"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? It’s 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 they’re probably right. Here’s a representative comment from Hacker News:

Let’s say you hire me for your company in San Francisco and pay me $150K. You’ve made a calculation: my value to the company is greater than $150K, and $150K is a price you’re 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 “cost of living”.

Why? My value to the company hasn’t 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?

It’s not an unreasonable point, and I have to wonder if “location-based pay” 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.

I’d love to live far away from San Francisco while making an SF salary (or indeed while not making one), and I’ll advocate huge paycheques for software engineers for as long as that’s in my self-interest, but many before me have made the obvious point about market reality. You don’t get paid what you’re “worth”, 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 there’s another point I haven’t seen get as much attention: what right do any of us in the rich world have to complain about “location-based pay”?

Share

The label in my shirt says Made in China. Likewise for my jacket, and my jeans were made in Bangladesh. “Equal pay for equal work” is a nice idea, but I don’t think we apply it universally.

The average Chinese textile worker makes something like 4,000¥ a month ($620 US). In Bangladesh it’s not much more than 8,000 Tk ($95), and in Vietnam, another major textile exporter, it might be 4 million đ ($175). I don’t 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:

Let’s say I manufacture a shirt in San Francisco and you buy it for $100. You’ve made a calculation: the shirt’s value to you is greater than $100, and $100 is a price you’re 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 “cost of living” for the workers on the assembly line.

Why? The shirt hasn’t changed! It’s 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 don’t 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. I’m 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.

I’m not here to make any grand pronouncements about globalisation. I have no idea what the solution is to big structural inequalities, and I know it’s not as simple as just closing down the “sweatshops” as if this will make their workers rich.

My only point is that, when it comes to “location-based pay”, 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?

Share

Leave a comment


Thanks for reading. For more, follow me on Twitter and Goodreads, and please consider subscribing.

Image credit: Euan Cameron on Unsplash