"Location-Based Pay" - Who Are You to Complain?
I might regret writing this if I move out of London
Should remote workers have their pay reduced if they move somewhere cheap? Itâs a popular debate as COVID ravages the world of work. Facebook, one of many giants to be shifting permanently to a more remote-friendly culture, has announced that those who move to lower-priced locales will have their salaries reduced accordingly.
Some call this unfair, and theyâre probably right. Hereâs a representative comment from Hacker News:
Letâs say you hire me for your company in San Francisco and pay me $150K. Youâve made a calculation: my value to the company is greater than $150K, and $150K is a price youâre willing to pay to leverage that value.
⌠But now if I decide to move to Tulsa, OK, you want to cut my pay and reduce it to 90K, because of âcost of livingâ.
Why? My value to the company hasnât changed! I am still worth the same amount as I was before! The only thing that changed is where I choose to reside. What difference is that to the company?
Itâs not an unreasonable point, and I have to wonder if âlocation-based payâ works in both directions. I live in suburban London, ten-ish Tube stops from the belly of the beast. If I worked remotely for Facebook and wanted to move somewhere central where rents are three times higher, would Zuck give me a raise? Somehow I doubt it.
Iâd love to live far away from San Francisco while making an SF salary (or indeed while not making one), and Iâll advocate huge paycheques for software engineers for as long as thatâs in my self-interest, but many before me have made the obvious point about market reality. You donât get paid what youâre âworthâ, you get paid what it takes to make you do the job, and not every CEO is Jason Fried. Companies reduce your pay because they can.
But thereâs another point I havenât seen get as much attention: what right do any of us in the rich world have to complain about âlocation-based payâ?
The label in my shirt says Made in China. Likewise for my jacket, and my jeans were made in Bangladesh. âEqual pay for equal workâ is a nice idea, but I donât think we apply it universally.
The average Chinese textile worker makes something like 4,000ÂĽ a month ($620 US). In Bangladesh itâs not much more than 8,000 Tk ($95), and in Vietnam, another major textile exporter, it might be 4 million Ä ($175). I donât have to look it up to know that similar jobs pay many, many multiples of that in Europe and North America, to say nothing of the difference in working conditions. And clothing is far from the only thing we import from poorer countries at scale.
I can imagine if third-world factory workers had an equivalent of Hacker News, they might write posts like this:
Letâs say I manufacture a shirt in San Francisco and you buy it for $100. Youâve made a calculation: the shirtâs value to you is greater than $100, and $100 is a price youâre willing to pay to wear it.
But now if I decide to make the shirt in Dhaka, Bangladesh, you want to cut the price and reduce it to $20, because of âcost of livingâ for the workers on the assembly line.
Why? The shirt hasnât changed! Itâs still worth the same amount as it was before! The only thing that changed is where I choose to locate the factory. What difference is that to the wearer?
Quite. I donât have a good answer to this, but I buy Chinese- and Bangladeshi-manufactured clothes anyway. Much else of what I purchase - food, toiletries, furniture, electronics - was grown or built in a faraway country for cheap, and I bet your shopping habits are similar. Iâm not sure how much it would cost to make all of our goodies in jobs that a middle-class Brit like me would accept for himself, but it would probably add tens of thousands of pounds/dollars/euros a year to the average household budget.
Iâm not here to make any grand pronouncements about globalisation. I have no idea what the solution is to big structural inequalities, and I know itâs not as simple as just closing down the âsweatshopsâ as if this will make their workers rich.
My only point is that, when it comes to âlocation-based payâ, maybe we should be careful what we wish for. Paying people according to where they live might not be fair, but who are the real winners and losers?
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Image credit: Euan Cameron on Unsplash
Remote freelancer here.
There are many differences between a worker in a clothing company and software engineer. Skill, education, scarcity just a few differences. It sounds wrong to say, but workers at clothing company are expendable. Meanwhile there's a constantly growing scarcity of good engineers. That's one difference.
Secondly, clothes manufacturer is not a remote work. It's work on the site. So again, I don't see how we could compare the two. It sounds like, if we really make a hyperbole out of this, everyone should be paid the same. No matter profession, no matter experience, difficulty, danger...
Thirdly, clothing companies would never be able to hire a worker from Bay Area to work in their Vietnamese branch. It would just be too expensive. Facebook, just like most of the companies, is trying to pay the employees the least amount possible so that people still work there. This is terrible. I cannot wrap my head around why would you advocate for this stance?
This, to me, really sounds like comparing apples and oranges. It doesn't make any sense.
I think the fundamental underlying principle is that of opportunity cost: https://en.wikipedia.org/wiki/Opportunity_cost
There is nothing bad about some, let's say software engineer from Vietnam making only a fifth of what someone in London or Munich does make, as long as their cost of living is in the same or an even better relation to their income. I know at least one country in Eastern Europe where developers working as freelancers only have to pay an income tax of 5%. I am at up to 51% here in Germany. That's a lot of room to compete with me on the price, assuming the same quality of service.