> what stops the employer from hiring someone who lives in a cheaper place?
I've worked with remote workers from around the world. Let me preface by saying there are of course exceptions but:
What I've found is that most often Americans exhibit self-starting and creativity. What I mean by that is non-us workers are great if you give them a specific task, even a really hard task.
But if you give them a nebulous problem, or worse, a business outcome, they tend to perform much more poorly. And I rarely see non-americans say something like "I think our customers would like it if we added X to the product, can I work on that?".
I don't think it's because Americans are better at this -- I think it's cultural. America has a much higher risk tolerance than the rest of the world. Failing is considered a good thing in the USA. And the USA is much more entrepreneurial than the rest of the world.
These two things combined create a culture difference that makes a business difference.
Additionally, what I've found is that the exceptions tend to move here because their risk taking is much more acceptable here (or they are risk takers willing to move across the world, hard to say which way the causation goes).