Zillow – Why Should You Earn Less Money Just Because Of Where You Live? It’s Time To Question Location-Based Salaries
If you are great at what you do, why should you be forced to earn less than what you’re worth just because you live outside of a major city? Doesn’t it seem reasonable that a person should be paid what they’re worth regardless of where they live?
Location-based salaries and compensation may turn out to be the next big hotly contested issue. Corporate executives have acknowledged that a percentage of their workers will relocate after being given the remote option. It’s reasonable that people who left family and friends in suburban and rural towns across the country that were not geographically conducive to working at a premiere tech company in Silicon Valley or on Wall Street will return home. Many people may relocate to a place that they love or seek out new and interesting locations. Housing prices, school districts, safety, weather, outdoor activities and taxes fit into the decision-making equation too.
We are seeing a divide amongst companies. A few are paying people the same—no matter where they live—and others say they’ll change the compensation based upon the new residence. Location-based salaries and compensation are now being questioned and reevaluated, in light of the success of the massive work-from-home or work-from-anywhere trend.
Last week, CNET reported that Google offered its employees the ability to request office changes or apply to become fully remote workers, via a new Work Location tool. “With our new hybrid workplace, more employees are considering where they live and how they work,” a Google spokesperson said in a statement. “To better equip people with the information they need to explore their options, we’ve built a tool that will allow all employees to request to move to a new location, or go remote.”
Google and Alphabet CEO Sundar Pichai previously shared his vision of the search giant’s new hybrid return-to-work plans via an internal message from the chief executive to his employees. The program calls for around 60% of Googlers coming together in the office for a few days a week, while another 20% will work in new office locations and 20% are anticipated to work remotely. He also raised a point, which might not be well-received by the Googlers, “Whether you choose to transfer to a different office or opt for completely remote work, your compensation will be adjusted according to your new location.”
A number of high-profile corporations, such as Reddit, the freewheeling community and comment-driven platform, and Zillow, the online real estate site, informed their employees that they could work wherever they’d like and earn the same amount of money—as if they were based in expensive cities, such as New York or San Francisco. This trend may continue, as it’s reasonable to see other companies recognize this is a great way to attract and retain workers. Their policies challenge the long-held belief that where people live should determine what they earn.
If this trend takes hold, it will be a boon for workers. The prospect of not needing to live within commuting distance of a job or applying for a role anywhere in the U.S. could be a career game changer. A person who’s stuck in a region that doesn’t offer appropriate jobs would have to settle for what’s available. When companies are open to recruiting talent away from the major business hubs, it opens up new vistas for a large number of Americans.
Morgan Stanley’s CEO James Gorman has a hardcore stance on remote work. Gorman, according to the Financial Times, said about his return-to-the-office plan, “If you can go into a restaurant in New York City, you can come into the office.” To underscore his desire for people to return to their respective offices, Gorman said he’d be “very disappointed” if workers have not “found their way into the office” by the Labor Day holiday on September 6.
It was reported that he’d “take a dim view of employees who did not work regularly in the office.” While some tech companies were open to paying people Silicon Valley wages, even if they relocated to lower-cost locations, Gorman said, “If you want to get paid New York rates, you work in New York.”
Reddit acknowledges that a percentage of people may elect to relocate. If they so choose, the company “will be supportive of the move—and won’t adjust their compensation down.” To show support for its employees, the company is “eliminating geographic compensation zones in the U.S.” Contrary to what other companies are doing, this policy suggests that “compensation will be tied to pay ranges of high-cost areas, such as [San Francisco] and [New York], regardless of where employees live.”
In a companywide announcement, Zillow chief people officer Dan Spaulding informed his 5,400 employees, “Effective immediately, we will offer about 90% of our employees the flexibility to work from home as an ongoing option.” Spaulding said in the memo that Zillow’s “allowing them the ability to work where they are most productive, whether that is in the office, their home or a combination of both.” Spaulding also said, according to the Wall Street Journal, a person’s compensation won’t change if they relocate to a lower-cost location. He added, “Our old preferences have been debunked during the pandemic.”
VMware, a California-based publicly traded software company that provides cloud computing and virtualization software and services, announced that employees who work remotely will get a pay cut if they move out of Silicon Valley to live in less-costly cities. According to Bloomberg, “Employees who worked at VMware’s Palo Alto, California headquarters and go to Denver, for example, must accept an 18% salary reduction. Rich Lang, VMware’s senior vice president of human resources, offered a positive alternative. When a person relocates and works remotely, they “could get a raise if they chose to move to a larger or more expensive city.”
Fast-growing fintech payments company Stripe announced a different spin with respect to compensation. In an effort to save on expensive real estate costs, Stripe said it will pay its workers $20,000 to leave New York City and San Francisco. As an incentive, employees would be paid $20,000 to relocate from high-priced cities to lower-cost locations. Sounds good, right? Here’s the catch—the workers who take up the offer will have to take a 10% cut to their compensation.
In May, 2020 Facebook CEO Mark Zuckerberg followed the footsteps of Jack Dorsey, the chief executive of Twitter and Square, and also promised to allow his employees to continue working remotely. Zuckerberg said, “We’re going to be the most forward-leaning company on remote work at our scale.” He then added ominously, employees will have to tell their bosses if they move to a different location. According to Zuckerberg, those who relocate to lower-cost cities “may have their compensation adjusted based on their new locations.” He added, “We’ll adjust salary to your location at that point. There’ll be severe ramifications for people who are not honest about this.”
To Zuckerberg, it’s a two-way street. The door is now open for Facebook to seek out talent all across the United States and other counties. This could end badly for workers. CEOs may arbitrage the best and cheapest job seekers across the country—and potentially globally. Facebook can source applicants who live in lower-cost places and pay them less than they’d receive working in San Francisco.
Dorsey, known to be employee-friendly and socially conscious, was forthright about his new ability to recruit people who don’t live within commuting distance. “We can get talent anywhere. There’s a lot of folks out there that do not want to move to San Francisco. They feel comfortable working in a much smaller office or just home.”
The downside is that job seekers must contend with more competition. Up until now, candidates worried about the other people in their immediate vicinity applying for the same jobs. Now, they’ll have to contend with the volume of applicants applying from all over the U.S.
This will work against people who live in high-cost cities and earn larger salaries compared to peers in other parts of the country. They may be passed over for jobs, as the company may decide that a person working at home in Montana has the same skills as someone in Chicago, but will take a much lower salary. It will be hard for employees to negotiate for raises, as management will believe that they could easily find a replacement somewhere else within the United States or abroad.