I've seen a bunch of these arguments recently, and they seem pretty baffling to me. It's not "rigging", it's supply and demand, nothing more. As an employee competing against other potential employers, you're going to demand a rate of pay that you think is "worth it" to you. The issue is, many people would be willing to work for less if they could stretch those dollars further in a lower cost locale.
I've generally been a fan of Greenspun's blog, but this conclusion seems nonsensical to me.
I don’t think this is quite supply and demand. The remote worker is already hired and then they move. The value Facebook gets presumably hasn’t changed but they are now paying a different rate. If this were about starting salaries, you might be right.
If I knew my colleague in the same position as me was making twice as much as I do just by virtue of physical location, I'd be pretty miffed. I probably won't work at much more than half capacity, if even that much.
Supply and demand makes sense as an explanation in a lot of these cases, but it doesn't actually explain this one.
If facebook were just charging a market rate determined by supply and demand, then your salary would drop when you become remote, regardless of where you actually live, as your location has nearly no bearing on your productivity or competition for the same job.
The fact that Facebook wants workers to report their location, as they cannot easily see the difference, shows their motivation cannot be driven by supply and demand.
This doesn't actually follow. Assume that there is a wide degree of variation in what people value "living in San Francisco" at. Some people value it at a million dollars a year, others value it negatively (ie. they'd prefer, all else equal, to live in Kansas). Both of these people probably exist in the real world.
If it costs N$ to purchase one developer in Kansas, and $2N to purchase on developer in SF, if there are enough developers in Kansas to satisfy the demand, then yes the price drops to $N. But if in fact the demand is higher than the supply Kansas can provide, then Facebook will buy out Kansas, and get its remaining supply from SF.
The average price of developers goes down, yes, but you get a form of price discrimination since those in SF value the city at more than the increase in relative salary from leaving.
The Kansas developers could increase their cost to compensate, sure, but you run into a few issues, while the market is supply-limited otherwise this wouldn't be an issue, if Kansas devs cost the same as SF devs, FB might just revert to its old practice and leave the Kansas devs back jobless.
You can sort of think of this as high CoL cities having a monopoly effect on pricing. "Normally" the market would fix this, but people are attracted to cities for lifestyle perks that can't be made up with equivalent $$. In other words, the city has an absolute advantage in city-lifestyle, so others can't compete on price to people who want city-lifestyle. In other words, for the person who enjoys living in SF, you'd have to offer them more to work in Kansas than to work in SF. As long as enough of those people exist, the market won't equalize. The normal econ-101 kind of understanding of supply and demand doesn't work, because you have, in essence, one consumer who wishes to purchase from two different markets with different market prices. City-livers and non-city-livers.
> FB might just revert to its old practice and leave the Kansas devs back jobless.
No, they won't, that's my point. If both developers are remote, and so Facebook is nearly indifferent to hiring Kansas vs SF, then it would happily keep pay Kansas developers until they raise their wages all the way to that of SF. That's true even if there's a fixed number of Kansas developers and that number will never increase (which I don't believe).
Or, in economics terms, both SF and Kansas workers are substitutable goods, so neither group has a monopoly and you'd expect their prices (or marginal price, to be accurate) to equalize, regardless of the elasticity of supply curves of the two goods.
We know the developers are substitutable, as the article states that Facebook isn't able to easily tell them apart, short of threatening them with strict penalties for lieing.
Then you're missing my point: if the Kansas dev costs as much as the SF one, why not just recentralize in SF? It's pretty clear that facebook believes that remote workers are somewhat less efficient. Maybe that cost is worth it at a 10% discount on labor, but maybe it isn't on 3% less.
>Or, in economics terms, both SF and Kansas workers are substitutable goods
Yes, in isolation, one SF worker and one Kansas worker are substitutable. But 1000 SF workers and 1000 distributed workers aren't. Or in other words, once you have 500 SF workers, the marginal value of an SF worker is > than a Kansas worker, even if the worker in question is the same human being in two different locations.
City lifestyle can be replicated by a large group of people in their 20s and 30s who settle in a smaller town. This is possible because in reality, you only ever meet and engage with a small percentage of the people who live alongside you in, say, NY. But up until recently, it was just easier to flock to the biggest city in your state/country. Now the virus is forcing people to consider smaller communities, which also has the advantage of better geographical sorting by self-selection.
I know this because this happened in several smaller cities in my country way before the virus, for other reasons.
Anecdotally, they also tend to tell me they are happy, compared to metropolis-dwelling friends who often confide in me that city life isn't all roses...
