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A response to buffer’s salary article + calculator

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    I agree with the article, but now feel like a lobster for reading it from here. Where is that warm pot, must crawl in.

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      Hey, all. Post author here. Thanks for the upvote love. :D

      The post is over on that “other site” as well, and it’s really interesting to see the different tone that this community takes. I think I’ll be coming around more often. :)

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        Running into Ernie on IRC (not in #lobsters) was the last straw that prompted this issue.

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          there’s a channel, interesting

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        Companies get away with option 1 because the demand for engineers is lower in some places and engineers who want to live there have fewer alternatives.

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          As someone who’s relatively open to moving, taking local purchasing power into account in salary offers makes a lot of sense to me. At least, that’s how I evaluate offers from the potential-employee side. If a company in SF and a company in San Diego each want to hire me to do similar work, and both offer me $100k, I’m not going to consider these equal offers: since SF is so much more expensive to live in, to be an equally competitive offer, they’d need to offer me more like $120-140k to match the SD company’s $100k offer. Conversely, if I had an SF-area offer of $120k, I’d be happy to consider San Diego area counter-offers in the $90-110k range.

          Now whether it makes sense for companies to make offers in line with my own preferences is a question for their side. But for offers to be competitive, I definitely expect those asking me to move to a high-cost-of-living area to offer higher salary. I think this is common enough that companies essentially have to do so: if you’re hiring in SF, you aren’t going to find many candidates if you don’t offer higher salaries. So your options are to either not hire in SF, or pay an SF premium.

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            I took the “market rate” to be about compensating for cost of living, rather than competing for talent. I once did an internal transfer from London to Hong Kong. The company I worked for didn’t simply apply an exchange rate to find my new salary: they found a couple of engineers at about the same experience level as me and gave me the average of their salaries. I ended up on more money in absolute terms, but adjusting for costing of living it was about the same.

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              Yes, which is exactly the problem. They have decided what your living standard should be.

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                I don’t think I understand what you mean. This was a case of me requesting the transfer. If I had been asked to go I am sure I had been given a better package, but that was not the case here. At any rate, I don’t see any other practical way of doing this. If the “market adjustment” didn’t happen they would presumably have a storm of applicants to transfer from London/New York/Tokyo/Hong Kong to Mumbai or any of the other regional offices where cost of living is much, much cheaper.

                I think the “market rate”, even in the sense that the OP means, has at least one good thing about it: it creates an(other) incentive for companies to offer remote positions, of which I’m a fan :-)

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                  A person’s salary should reflect the value they add to the company, and there’s really nothing else to consider, IMO. Unless you can demonstrate that living in Hong Kong changed your productivity or made you more useful to the company in some way, how can they justify changing your pay?

                  And if that’s legitimate, why stop there? Why not pay a person more for choosing a luxury car? Or choosing to live in a mansion in their current city? Or choosing to wear $15k suits all the time?

                  Or to put it another way, if an employee wears cheap clothing, should it be okay to cut their pay? If they bike to work instead of driving, should they get a pay cut?

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                    A person’s salary should reflect the value they add to the company

                    I agree, a person should be paid their value. However, as you know, if companies payed you the value they get from you, they wouldn’t make a profit. By definition, capitalist organizations MUST pay you less than the value you bring to them.

                    Which is exactly why I am anti-capitaist.

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                      This is off-topic, but that’s not really true, and not how capitalism works.

                      A person sells a product (in this case their labor) when the price they’re getting (in this case wages) is more valuable to them than the product they’re selling (the labor). On the other hand, the labor (or more the results of the labor) an employer receives from an employee is more valuable to them than the wages they pay in return. The employee comes out ahead and the employer comes out ahead.

                      Your scenario where everything cancels out makes no sense because everything cancels out and there’d be no benefit of buying and selling anything.

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                        Also, how do you measure value? There’s around 500 up to a million criteria.

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                        Hilariously, this is almost exactly what happens, if you consider free parking to be a thing of value which non-drivers do not partake of.

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                          Some employers actually account for that, though. I get $150 a month for declining a parking pass and biking to work. It’s a really sweet deal considering I’d do it anyway.

