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.”


Musk’s texts reveal what tech’s most powerful people really want

From Jack Dorsey to Joe Rogan, Musk’s texts are chock-full of überpowerful people, bending a knee to Twitter’s once and (still maybe?) future king.

“Maybe Oprah would be interested in joining the Twitter board if my bid succeeds,” one text reads.

Photo illustration: Patrick Pleul/picture alliance via Getty Images; Protocol

Elon Musk’s text inbox is a rarefied space. It’s a place where tech’s wealthiest casually commit to spending billions of dollars with little more than a thumbs-up emoji and trade tips on how to rewrite the rules for how hundreds of millions of people around the world communicate.

Now, Musk’s ongoing legal battle with Twitter is giving the rest of us a fleeting glimpse into that world. The collection of Musk’s private texts that was made public this week is chock-full of tech power brokers. While the messages are meant to reveal something about Musk’s motivations — and they do — they also say a lot about how things get done and deals get made among some of the most powerful people in the world.

Keep Reading Show less
Issie Lapowsky

Issie Lapowsky ( @issielapowsky) is Protocol's chief correspondent, covering the intersection of technology, politics, and national affairs. She also oversees Protocol's fellowship program. Previously, she was a senior writer at Wired, where she covered the 2016 election and the Facebook beat in its aftermath. Prior to that, Issie worked as a staff writer for Inc. magazine, writing about small business and entrepreneurship. She has also worked as an on-air contributor for CBS News and taught a graduate-level course at New York University's Center for Publishing on how tech giants have affected publishing.

Sponsored Content

Great products are built on strong patents

Experts say robust intellectual property protection is essential to ensure the long-term R&D required to innovate and maintain America's technology leadership.

Every great tech product that you rely on each day, from the smartphone in your pocket to your music streaming service and navigational system in the car, shares one important thing: part of its innovative design is protected by intellectual property (IP) laws.

From 5G to artificial intelligence, IP protection offers a powerful incentive for researchers to create ground-breaking products, and governmental leaders say its protection is an essential part of maintaining US technology leadership. To quote Secretary of Commerce Gina Raimondo: "intellectual property protection is vital for American innovation and entrepreneurship.”

Keep Reading Show less
James Daly
James Daly has a deep knowledge of creating brand voice identity, including understanding various audiences and targeting messaging accordingly. He enjoys commissioning, editing, writing, and business development, particularly in launching new ventures and building passionate audiences. Daly has led teams large and small to multiple awards and quantifiable success through a strategy built on teamwork, passion, fact-checking, intelligence, analytics, and audience growth while meeting budget goals and production deadlines in fast-paced environments. Daly is the Editorial Director of 2030 Media and a contributor at Wired.

Circle’s CEO: This is not the time to ‘go crazy’

Jeremy Allaire is leading the stablecoin powerhouse in a time of heightened regulation.

“It’s a complex environment. So every CEO and every board has to be a little bit cautious, because there’s a lot of uncertainty,” Circle CEO Jeremy Allaire told Protocol at Converge22.

Photo: Circle

Sitting solo on a San Francisco stage, Circle CEO Jeremy Allaire asked tennis superstar Serena Williams what it’s like to face “unrelenting skepticism.”

“What do you do when someone says you can’t do this?” Allaire asked the athlete turned VC, who was beaming into Circle’s Converge22 convention by video.

Keep Reading Show less
Benjamin Pimentel

Benjamin Pimentel ( @benpimentel) covers crypto and fintech from San Francisco. He has reported on many of the biggest tech stories over the past 20 years for the San Francisco Chronicle, Dow Jones MarketWatch and Business Insider, from the dot-com crash, the rise of cloud computing, social networking and AI to the impact of the Great Recession and the COVID crisis on Silicon Valley and beyond. He can be reached at or via Google Voice at (925) 307-9342.


Is Salesforce still a growth company? Investors are skeptical

Salesforce is betting that customer data platform Genie and new Slack features can push the company to $50 billion in revenue by 2026. But investors are skeptical about the company’s ability to deliver.

Photo: Marlena Sloss/Bloomberg via Getty Images

Salesforce has long been enterprise tech’s golden child. The company said everything customers wanted to hear and did everything investors wanted to see: It produced robust, consistent growth from groundbreaking products combined with an aggressive M&A strategy and a cherished culture, all operating under the helm of a bombastic, but respected, CEO and team of well-coiffed executives.

Dreamforce is the embodiment of that success. Every year, alongside frustrating San Francisco residents, the over-the-top celebration serves as a battle cry to the enterprise software industry, reminding everyone that Marc Benioff’s mighty fiefdom is poised to expand even deeper into your corporate IT stack.

Keep Reading Show less
Joe Williams

Joe Williams is a writer-at-large at Protocol. He previously covered enterprise software for Protocol, Bloomberg and Business Insider. Joe can be reached at To share information confidentially, he can also be contacted on a non-work device via Signal (+1-309-265-6120) or


The US and EU are splitting on tech policy. That’s putting the web at risk.

A conversation with Cédric O, the former French minister of state for digital.

“With the difficulty of the U.S. in finding political agreement or political basis to legislate more, we are facing a risk of decoupling in the long term between the EU and the U.S.”

Photo: David Paul Morris/Bloomberg via Getty Images

Cédric O, France’s former minister of state for digital, has been an advocate of Europe’s approach to tech and at the forefront of the continent’s relations with U.S. giants. Protocol caught up with O last week at a conference in New York focusing on social media’s negative effects on society and the possibilities of blockchain-based protocols for alternative networks.

O said watching the U.S. lag in tech policy — even as some states pass their own measures and federal bills gain momentum — has made him worry about the EU and U.S. decoupling. While not as drastic as a disentangling of economic fortunes between the West and China, such a divergence, as O describes it, could still make it functionally impossible for companies to serve users on both sides of the Atlantic with the same product.

Keep Reading Show less
Ben Brody

Ben Brody (@ BenBrodyDC) is a senior reporter at Protocol focusing on how Congress, courts and agencies affect the online world we live in. He formerly covered tech policy and lobbying (including antitrust, Section 230 and privacy) at Bloomberg News, where he previously reported on the influence industry, government ethics and the 2016 presidential election. Before that, Ben covered business news at CNNMoney and AdAge, and all manner of stories in and around New York. He still loves appearing on the New York news radio he grew up with.

Latest Stories