TLDR: One only really needs a community of about 150-250 non-interchangeable like-minded people to be happy and have dating/marriage prospects. In a city of 10K people you can also change your Dunbar community several times if you want to.
> TLDR: One only really needs a community of about 150-250 non-interchangeable like-minded people to be happy and have dating/marriage prospects. In a city of 10K people you can also change your Dunbar community several times if you want to.
While true, this also forces you to change the things yo do to fit the community. If you have, say, two relatively unique pasttimes, you'll be able to find communities for both in most major cities, but will be one of only a handful (or the only!) person who does the thing in a town of 10000.
You don’t see food costs in Walmart adjusted based on you income, even though supply and demand would also dictate that you’d be willing to pay more for milk if you have a higher income. It’s not supply and demand to allow once side to differentiate costs based on factors that shouldn’t matter to them, that’s rigging the system.
I think you underestimate the amount of price discrimination that is possible and practiced in grocery stores. And how much it matters. Any trade normally creates value, but that doesn't mean the two sides each capture half of that value. The whole business of business is trying to make sure 99% of it goes to them and not the consumer.
Coupons are one obvious long-standing mechanism. Loyalty cards are another. Another is the stocking of similar products at different price points in different locations, either different stores or different places within a store. Many stores these days seem not only to have a store brand vs. brand name products, but may have two or more levels of store or economy brands. You can add products from local producers at a higher price; maybe they even come from the same source as the regular ones, but you label them to differentiate your customers. Yet another thing I've seen (granted, it could be an error, but who knows) is pricing a larger size product or one that is labeled as an "economy" size at a higher per-unit cost than a smaller one. Or even pricing it at the same per-unit cost, which helps extract more money from people.
The basic principle you use to discriminate when you can't do it directly is to exploit a correlation - an obvious way to charge people with money more is to use the fact that they probably value their time more and are more impatient. But if someone who is poor is impatient, and is stuck paying more, all the better for the business. People are far from ideal economically rational actors and every aspect where it's normal to use heuristics can be targeted to improve profits.
Why would they regret being bailed out? In these circumstances, society requires safety valves where we can freeze financial activity to address more pressing concerns. Such mechanisms need improvements. But the crisis do highlight practices of ie. stock buybacks where short-term thinking is encouraged and even rewarded. These are just prelude to the next financial meltdown, unless mitigated beforehand.
Heh, this certainly isn't meant to happen in theory. If Facebook manages to carry this decision it suggests something really odd is happening in the programmer labour market - the buyer shouldn't have enough power to do this in a competitive market.
Companies just don't pay people high salaries because of 'need'.
Its probably too early to tell how this pandemic will impact software engineers. There have been plenty of high profile layoffs, but there are also plenty of companies that are going gang busters right now (zoom, netflix, etc..).
However, I would not be surprised if Facebook did some internal polling of their employees and saw really high levels of interest in leaving the Bay areas. So its possible that the salary adjustments were brought up as a way to counterbalance the interest levels. If 2/3 of company decides to just pick up and leave the Bay area, that could cause some problems.
Regarding having a family: that's also a signal for stability. If you have a family and have settled down, there's less risk for the employer that you'll quit. I don't know how large the difference is for men and women with children and who's family planning is complete.
For young women who have no children, the "risk" (from the employer's perspective) of pregnancy and motherhood is another large factor.
You'll quit as a young, single anything if you are treated without respect... Besides, the line in this film was to point out the sexism in society where women work for free - in this case, the man's wife who is at home with the children while the boss is able to take advantage of this situation to get more out of his worker. On top of, the obviousness that the worker is less likely to quit because of the family 'burden' where, back to the circular sexism, the wife cannot be the one getting the job because she is a woman..
Remote working hugely serves to balance the possibility of everyone regardless of gender and nationality to access the jobs that best fit their talent and work ethic. I'll be very very interested to see what happens to traditional gender and nationality roles once it's fully entrenched.
I'm sorry, I don't know the movie, my comment wasn't on its story.
The "has family" checkbox isn't so much a sexist thing, I believe. A woman with children is also much less likely to just pack her bag and move to India on her search for enlightenment, she has more things tying her down, making her more predictable. If you want a long term employee, you'll pick a woman with children over a single man without children, all other things being equal.
Remote working might have an impact there. But if you believe that there are hidden biases holding some people back, they won't just go away, and remote working isn't going to change that, unless you completely anonymize any communication between the employees and the company. Would be a fun experiment, but I don't know how practical it is.
Of course the labour market is rigged. It's a power struggle.
Facebook will only pay what they have to. You'll take the best offer you can get - there or elsewhere. That's how it works isn't it?
