Isabelle Roughol hosts Borderline, a podcast about living and working in other countries.
She argues that tech companies that claim they will reduce remote workers' wages are fair and not greedy.
Employers consider the cost of living when calculating salary.
This column is an opinion piece. These thoughts are solely the author's.
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Google is the latest tech employer to announce a plan to reduce the salary of remote workers.
Their compensation would depend on where they live and not the office they once worked in. If they choose to move to a less expensive area, it could result in a substantial pay cut.
Similar plans have been announced by other tech companies like VMWare, Twitter and Facebook. (At the very least, some companies have indicated that salaries could be increased.
This is the outraged tone and gut reaction that most media coverage portrays. Greedy companies removing workers who have given their best during the pandemic, and placing families and marginalized employees in lower-income areas at a disadvantage.
These analyses do not provide a real understanding of how compensation is set by companies and why some of the most generous employers in the world, who have no interest whatsoever in employee mutiny came to the conclusion of reducing remote workers' wages.
These workers are feeling the fundamentals and effects of globalized capitalism. It's possible to argue that it's fair.
We will get into the details, but if I do it right, you'll understand the news better and might be able to renegotiate the salary.
First: Why you should believe in me
For the greater part of the past decade I was a tech professional. I went through two international moves and helped many others with theirs. I managed and hired employees on four continents.
My eyes opened when I became a manager. I've often shared the following in one-on-1 conversations, and have long wanted to write it.
Someone is going to be unhappy
You must imagine the alternative to Google's move before you can decide if it is fair.
Saba, a San Francisco software engineer, was hired for $140,000. This is a decent, but not-that-high, salary. She decides to return to Nebraska, now that she can work remotely. She can spend more time with her parents and will be a homeowner in no matter how long it takes. This is something she couldn’t imagine in San Francisco.
Her employer should not be concerned about this. Because she is able to have better childcare and has no commute, she delivers more value. Her manager is delighted for her and supports the move.
Taylor is a site reliability engineer at the Omaha data center. He was localized and earns $85,000 per year. He is happy to have a friend in his community. Both their children attend the same public school. Her children have a private tutor, and they go to French camp in France.
Is that a Tesla? Is her husband not a county employee? He knows the pay and they do the same job. Or does he? He asks his manager to explain and give him a raise. He denies it, he is already at the top in the local pay band. He asks around and points out the discrepancy with other colleagues. Resentment grows.
They don't hate Saba, but they are mad at the situation. She is supportive of them, but she feels awkward. She won't volunteer to take a cut in her pay. The team collapses. Taylor files a lawsuit against Taylor for discrimination in pay. Saba is fired.
This is the scenario Google HR envisions when employees in California log into Zoom from Ohio or Lake Tahoe. They return to the system that they are familiar with location-based market rates.
It's not a cost of living, but why you should earn what you do.
Employers set a range of salaries for each role to attract the best candidates. A range that is well-designed can be compared with other candidates, is fair enough to guarantee fairness, and broad enough to allow for career advancement.
A new employee will usually be at the bottom of a band. An experienced employee will do the same job better and someone who is a star could legitimately aim for a promotion, or worse, move to the top. Pay gaps within the same job are minimal and can be explained by performance and experience.
Pay ranges can vary depending on where you live, as work has been conditioned upon showing up at a specific field, factory, or office for many centuries. They are designed to attract the best candidates to the job.
This is where the common misconceptions begin. It's a common misconception that I have seen in all articles I've read about Google’s plans. It's not about the cost of living that employers think about, it's about the cost to recruit talent. They are only partially related.
Companies will pay whatever it takes to retain and attract people in a specific market. It is the cost to hire a software engineer, and not the price of a small apartment. An employer doesn't care what you or your family will take, but what you can afford to live on. This is what you should remember when you negotiate.
Let's take an actual example. I have been hiring people for years in France and Germany. Although the cost of living in Paris was higher, my salary ranges in Munich were much more generous. German professionals can afford more because of their low unemployment rate and stronger unions.
