Because they feel they can get away with paying you less if you live in an area with a "lower cost of living". It's a way for the company to extract more value from the employee without having to pay the employee what they're actually worth.

Remember: you are an asset to the company only worth what you're willing to fight to be paid for. A company will pay you the least amount of money they can to keep you.

If the job is not remote or has on-site duties the argument becomes moot.