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Zuckerberg says employees moving out of Silicon Valley may face pay cuts

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Re: Zuckerberg says employees moving out of Silicon Valley may face pay cuts

#151

Post by foogazi »

TeMPOraL wrote: post #120
Tade0 wrote: post #90

Earlier quoted context omitted.

Relocating for most people is actually a bigger deal than it may seem. I personally have no problem with it and did just that at least once, but after returning I asked around and most if not all of my friends and family would not do the same even for - and this was especially shocking to me - 4x the salary. Apparently flexibility is rare and sought after.

Was that 4x the salary truly 4x, after subtracting out the costs of living? I got an offer for an on-site job in London the other day, that would technically be ~1.5x salary boost - and ~5x the salary I had the last time I worked for a local company. But after subtracting out the costs of living, it turned out it would be effectively a 3x salary decrease , and at the same time a significant degradation in the standar…

> it turned out it would be effectively a 3x salary decrease

What do you mean by 3x decrease? X/3 ?

Re: Zuckerberg says employees moving out of Silicon Valley may face pay cuts

#152

Post by fchu »

mrkurt wrote: post #59
Jemaclus wrote: post #2

This is one of the things that's always bothered me. 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. In other words, the company will (eventually) make more than $150K per year off my contributions to the company. But now if I decide to move to Tulsa, O…

I'm disappointed that all the replies to this sentiment are "lol, it's supply and demand". I mean, maybe that's it but it's not a very useful thing to think about. As someone who's run two remote companies now, I have struggled with this dilemma as an employer. Because I agree with you, if a person is worth $x to the company, their location doesn't change that. The flip side, though, is that I also want people to be…

Without getting into what's right or fair, the reality is that it supply & demand that defines price setting behavior (in this instance, the company is optimizing for its consumer surplus)

Maybe another way to think about it is when some innovation drove the price of a car down by 10% (because production costs are lower, the car maker makes the same profit). Would you say "Hey I was happy paying the car full price for the value it provided me, so let me pay its old, full price, I'd be happy to do that"?

Re: Zuckerberg says employees moving out of Silicon Valley may face pay cuts

#153

Post by TeMPOraL »

foogazi wrote: post #151
TeMPOraL wrote: post #120

Earlier quoted context omitted.

Was that 4x the salary truly 4x, after subtracting out the costs of living? I got an offer for an on-site job in London the other day, that would technically be ~1.5x salary boost - and ~5x the salary I had the last time I worked for a local company. But after subtracting out the costs of living, it turned out it would be effectively a 3x salary decrease , and at the same time a significant degradation in the standar…

> it turned out it would be effectively a 3x salary decrease What do you mean by 3x decrease? X/3 ?

Right. Bad phrasing. I meant X/3. I.e. after subtracting the essentials, I'd be able to afford 1/3 of good and services equivalent to what I could afford in my current location on previous salary.

Re: Zuckerberg says employees moving out of Silicon Valley may face pay cuts

#154

Post by shuckles »

nikhizzle wrote: post #53
floatingatoll wrote: post #20

Facebook and Palantir both used to pay people up to $10k/year to live within a mile or so of the office, since the cost of living in SF & Palo Alto & Menlo Park was so much higher than the rest of SFbay. I don't know if they still offer that perk, but I can attest that the increased costs of rent within a mile of those offices would, at that time, burn up that entire $10k and then some, relative to the rest of SFbay.…

This perk at fb was halted in 2008 precisely for the reason you mention above - it raised all the rents suitable for employees at the time within that perimeter by $1000/mo. (Source: I worked for fb)

Henry George had something to say about this!

Re: Zuckerberg says employees moving out of Silicon Valley may face pay cuts

#155

Post by mnm1 »

Jemaclus wrote: post #2

This is one of the things that's always bothered me. 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. In other words, the company will (eventually) make more than $150K per year off my contributions to the company. But now if I decide to move to Tulsa, O…

That's one way to give the middle finger to your employees, lower morale, and have them underperform. Businesses do stupid things like this all the time, against their own interests just to save a little money. Another example is not giving even inflation adjustment raises. The employees will respond accordingly and lower performance, work less, try less. Not enough to get penalized, just enough to stay in the boundaries. Or they'll leave. It's especially stupid to do this to remote employees for obvious reasons.