If you're in the gig economy the employer has the power since they have plenty of alternatives to go for. If you're in the talent economy then the employer either takes your price or doesn't do the thing they want to do and you go to one of the other people after your services.
And that's the difference. Workers tend not to have a a 'no deal, I'll not bother option'. Because if they do that eventually they starve. The lower down the tree they are the quicker they starve.
I think it was Beveridge that pointed this out originally. Essentially companies only hire when there is a chance of a profit, whereas workers have to get hired or they starve. That's the asymmetry of power which Beveridge hoped to correct by ensuring there were always more jobs on offer than people who wanted them.
Right at the moment Facebook knows you don't have too many alternatives - given the state of the economy. Zuckerberg is taking advantage of that to reduce his costs while still appearing to be magnanimous.
> The company is paying for your costs, plus providing you a margin. If your cost are lower, your margin is the same but the absolute number is smaller.
In that case, they'd look at your lease to see what you are paying. They don't, and whether you live in a cheap apartment or in a luxury one does not matter, even though it can easily change that "margin" by 100%.
You're right regarding the competitiveness setting the price. And once the company is fully remote, the competition is no longer constrained by locality. It does not make any sense to pay more or less because the remote worker lives in some location, and unless there is no competition, somebody else will just pay them more and you will not get the employees you were looking to get for cheap.
Remote employers right now need to decide whether they want to hire the kinds of people who relocated to the bay area to benefit their careers, because that means they still have to compete with bay area offers. If remote work becomes the norm, at that point bay area offers will no longer be higher (and some of us will leave). Maybe American offers overall will no longer be higher....
the underlying point, which isn't explicitly spelled out, is that labor should be priced by the value it accrues to the buyer, regardless of the cost of that labor (locationally in taxes, mortgages, etc.). it's hypocritical of facebook not to price it's own products (advertising rates) on a cost-plus basis, if it believes so strongly that its employees should do so. or, they should accept that labor can be priced on value just as it prices its own products.
Facebook could probably layoff half their staff without even the tiniest impact on revenues. The vast majority of engineers in these companies are replaceable. The high salaries are largely due to the competitive market and the FAANG obsession of only hiring the best. While some employees have a high enough profile/reputation that they can demand value based salaries, for the average engineer, the pay is essentially a slight premium over what the next lower tier of candidates would cost.
not sure what to make of your comment. you're simultaneously asserting that the engineering labor market is cost-plus ("the pay is ... a slight premium"), but with its "high" salaries, it's not.
that's incoherent--similarly incoherent to facebook pushing employees into cost-plus pricing while enjoying value-based pricing for itself.
absent significant outside influence, markets, including labor markets, will naturally drive prices down to cost-plus levels through competitive dynamics. if a market has outsized value-based pricing, it's a prime signal of inefficiency, and competitors should enter (not being a free market is a significant barrier, but a different issue).
Not everyone makes FAANG level salaries. There is a very steep gradient of salary levels in tech. At the top is FAANG, right below them are unicorns, and a few more tiers down you get to the bottom feeders, underfunded startups offering worthless equity and hopes and dreams instead of salary.
FAANG salaries are product of the hiring competition between each other and their self-imposed selectivity. Lowering the interview bar would likely open up the hiring pool enough where they could also get away with lower offers.
FB should pay more to remote workers. Cost of having a worker in an office (even in the tragedy of a city Menlo Park is) is very non-trivial. Now remote work is the new norm, and companies make the worker pay for space, furniture, internet, some equipment, parking, and, in case of FB, food. On top of that worker doesn’t come to the office, and doesn’t consume these valuable resources there. If worker moves out of the Bay Area, or even better, California, FB doesn’t have to pay high local taxes. So FB should give bonus for working from home, not tax it.
I joke with my friends working at Google/FB/MS/Amazon that soon company will make them pay for the office - “want to come the office? Pay the rent yourself”.
If you are a remote employee in the Bay Area, do you keep your Bay Area salary? As a thought exercise, what would prevent someone to rent a very cheap closet in a flat share and use it as an official address? What if you start spending 50% of your time visiting your relatives in Montana?
I expect that a new US remote salary standard will eventually emerge out of all of this. The company would pay you a certain amount and the free market will help you decide which state/city you decide to go live in.
New York is expensive but is also seen as more desirable than Omaha or Phoenix, individuals should pay more to live in more expensive and more desirable areas.
Paying employees more to be remote in high CoL cities means that you subsidize their rent or mortgage.