                          The cynic in me is pretty sure $150 a month is still cheaper than the garage parking passes that the drivers get, but it’s still nice.

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                            Paying employees exactly what the perk costs is almost certainly unproductive. Then you’d take the money but start price shopping for parking anyway. A waste of your time.

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                        One way to think of this is in terms of arbitrage: In a world (we don’t live in) where your salary isn’t determined by location, you can use your salary and location flexibility to choose your quality of life – Live in an expensive city, with less room for saving (but perhaps make up for quality of live in non-monetary ways), or move to a rural province with a low income, and be able to afford a lot.

                        Having said that, as I wrote the above, I realized that location flexibility is definitely a privileged position: Very few are able to freely move about, even those doing remote work. There are families and comfort involved.

                        Perhaps location adjustment makes sense, if you set your base pay independent of location, then give everyone salary adjustment based on location; i.e. Use some very local price index to adjust for cost of living.

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                          The idea of having my desire to live in a super expensive city subsidized, but not my retirement account really annoys me.

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                            In 2009 I briefly dreamt of going independent & selling apps on the iOS App store. The idea was to make a modest income but living somewhere dirt-cheap like Vietnam. (I visited Vietnam for a friend’s wedding that year, hence picking on that particular country.) I never got around to it, and now it’s not really practical because of kids.

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                            I have understood that you asked for it, I just don’t think it matters. For adjusting your rate to match your standard in Hong Kong they also needed to make a judgement about your standard in London. Your transfer just revealed both of their sins ;-)

                            I agree that same rate would make some offices more attractive than others, but they wouldn’t be attractive to everyone and it should be companies problem how they solve this not also yours.

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                              I still don’t understand what you mean. It’s not like I started working there, then they revealed what they were going to pay me based on how lavish a lifestyle they wanted me to lead. They were upfront about what they were going to pay, and I chose to work there on that basis. I think you’re ascribing malice where there is none, to be honest, or I am utterly failing to understand what you’re getting at.

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                                I’m not markos, but I agree with (what I take to be) his point. Suppose that by moving two blocks you could cut your expenses by $10,000 a year, and you decided to do so. But when changing your address, HR informed you that they would be cutting your take home pay by a corresponding amount. That strikes me as quite unfair. What business is it of the company how much of your pay is taken up by expenses vs saving vs recreation?

                                The company has already stated how much they are willing to pay for your labor. Assuming that your location does not materially affect your work output, your location is irrelevant.

                                FWIW, I’ve been in this situation before and moved from an expensive metro area to a much less expensive area where my salary goes much farther. Had my company attempted to cut my pay, I likely wouldn’t have continued working for them.

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                                  Assuming that your location does not materially affect your work output

                                  Is this a good assumption? Even if you produce the same code, it could well be that an engineer in Silicon Valley is more valuable to the company than the same engineer elsewhere, especially taken a collective scale: 1000 engineers in Silicon Valley vs. 1000 engineers elsewhere makes a difference when it comes to visibility to investors, clients, etc. Companies at least believe this to be the case, because they’re willing to pay the premium it takes to rent offices and hire in the SF Bay Area, when they could save quite a bit of money by moving elsewhere.

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                                    Isn’t that more about casting your fishing line in an area with 1000 Silicon Valley engineers versus 100 engineers elsewhere?

                                    I’m not sure I’d agree that 1000 SV engineers are heads above 1000 Boston or NYC engineers, for instance.

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                                      I don’t think engineering talent is the primary driver there, at least in cases where I’ve seen companies moving to SF. A number of Danish companies have moved their headquarters from Copenhagen to SF or the Valley once they grow past the startup stage, not because of any lack of engineers in Copenhagen, but because it’s a better location from which to find investors and clients. I think those are more of the limiting factor. You can find good engineers in lots of places, and SF is not even really a great place to find tech talent, because of the high salaries / high demand. If you wanted to expand out of Copenhagen purely seeking more high-quality engineering talent, Finland or Estonia would be better next steps than SF. But capital and business connections are a scarcer commodity, and it’s easier to come by those if you have a credible engineering office in the Valley with more than just a figurehead staff. So there are Danish companies who set up an office in the Valley and hire 100 engineers or something, because simply having that office is valuable, in a way that having an 100-engineer office in Austin or Chicago wouldn’t be (even if they were just as good or better engineers).