Re: Zuckerberg says employees moving out of Silicon Valley may face pay cuts

#156

Post by JoeAltmaier »

Jemaclus wrote: post #2

This is one of the things that's always bothered me. 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. In other words, the company will (eventually) make more than $150K per year off my contributions to the company. But now if I decide to move to Tulsa, O…

Its also meaningless for stay-at-home employees. How exactly does the distance to your house, affect your pay? Why?

Re: Zuckerberg says employees moving out of Silicon Valley may face pay cuts

#158

Post by economicslol »

volkk wrote: post #79
librish wrote: post #58

This shouldn't come as a surprise to anyone who knows the general compensation strategy for all the major tech companies. They don't pay based either on value added or cost of living (which is why compensation is higher in the Bay Area compared to London). They pay based on market rate where the target is something like 95th-percentile based on market surveys they do. Presumably this hits some sweet spot in acceptanc…

> If you remove B you've massively increased the available talent pool. i'm not convinced this is the case. maybe by a bit...but massively? if you look at all of the places that all of the top paying FAANG companies are located--lets keep it within the US for simplicity's sake--you've got basically all of the major cities with the top talent. I'm not really picturing THAT many brilliant developers that fall under the…

>I'm not really picturing THAT many brilliant developers that fall under the bucket of: a) really smart and able to pass FAANG interviews b) not willing to relocate if they did get a huge offer

What about anyone that wants to own a home before they are 40? Even on FAANG salaries its very difficult to buy when millionaires are snatching up fixer uppers for $1M+ all cash.

Re: Zuckerberg says employees moving out of Silicon Valley may face pay cuts

#159

Post by koheripbal »

Jemaclus wrote: post #2

This is one of the things that's always bothered me. 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. In other words, the company will (eventually) make more than $150K per year off my contributions to the company. But now if I decide to move to Tulsa, O…

This is a fundamental Microeconomics supply-demand pricing question: Do you sell an item based upon the cost to produce it, or the price customers are willing to pay for it?

Employment is no different. There is a struggle between buyers of your employment, and you (the seller) of your time/expertise. If those prices overlap, then there is a spectrum of possible transaction prices that can occur.

As you can imagine, if there are many buyers, and few sellers, then the price is driven to an auction level where buyers must compete with one another for the employee. If there are more sellers than buyers, then the price is driven down towards the cost of that employee (and associated education).

Typically we exist in the middle where negotiation tactics dominate where within that range the price settles. That's why there are policies such as "don't share your salary" - to create information asymmetry favoring the employer. ...and why people with poor negotiating skills typically earn significantly less than those who demand more.

Generally, when demand for employees is high, companies try to make the market less efficient by creating hurdles to employees leaving (like the agreements between tech companies not to "poach" employees from one another), and bonus programs that vest over multi-year periods.

This is relevant today because allowing employees to work from home greatly increases the supply of potential employees (both domestically as well as internationally), thereby forcing employees to accept closer and closer to their cost-basis. By microeconomic principles alone, it would be surprising if this didn't significantly drive down tech wages.

Re: Zuckerberg says employees moving out of Silicon Valley may face pay cuts

#160

Post by foogazi »

Tade0 wrote: post #90
aeternum wrote: post #49

Earlier quoted context omitted.

The part that doesn't make sense though is keeping the employees that live in SF, or paying an employee more if they choose to relocate to SF. Tech companies typically do increase your salary if you move to a higher CoL area.

Relocating for most people is actually a bigger deal than it may seem. I personally have no problem with it and did just that at least once, but after returning I asked around and most if not all of my friends and family would not do the same even for - and this was especially shocking to me - 4x the salary. Apparently flexibility is rare and sought after.

I moved to the Bay Area for a 2.5x increase in TC and none of my former coworkers followed up for referrals

Later I asked one of them if they wanted to know the salary range difference preferred not to think about it

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