I'm not a lawyer, but I'm guessing this counts as fraud. Facebook could terminate you if they found out and try to recover wages from you. Nevada might not care since it has no income tax, but most states would care if you were actually resident there and not paying taxes. If you moved to Portland for its lower cost of living, tax officials might not like that you aren't paying taxes to Oregon.
It's a little weird, but most companies seem to want to vary salaries by location, even for remote work. It might not seem fair or correct, but I do think there are reasons you couldn't pull of a scheme like that. The IRS has information sharing agreements with most states.
Let's say you pick Arizona. What happens when your car is registered in Arizona and the IRS tells Arizona that you earned a lot of money and should have paid them thousands? Do you register your car in California, keep a CA license, buy car insurance at the CA address that it isn't garaged at? I know that these are small things and often people don't change this stuff for a few years after college, but at some point it starts adding up to more and more evidence of one's intent to defraud. Do you set up a non-USPS mail-forwarding scheme to make it seem like you're still in CA? If you get into a car crash, will your insurance start looking into why you're always in Arizona?
For Facebook, it wouldn't be too hard for them to figure it out. You'll be connecting to their servers for work from an IP address. Do you keep a server in the CA flat share to proxy everything? What if the box goes down? Worse, this shows real thought going into the fraud. It wasn't a casual, "oh, I thought I was going to be spending most of my time in the $500/mo flat share and just innocently forgot to update that I'm in Arizona basically always" and rather something really intended to defraud.
To keep tax collectors off your back, you'd have to let FB pay CA and then you'd have to pay AZ tax out of your pocket. Even a cheap $500 flat share eats into the profitability of this scheme. If you're earning $200k in CA and offered $150k in AZ, $13k of that will likely be eaten up by expenditures. Plus, with roommate turnover, at what point do people think it's weird to have someone on the lease that basically doesn't exist? How much time and money do you spend on flights for administrative things like flying back to CA to renew your license? Heck, do you vote in CA despite not living there?
It could certainly be profitable, but it does seem like there's significant risk of being caught. I'm not a lawyer, but this feels like defrauding an employer and different states handle background checks differently, but it seems like something that might go on a record that wouldn't be great to explain away. Like, "I was 19 and we thought it would be fun to steal the University sign" is a lot easier to explain than "I thought the company should pay me more so I defrauded them out of tens or hundreds of thousands of dollars."
>Readers: Does the fact that Facebook can unilaterally set the price it will pay for labor depending on the cost of housing from which the labor toils show that the market for Silicon Valley labor is rigged?
I don't understand what he is asking. What does "rigged" mean in this context?
Is he asking if SV employers are rigging wages too low? This seems to be evidence almost the opposite of that, because SV employers are paying remote SV employees more than remote non-SV employees.
Is he asking if SV employers are rigging wages too high? What motivation would they have to do that?
I guess the work contract also said that the Facebook employee has to show up for X hours per week at Facebook HQ to fulfill their duties. In other words: the permanent home office arrangement requires a new work contract anyway.
there is no "work contract" for employment in the US. It's at-will employment, the employer can change the terms at any time and if the employee doesn't like it, he can go elsewhere. Not saying this is a good thing (European countries do have work contracts for instance), or even expressing a preference (I personally think having a contract would be a good thing), just stating the state of affairs in US employment.
Huh, I have permanent contract without end date. It is forbidden here to keep people on short term contracts indefinitely. Raise is done as an amendment to the contract and, technically, can be refused.
Yeah but the contract has a clause that says if either of you wants to stop working together, there's a few months notice, right? It's only permanent in the sense that the end date is not known beforehand.
I can leave the company at will (respecting the notice period) but they cannot easily get rid of me. They can eliminate the role I'm in, but they must offer me a replacement if they can. Of course due to covid a lot of companies have to fire people and they absolutely can: the realities of business have changed. Firing due to poor performance is bit hard, but not impossible. Firing due to gross negligence is also possible and happenes, though you must really screw up to be eligible.
> How is this even legal? FB signed contract to pay X amount of dollars and now it can lower that amount unilaterally and without any kind of warning?
I think it works the same in Europe right? If you work for a company in Zurich and then move with them to London your wages will decrease, right? The difference being you will have to sign a new contract because its a different country. In the case of the US, they might not have to sign a different contract (unless they are on a visa). There is nothing stopping them from checking with FB what their new pay would be and then move.
Maybe one day they will understand that free trade is better overall actually means better for the very rich and very poor and worse for everyone in the middle. A college degree is unfortunately no indicator of common sense.
The difference between them is that the blue collar workers knew they were in the middle, and the valley workers who thought they were at the top are about to find out they've been in the middle all along.
