagine if NYC's population suddenly spread out to all live in detached single family homes on large lots. The environmental devastation would be enormous.
In any case, commutes don't have to be that bad for environment. Electrically-powered public transit, or biking, have a marginal per-person impact on the environment, relative to the US standard of a person driving themselves a long distance in their gas car, alone.
At least at the pay grades that greatly exceed comfortable living needs, 5%-15% to WFH could be a great quality of life deal, even before taking possible lower housing&commuting costs into consideration.
At lower pay grades, where 5%-15% cut in isolation could be very painful or nonviable, if WFH means a parent doesn't have to pay child care (or pays less for care, like part-time older neighbor kid), is that a good financial deal for the parent?
Maybe one situation in which to be upset is if you're much more productive WFH; in which case, even though a pay cut for WFH is a good immediate deal for you, the company is getting much more out of the deal than you are?
It'll be way cheaper--and hence the obvious corp strategy--to lower salaries in SV than increasing them everywhere else (because everyone is already "remote from SV").
Doesn't matter if I am in Mountain View or Cokeville WY, I still have the same experience, knowledge and capabilities.
There is no good way to measure the value generated by an individual engineer in most cases (in large enough companies), only the total/average value produced by a group of engineers - and even then, it's a first order approximation. Hence, the market is not efficient.
”evil”?
Your value hasn't decreased just because you live in Wisconsin instead of California. Your contributions are the same and you are just as productive of an employee. They have no right decreasing your salary just because they can get away with it.
And do you have an example of somewhere their salary was “slashed by half”?