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                          Conversely, when my partner and I moved from the northeast to the southwest US, neither of our salaries - at different companies - changed. It’s a much cheaper (and enjoyable) place to live, but both companies knew that taking money out of our pockets would lose us, and apparently decided against it.

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                            It probably didn’t outweigh the cost of hiring replacements :-)

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                            Which turns out to be a problem for regions with lower cost of living. Above a certain threshold, moving is a zero-sum game for you, actually disincentivising moving to areas with lower cost of living to better (e.g. because you want to put money on your account for future endeavours or affort a bigger house).

                            It remains a problem for those of lower income.

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                            It’s not about “market rate” but personal leverage. Sofia gets a lower salary because the presumption is that fewer jobs, and at lower salaries, are available to her than is the case for Ann, and that’s usually true. Firms don’t care either way about their workers' lifestyles or goat-affordance, to use the OP’s metaphor. In general, they want to pay as low as they can get away with. If Sofia developed an international reputation (which is substantially harder from Argentina than from California) and could demonstrate that others would readily pay her $170,000, then she’d get a comparable salary.

                            In other words, geographic location is used as a proxy for the individual’s leverage, and it’s pretty accurate in most cases.

                            It actually gets worse than the OP suggests. Sofia isn’t only going to get a lower salary because of her presumed lower leverage, but she’s going to get worse work assigned to her, slower promotions, and less respect within the organization. At this point, her lower salary will be justified using claims of “meritocracy” when, in fact, the situation has more to do with her inferior leverage than any meaningful definition of merit.

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                              So, throwing the word “leverage” around doesn’t change the fact that Sofia is just as qualified (valuable) to do the job as Ann is. The work she creates is the same.

                              From that perspective there actually is a market, and it’s not based on geography but on skill. The market includes Ann, Sophia, and everyone else with approximately the same skill level. Sophia could argue this point quite convincingly in a negotiation with the company.

                              If Ann is unavailable or more likely to become unavailable due to her presence in Silly Valley, that also becomes a leverage based argument in favor of Sophia. Sophia could get the same pay as Ann, she just needs to convince the company of this. The logic is sound, but whether or not the company will buy that logic is a different question. cc @ernie

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                                More to the point, I believe that as remote-first work becomes more common, we will (and should) see a reduction in the power that geographic location has to affect salary. We can’t get away forever with saying our market is global and our team is distributed without acting like it. This congruency won’t happen overnight, but I believe that it will happen.

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                              This points out an oddity but doesn’t propose a better solution. It’s just supply and demand. To be consistent in pay, you can pay people in San Francisco and Ukraine the Ukraine prices, in which case you will only have a Ukraine office. You can also pay people in San Francisco and Ukraine the San Francisco prices, in which case you are probably spending a lot more money than you need to. Which would you do, if you were running the company?

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                                Why not simply make the cost-of-living adjustment clear in the employment contract as something variable? Sure it kind of sucks and isn’t fair but it makes the situation obvious.

                                Companies here in .fi pay “Helsinki extra” that way for the same reason and it works relatively well.

                                Edit: not sure all of the companies working in many citiea do this but it’s often talked about and one friend certainly got this moving from Tampere with his employment.

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                                  It’s completely standard in the UK. The not-for-profit Living Wage organisation publishes a Living Wage calculation that shows one number for London, and another for the rest of the UK.

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                                  I love the Marxist undertone of the article mixed with a bit of Capitalist confusion about what a market is.

                                  There is a common confusion about what pay should be and how it works in the real world. The confusion is this. People think companies pay you what you are worth. This is a confusion prominent among engineers.

                                  You are not paid what you are worth to a company, you are paid with what a company can get away with paying you.

                                  This is obviously not right and goes against what people feel should be right. Capitalists don’t believe in the value theory of labor while most people do.

