I'm still not sure I'm understanding you. What I'm asking about is the question of compensation
conditional on experience and skill being identical. So by definition, I'm taking experience/skill differences out of the picture. So we have
Alice: backend engineer in London, able to get $120K from UK companies
Alicia: backend engineer in NYC, able to get $250K from US companies
with identical skill/experience. And we say for the sake of argument that cost of living is identical in London and NYC.
Now suppose Alicia's company wants to hire Alice.
Certainly, I agree that it makes perfect sense in a free labor market for the US company to try to get Alice for $120K.
But the company I work for (a well-known US tech company) makes many claims about how "fair" its compensation program is. So what I'm inviting you to discuss is whether or not that company would have a hard time making an argument that adjusting according to the local labor market is actually "fair".
Essentially, Alice is being penalized for happening to be in a locality where her skills are valued less. But that is out of her control. Would it not be "fairer" for a company to adjust compensation as follows:
1. Firstly, according to skill / experience
And then, either
2a. That's it, end of story: skill / experience only.
or
2b. By local cost of living, within equivalent skill levels.