Goodbye expensive city, hello country: More and more employees of tech companies are leaving Silicon Valley to work from home. They want more space and cheaper living costs. The companies they work for respond with their own change: They cut their salaries.
In the past six months, many employees who actually live in large cities like San Francisco have moved their center of life. While some employees want to return to the Bay Area after the offices reopen, others want to move permanently and work from home indefinitely.
Those who move to cheaper regions should receive less wages
In response, major technology companies have begun auditing the pay of employees who have left the Bay Area permanently. According to a Bloomberg report, software company VMware recently decided to cut salaries for those who moved to less expensive cities. While employees can work permanently from anywhere, their salaries should now be lower when they leave the Bay Area. For example, an employee who moves to Denver, Colorado, will receive 18 percent less pay, according to Bloomberg.
Even moving within the state of California should lower VMware salaries: workers moving to San Diego or Los Angeles will have to accept an eight percent cut, reports Bloomberg.
VMware isn’t the only company that’s giving this thought. In late May, Facebook announced that it would allow employees to work from home permanently. However, from January, their salary will be adjusted based on their place of residence, reported the “New York Times”.
Twitter wanted to decentralize its workforce even before the pandemic
On Twitter, locally adjusted salaries have been a hot topic for years. In early May, Twitter boss Jack Dorsey became the first major tech CEO to announce that employees would have the option to work from home forever. There is no expectation to return to the company’s headquarters in San Francisco when the coronavirus threat has subsided. While this move was in response to the pandemic, it was part of a larger plan to decentralize the company’s workforce.
Dorsey said on the August podcast “The Boardroom: Out of Office” that Twitter had been moving towards a more dispersed workforce “a year, if not two years” before the pandemic. As a result, the company already has a compensation plan.
“We have always had a competitive approach to local salaries and we pride ourselves on the many ways we support our employees during this difficult time,” a Twitter spokesperson told NewsABC.net.
Many employees are willing to accept lower salaries for a move
The locally adjusted salary policy would apply to employees moving outside of the Bay Area to lower-cost cities, according to Twitter. The company’s other coronavirus-related benefits, including company-wide “days off,” a $ 1,000 grant to work from home, parenting resources, and wellness programs apply to all employees regardless of where they live.
But for tech workers, a wage cut isn’t necessarily a bad thing – some even seem to view it as a rather small price to pay for a lower cost of living and a better work-life balance. A new survey by the workplace chat app Blind polled 2,800 users in New York, Seattle and the Bay Area and found that 44 percent would be willing to accept a wage cut if they moved to a less expensive location.
After Bloomberg reported that VMware was cutting salaries for employees in cheaper cities, a VMware employee responded that he would “happily” accept a cut, especially given that many tech workers have both a salary and a get a bonus.
San Francisco is the most expensive city in the US for homebuyers
“It’s just a cut to my base salary, and the base salary makes up half of my total compensation,” the employee wrote via Blind. “So a net reduction of my total pay of 6.5 percent in order to move to a place where houses cost 20 percent less and taxes alone make up a difference of five to six percent? Sign me up”.
San Francisco is the most expensive city in the US for homebuyers. Only 18 percent of households in the region can afford to buy a house in the middle price segment. With the median income in San Francisco being $ 112,376, anyone looking to buy a home in the city would have to earn at least $ 172,153 in salary to be able to afford the mortgage. The cost of living has gotten so high that even tech workers have found it hard to afford: Another recent blind survey found that 70 percent of tech workers said they couldn’t afford to buy a home in the Bay Area.
Experts told NewsABC.net in May that as the home office becomes more and more permanent for many workers in the region, an “escape from the city” must be expected. In June rents in the region had already fallen sharply, and in San Francisco they fell by 9.2 percent year-on-year. So, with many offices closed – some plan to keep it that way until next summer – there could be continued migration from the Bay Area.
Such a development is also conceivable in major German cities
Such a scenario would also be conceivable in Germany. In cities like Munich, Frankfurt or Hamburg, rents and purchase prices for real estate have risen sharply in recent years. Some experts expect that the trend towards home offices could change the housing market. “Working from home could make a larger area around the metropolises attractive,” said Michael Voigtländer, real estate expert at the Institut der deutschen Wirtschaft (IW), at the end of August. If you only have to come to the office twice a week, you can also take other commutes into account. The home office is therefore also an opportunity for rural regions.
If companies have to pay their employees lower salaries for this, the home office could also be financially worthwhile for them. In addition, an office workstation costs several thousand euros a year – money that could be saved more easily in the future. According to a survey by the Center for European Economic Research (ZEW), 37 percent of German companies plan to keep working from home even after the crisis.
This article has been translated from English and edited. You can find the original version here.