Workplace

Remote work is closing the geographic pay gap

It used to be much cheaper to hire engineers who didn’t live in pricey tech hubs. Now, not so much.

People working at computers.

The rise of remote work and geo-neutral pay — the practice of offering similar compensation regardless of location — are rejiggering what it costs to build a tech team.

Photo: Sigmund via Unsplash

Tech companies can still save on payroll by hiring engineers in cheaper cities. But the geographic wage gap in tech is shrinking in the U.S., especially for senior roles, experts say.

For senior software engineers, the pay gap between the most expensive U.S. cities and the least expensive shrank by two-thirds between 2019 and 2021, according to data from the compensation data provider Pave. By the third quarter of last year, the gap between Tier 1 salaries and Tier 3 salaries had narrowed from 18.1% to just 5.9%.

“There are startups that are applying pricing pressure in this free market, where now you don’t have to be in a seat in the office to get the same amount of output,” said Matt Schulman, Pave’s co-founder and CEO.

A larger data set from the compensation software maker Payscale looked at pay compression across software engineers of all levels of experience. It showed the same compression across regions, but not to the same degree as Pave’s data on senior software engineer salaries.

Payscale found that since 2019, median engineer pay has increased 7.1% in San Francisco and 8.9% in New York. But in Dallas, it’s increased 15.2% and in Minneapolis, it’s up almost 17%.



“What we are seeing now is a decline in wage growth in high-tech metro areas as companies expand their recruiting efforts for technical talent into metros with a lower cost of labor,” said Amy Stewart, a senior content marketer and analyst at Payscale. “However, increasing competition nationally could impact wages over time.”

The rise of remote work and geo-neutral pay — the practice of offering similar compensation regardless of location — are rejiggering what it costs to build a tech team. While distributed work opens up a less expensive talent pool, it’s no longer as much of a discount to hire outside expensive cities.

Geo-neutral pay is gaining steam

While FAANG and other big tech companies are largely sticking to geo-differentiated pay — Airbnb, Reddit and Zillow are notable exceptions — Schulman said many startups are going geo-neutral.

While typically large companies are still differentiating pay based on location, their openness to remote candidates is also driving up tech salaries in lower-cost cities, according to Julia Dow, vice president of Services at the compensation benchmarking software maker OpenComp.

And tech workers’ moves out of high-cost cities — San Francisco alone lost 6.3% of its population between 2020 and 2021 — have also pressured companies to offer geo-neutral pay, Dow said.

“Companies wanting to stay relevant to top talent are embracing geo-neutral compensation strategies, and the trend is likely to stick,” Dow said. “Companies of all sizes are choosing not to apply geographic rules to compensation to retain a competitive edge with technical talent in the same way they do with [non-technical] roles.”

In some cases, startups allow workers who move to a lower-cost area to keep their big-city pay — but limit their pay increases going forward.



Engineer pay is also rising globally as more companies outsource. “I have a lot of founder friends at earlier-stage companies, and a lot of them are just saying, ‘You know what? We’re going to pay the same amount of compensation to an engineer in Poland and San Francisco and Rio,’” Schulman said.

A few months ago, Schulman looked into hiring engineers in Mexico City, but found that “it’s not that much cheaper,” he said.

Even outside of the tech industry, many remote IT jobs now offer geo-neutral pay in the U.S., according to Christian Burney, managing partner at the recruiting firm Magee Resource Group.

“We are, for the most part, getting pay across the board, it is what it is, whether you live in San Francisco or you live in Iowa. The pay is going to be the same,” Burney said. “I think some are actually using it as a tactic to save money, because they don’t have to pay the San Francisco prices anymore to get the best people.”

Geo-neutral pay can also be more expensive if companies are paying San Francisco salaries nationwide — hence the wage compression.

Senior engineers can make bank anywhere

Pay compression is more dramatic in senior roles, Schulman found. According to Pave’s data, P5 engineers in San Francisco and New York only make around 3% more than their counterparts in third-tier cities, compared to an 11% gap for entry-level engineers.

“The more senior you get, the less of a geographic disparity discount,” Schulman said. “Which makes sense. If you’re hiring executives, they’re just more highly sought after. It doesn’t matter where they’re located.”

Climate

New Jersey could become an ocean energy hub

A first-in-the-nation bill would support wave and tidal energy as a way to meet the Garden State's climate goals.

Technological challenges mean wave and tidal power remain generally more expensive than their other renewable counterparts. But government support could help spur more innovation that brings down cost.

Photo: Jeremy Bishop via Unsplash

Move over, solar and wind. There’s a new kid on the renewable energy block: waves and tides.

Harnessing the ocean’s power is still in its early stages, but the industry is poised for a big legislative boost, with the potential for real investment down the line.