Want more disposable income? Learn German and get out there.
The cost of living is just a fig tree that hides a more unpleasant reality: Your value to capitalism is completely dependent on your context. Your needs and the value that you create are not what determine how much you get paid. It is based on what it would take to replace you at your current place. In an economy where "where are you standing" is still important,
This phenomenon has been experienced by international workers for many years
What is happening to domestic remote workers now has been happening for years to international employees. Expat contracts are gone. Usually, when you move to a country, you will be asked to cancel your current contract and sign again according local law and pay rates.
It is possible to move from Paris to Munich to your advantage. However, it can also happen the other way. A San Francisco employee who leaves for London will see a 20% salary cut. San Francisco is not much less expensive than London, but it's still more expensive than London.
UK salaries are well-known for being low. This is why London professionals often share their homes into their thirties, and it's rare to find a Silicon Valley professional who'd be willing to travel abroad.
Accepting a pay cut is acceptable if someone really wants to move. They will grumble and negotiate to the point where they are willing to take it or leave it. Smart managers will either absorb the difference and move the employee to a different pay band, so they don’t feel the pain. They don't get a cut in their pay that they didn't deserve and they don't receive the pay increase they earned. It is logical psychologically and financially.
Consider the alternative. Imagine someone who moves to another country and earns twice as much for the same job. This is still happening, especially in the Global South. It's often disguised by moving bonuses and risk pay, justified by the newcomer’s "unique skill" that isn't available in the local market. The colonial undertones that a high-paid expat class has are losing their appeal, and they should. It is unfair to ask an immigrant for a lower local minimum wage.
Only a handful of wanderlust-driven professionals have taken care of this issue until today. Millions have experienced remote work, and they don't want to stop.
Is it possible to create a pay scale that is location-independent?
We have a location-based system of compensation for work that is becoming more location-independent. This is the fundamental problem. Why not just pay everyone the same amount?
Reddit, Zillow and other companies have made this decision. They are letting US employees roam freely without reducing pay or adjusting the compensation scales for new employees. To remain competitive in the tech talent battles, they have to align themselves with more expensive markets like San Francisco and Seattle.
Reddit employs 700 people, while Zillow has about 5,000. Both are based in the US. It's very convenient. There are endless complaints about differences in food quality or benefits between global offices.
I would not want to be an international manager explaining why Americans got a pay increase of 100%. However, aligning global pay would be both a logistical and legal nightmare. It would also come with a large bill.
Google and its 135,000 employees would need to spend hundreds of millions in order to level up. Perhaps shareholders have some thoughts. Local economies can be destabilized by sharp pay increases from one industry or employer. Ask native San Franciscans, Seattleites, or Austinites about their opinions on housing prices following the sudden influx in tech workers. Companies of a smaller size would not be able to compete.
Google may have chosen to be the fairest option in the short-term. Alternatives include a nomadic group living in small towns with less-paid colleagues, or traveling the US in luxury campervans and increasing their savings.
Guess who is more likely to profit from this arrangement? * It's not feasible for companies, which is a good thing for them. Digital nomadism is mostly for the self-employed or small startups.
Long-term, professional pay scales will change as knowledge work is no longer tied to location. Google is the only company with the brainpower and influence to change the way we pay labor, and it's definitely Google. Institutions are slower to change than people's habits. Employers will catch up.
However, professionals from the rich world need to be careful: If we insist that work can be done anywhere, corporations may insist it can. It's the day that location doesn't matter anymore and you must compete with all similarly skilled knowledge workers around the globe. We won’t all be aligned on San Francisco salaries.
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*Caveat: The fairness of the plan depends on who gets an adjustment. Employees living in more privileged areas or long commuters should not be penalized. New York employees can still be considered Connecticut residents or New Jersey residents if they live in New Jersey. Perhaps you don't live in Mississippi.