>Why is being worse for the middle more important than being better for the very poor?
It's not, except for the extremely disingenuous way it was all sold to us. We knew what would happen to the rust belt. We told them "the jobs would come right back" and "it's better for everyone." Well, it wasn't. And if they had the audacity to complain we called them every bad name in the book. And in the blue collar case the poor people that it helped were largely in other countries. Can you imagine a politician making that sales pitch honestly? "We're gonna fuck over the working class, but it's gonna really make our rich richer and some poor people on the other side of the planet will be a little better off." I dare say, that would not have gone over well.
Simply taxing the rich more won't help anyone. You need to reevaluate the budget in any case, and at that point you might just redirect most of the tremendous amount of money already there to the poor AND tax people less.
Indeed better spending is a decent idea. However, wealth inequality in the US is already pretty terrible, it's unclear if it could be fixed at our current tax rates even if we did something drastic like replacing military spending with entitlements.
I don't understand the goal of equality. That sounds like the failed social experiment that was destroying my country for 40 years and the damage is there even now, 30 years after the end. Why is not the goal to lift people out of poverty? The UBI proponents are claiming it can be done with current budget, and if that can be done, surely a little bit more targeted social anti-poverty system should be possible just as well?
For every anecdote there is a counter anecdote! I was born and grew up in a country that (eventually) became hyper capitalist (maybe more like the UK than the US) & then moved to social democratic countries as an adult (first Austria then Germany).
In both of these the quality of life is so much better than in my home land, despite the fact my earning here is a bit lower and I pay more taxes on that earning - you get so much for free/cheap from the government here that I don't mind paying the higher taxes & life is so much less stressful: free kindergarten from age 1, 14 months parental leave, 200 euro per child for 18 years (up to 26 years if they study & don't yet have an income of their own), university is free, healthcare is free (it is nominally free in my home country but here a lot more is included in the free tier & the quality is higher), tenants get protections people from my home country find hard to believe when I tell them, and the list goes on and on.
So yes, life in Moldova, Belarus or wherever you come from is shit but it's not shit because socialism can never work. And nobody is arguing in becoming more like the Ukraine they argue in favor of becoming more like Sweden.
EDIT: What I was trying to express (without being snarky) is that stereotypically what you see in the bay area is very rich successful people moralizing others on liberal values from their high horses. I have a hard time to put this together with people earning a fortune, doing minimal things to actually help others and feel threatened when there is a risk that other people might benefit from opening bay area jobs to a wider audience.
I don't understand how one can make such broad stroke judgements about tens of thousands of engineers, their opinions, their morality and their political affiliations all at once.
What's even more amazing is these engineers that live in the bay area, many of them are from diverse backgrounds around the world, not just the US. I have no idea how one can bundle all that up with one generalization. Must feel good to think you're looking down from a higher horse.
No, it just proves that Marx was right about the nature of the wage/salary. The value of labour power is the cost of reproducing/maintaining that worker at a particular standard of living, not some particular fraction of the value generated at work.
Marx was a crank who speculated about work and value but never tried to hire anyone. Why would they know or care about your standard of living? Supply and demand determine the wage they need to offer to keep you. If you move to a labor market with lower local demand, you now have fewer potential employers making offers that Facebook must outbid.
Above, user mrbuddycasino said exactly the same thing without invoking a certain philosopher's name. That post is getting upvoted.
I think hn users reflexively stop reading and downvote when they see "Marx." Which is a shame, because he was an interesting guy. You don't need to be a full-fledged communist to acknowledge that he had a lot of insight.
Zuckerberg's failure to graduate and build his enterprise via his former ivy league institution is showing.
Most of them have the same perceptions of their workforce: that employees are indentured servants who owe the company their time. The difference is Zuckerberg is willing to 'mask-off' admit this disregard for everyone but himself.
Of course it does and the only force strong enough to counterbalance Zuckerberg would be a Facebook union. This is why organized labor has always pressed to set a floor for wages and other terms. Otherwise, the people who run the places will always try to pit different groups of workers against each other like this.
They are sides to the coin, as they say. Salaries are X in San Francisco and NYC because its competitive and cost of living is high. So are taxes. But then ,if Facebook hired 12000 people in SF it means that they are worth the (say) $250K each a year and then some. If they work from Vietnam or Small Town, Georgia FB still gets the same benefits but the employees would have like a triple or quintuple salary.
I don't have an answer to this, but I'm almost certain that people in a foreign country office don't get paid the same as those that work in SF or NYC. But then, FB, Google and the likes are already super-profitable so it's hard to argue in their favor.