Keep Reading Show less
Lisa Martine Jenkins

Lisa Martine Jenkins is a senior reporter at Protocol covering climate. Lisa previously wrote for Morning Consult, Chemical Watch and the Associated Press. Lisa is currently based in Brooklyn, and is originally from the Bay Area. Find her on Twitter ( @l_m_j_) or reach out via email (ljenkins@protocol.com).

Every day, millions of us press the “order” button on our favorite coffee store's mobile application: Our chosen brew will be on the counter when we arrive. It’s a personalized, seamless experience that we have all come to expect. What we don’t know is what’s happening behind the scenes. The mobile application is sourcing data from a database that stores information about each customer and what their favorite coffee drinks are. It is also leveraging event-streaming data in real time to ensure the ingredients for your personal coffee are in supply at your local store.

Applications like this power our daily lives, and if they can’t access massive amounts of data stored in a database as well as stream data “in motion” instantaneously, you — and millions of customers — won’t have these in-the-moment experiences.

Keep Reading Show less
Jennifer Goforth Gregory
Jennifer Goforth Gregory has worked in the B2B technology industry for over 20 years. As a freelance writer she writes for top technology brands, including IBM, HPE, Adobe, AT&T, Verizon, Epson, Oracle, Intel and Square. She specializes in a wide range of technology, such as AI, IoT, cloud, cybersecurity, and CX. Jennifer also wrote a bestselling book The Freelance Content Marketing Writer to help other writers launch a high earning freelance business.
Entertainment

Watch 'Stranger Things,' play Neon White and more weekend recs

Don’t know what to do this weekend? We’ve got you covered.

Here are our picks for your long weekend.

Image: Annapurna Interactive; Wizard of the Coast; Netflix

Kick off your long weekend with an extra-long two-part “Stranger Things” finale; a deep dive into the deckbuilding games like Magic: The Gathering; and Neon White, which mashes up several genres, including a dating sim.

Keep Reading Show less
Nick Statt

Nick Statt is Protocol's video game reporter. Prior to joining Protocol, he was news editor at The Verge covering the gaming industry, mobile apps and antitrust out of San Francisco, in addition to managing coverage of Silicon Valley tech giants and startups. He now resides in Rochester, New York, home of the garbage plate and, completely coincidentally, the World Video Game Hall of Fame. He can be reached at nstatt@protocol.com.

Fintech

Debt fueled crypto mining’s boom — and now, its bust

Leverage helped mining operations expand as they borrowed against their hardware or the crypto it generated.

Dropping crypto prices have upended the economics of mining.

Photo: Lars Hagberg/AFP via Getty Images

As bitcoin boomed, crypto mining seemed almost like printing money. But in reality, miners have always had to juggle the cost of hardware, electricity and operations against the tokens their work yielded. Often miners held onto their crypto, betting it would appreciate, or borrowed against it to buy more mining rigs. Now all those bills are coming due: The industry has accumulated as much as $4 billion in debt, according to some estimates.

The crypto boom encouraged excess. “The approach was get rich quick, build it big, build it fast, use leverage. Do it now,” said Andrew Webber, founder and CEO at crypto mining service provider Digital Power Optimization.

Keep Reading Show less
Tomio Geron

Tomio Geron ( @tomiogeron) is a San Francisco-based reporter covering fintech. He was previously a reporter and editor at The Wall Street Journal, covering venture capital and startups. Before that, he worked as a staff writer at Forbes, covering social media and venture capital, and also edited the Midas List of top tech investors. He has also worked at newspapers covering crime, courts, health and other topics. He can be reached at tgeron@protocol.com or tgeron@protonmail.com.

Policy

How lax social media policies help fuel a prescription drug boom

Prescription drug ads are all over TikTok, Facebook and Instagram. As the potential harms become clear, why haven’t the companies updated their advertising policies?

Even as providers like Cerebral draw federal attention, Meta’s and TikTok’s advertising policies still allow telehealth providers to turbocharge their marketing efforts.

Illustration: Overearth/iStock/Getty Images Plus

In the United States, prescription drug advertisements are as commonplace as drive-thru lanes and Pete Davidson relationship updates. We’re told every day — often multiple times a day — to ask our doctor if some new medication is right for us. Saturday Night Live has for decades parodied the breathless parade of side effect warnings tacked onto drug commercials. Here in New York, even our subway swipes are subsidized by advertisements that deliver the good news: We can last longer in bed and keep our hair, if only we turn to the latest VC-backed telehealth service.

The U.S. is almost alone in embracing direct-to-consumer prescription drug advertisements. Nations as disparate as Saudi Arabia, France and China all find common ground in banning such ads. In fact, of all developed nations, only New Zealand joins the U.S. in giving pharmaceutical companies a direct line to consumers.

Keep Reading Show less
Hirsh Chitkara

Hirsh Chitkara ( @HirshChitkara) is a reporter at Protocol focused on the intersection of politics, technology and society. Before joining Protocol, he helped write a daily newsletter at Insider that covered all things Big Tech. He's based in New York and can be reached at hchitkara@protocol.com.

Latest Stories
Bulletins