1. What will Facebook's pay-by-location move mean for cities/tech hubs - A little riff on this interesting story in @FT: https://www.ft.com/content/1c52a7a2-aa65-11ea-abfc-5d8dc4dd86f9
2. First and foremost, for all those who think this will cause tech hubs to decentralize, the opposite is more likely to happen: Pay-by-location will more likely reinforce the dominance of expensive cities & tech hubs like the Bay Area and NYC.
3. The reality is leading tech companies, and leading companies of all sorts have long practiced a form of pay-by-location, paying employees a substantial premium to cover the more expensive costs of housing in places like San Francisco and NY.
4. That is part of the reason why housing is so expensive there. Techies, finance whizzes, & other "prized" talent are paid more than enough to cover housing costs in expensive cities & tech hubs, driving up housing costs & pushing everyone else out.
5. So this new pay-by-location policy will likely have the reverse effect that many think or hope for: It will provide additional incentive for "talent" especially younger workers to flock to superstar cities & tech hubs.
6. If you wanted to encourage decentralization, you would pay people the same which would enable them to dramatically improve their living situations by moving to less expensive places. But that's NOT what companies are doing. They are cutting pay to match local living costs.
7. MIT work expert Tom Kochan nails it, saying it is “treacherous ground if you pay people less because they live somewhere that costs less.”
8. So ends up pay-by-location is really an insidious kind of incentive for workers to move to or stay in expensive cities and tech hubs.
9. Why would you move to Buffalo or Detroit or Cleveland or Pittsburgh for Omaha and take a pay cut when you could live in New York or San Francisco and get a raise to cover the expense of housing.
10. If you are a young person starting out this is a no-brainer: you look at this and say, they're essentially paying me to move to NY or San Fran to establish my career, build my network, have more abundant employment options & have many more people are to hang out with & date.
11. Then, later on I can take the salary floor I establish in an expensive city back to another less expensive location when I have a family. Young techies told me this as far back as 2000.
12. So, the only way to make this work is to keep people at a high salary and let the move to more affordable places. Varied pay by location ends up being an incentive for the most prized "talent" to continue to locate to the most expensive cities.