                                  I, like most people, believe in the labor theory of value and agree with the post’s main point. However I also disagree with the author about what fairness is. Fairness is not treating everyone the same at the surface rule level. Fairness is treating everyone equally on the human level.

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                                    Hey, @mempko! Thanks for the comments.

                                    You might be surprised to notice a few things:

                                    1. At no point did I use the word “fair” in this post, and in fact the post isn’t about fairness at all. It’s intended to shine light on a practice that is ridiculous on its face, and hopefully to generate discussion around if, and how, we can change it.
                                    2. If I had to point out one specific topic, then the article is about knowing one’s value (the whole “be the goat” section is addressing this, specifically).
                                    3. In the comments section, in a response to Leo, I noted:

                                    Does this mean an identical, across-the-board, pay scale? Almost certainly not. There are real costs associated with employing people: for instance, federal, state, and local payroll taxes, health care, and so on. These can vary depending on location, and I’m not suggesting that it’s the company’s burden to equalize those.

                                    But, the discrepancy we see today goes further than accounting for those costs. I understand that companies have responsibilities to their investors to limit expenses where they can, and so it might not make the most sense to bump up the wages of remote employees if they are apparently satisfied with what they’re making. And, in fact, so long as remote-first is the exception, that’s probably pretty sustainable, because the majority of your competition will still be local – you’ll find takers.

                                    However, I believe, and suspect you agree, that remote-first is a better way to do business for software teams. And therefore, I expect it to become more popular over time.

                                    Is it possible that it’s actually OK for highly-qualified candidates in areas with high costs of living to turn down offers? I would suspect that for each of those situations, you’ll encounter at least as many cases where an employee from another area who is every bit as qualified would love to come work for the rate you’re paying.

                                    Anyway, I just wanted to point out that, viewed from another angle, these views might be considered extremely capitalistic – we own our own means of production and determine the price at which we’re willing to provide our goods and services. I’ve often said “we are the product, which means we are our product manager.”

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                                      Do you also want to own not just your own production, but a group of people’s? Then that is just plain “capitalism”. If you believe the people who create the surplus should decide what to do with it, then that is socialism.

                                      If you believe people shouldn’t be able to group together and that everyone should be individual contributors, then Marx already had a term for that, Primitive Accumulation (I feel most right wingers are basically primitivists)

                                      I called your article Marxist precisely because it dealt with arguing who should own the means of production. Which is what Marx concerned himself with.

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                                        I’m not sure it’s productive to spend time applying a label to my views. I don’t have a background in economics, nor an interest in debating the finer points of where my views lie on the spectrum.

                                        My reason for replying was that bit right in the middle of your initial comment that seemed to think I was “confused”…

                                        You are not paid what you are worth to a company, you are paid with what a company can get away with paying you.

                                        …along with what I believe then followed from the perceived confusion, that I was making a point regarding “fairness”.

                                        I’d hoped by sharing the response in the comment to make the point that the article was more than the entitled whining of a clueless, entitled developer caste, and not about what’s “fair” so much as shining light on the question of what determines our value, the merit of having some ideas about what your value should be, and owning the consequences of choices we’ve made.

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                                          To be very clear. I like your article.

                                          I want to clear up what I thought you were confused about. I dont think you were confused about where value comes from and how you are payed. I said it was a common confusion, which you acknowledge in your article.

                                          What I think you are confused about is what a market is. Let me ask you a question, do you really think we are in a global market?

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                                            I don’t think it really matters what I think.

                                            I think it matters what a company that is running a distributed team and selling to a global customer base thinks. They are selling their product anywhere. They are hiring from anywhere. Based on their behavior, they don’t believe their product’s value differs from place to place based on where it’s being offered/consumed. I find this inconsistency worth remarking on.

                                            At the very least, I believe that the competition for employees looking for remote-first positions is a superset of the group of all companies hiring for remote-first positions that includes companies local to the candidate who are looking for non-remote positions, assuming the candidate is willing to work primarily in an office environment for a local company (I am not, but am perhaps an exception in that).