
Why are people paid differently based on geography?
My entire career in technology has been spent in the Chicago tech market. Because of this, my sense of “normal compensation” is based on what one can expect software engineers to be paid in Chicagoland. Having helped grow businesses that had offices in San Fransisco and New York City, I’m also familiar with the fact that these areas have higher expectations for compensation. Up until recently, I simply accepted that as normal, I didn’t think much of it. Paying more for the same talent in SF and NYC was just the way it was.
Two years ago, I was privileged to visit Lagos, Nigeria. I met a bunch of people over there, and have continued collaborating with technologists via my software development firm, Red Squirrel. In fact, I’ve welcomed several Lagos-based software engineers onto the Red Squirrel team this year. I’ve also become friends with an experienced and well-travelled software engineer in Lagos. Our conversations about compensation have been mind-expanding.
I wanted to get people from Lagos involved with Red Squirrel for two primary reasons. First, I’m inspired by human potential. My career as a software developer has helped me make progress toward my potential. As I make that progress, I strive to facilitate progress for other folks who want to get into this career, particularly those who have been historically left out. Secondly, some of our clients are looking for ways to bring down the price of software development. Working with our engineers in Nigeria is currently less expensive than working with our engineers who are based in the United States. This is because I’m not paying the folks in Nigeria as much.
Why am I not paying them as much?
At Red Squirrel, I approach conversations about compensation in a consistent way. I simply ask the potential employee or subcontractor how much they would like to be paid. I can’t always hit the numbers they tell me, but my goal is to get as close to their number as I can, working within the constraints of my business model and my clients’ budgets.
When I ask someone in NYC what their hourly rate is, I often get a different answer than someone who is based in Chicago, or Lagos, or someone who lives as a digital nomad. Why are these answers so different, regardless of skill level? Well, that’s fairly obvious, right? These folks are basing their rates on their accustomed standard of living, and then attempting to make some financial progress on top of that.
Our engineers in Lagos are willing to work for a lower hourly rate than, say, folks in New York City. So, I’m finding that our Lagos talent is more attractive to our clients than New York City talent, given the fact that 1) we primarily work remotely with our clients, and 2) our engineers in Lagos are willing to time-shift toward US time zones. So, from a client experience, the only noticeable difference is just hearing a different accent during audio conversations.
Interacting with this market dynamic has made me wonder about the present and future of how compensation works across international software engineering talent pools.
Are we willing to pay people in developing countries the same rates that we pay people in developed countries?
Today I asked someone in Lagos for their target hourly rate. If their response had been on par with someone in NYC, I would have been surprised. And yet, if there is a client that is willing to pay someone in NYC a certain rate, why shouldn’t someone in Lagos be able to demand the same amount? (Provided they are both working remotely, on US hours, with similar skill-levels, and similar communication abilities.)
There’s an expectation that has established itself firmly in my mind that immigrants and “off-shore” talent that come from developing countries are always paid less. I think this expectation is pervasive across the US economy. It’s an expectation that is based on experience. There are countless millions of people who have taken enormous risks to immigrate into our wealthy economy and take on our relatively low-wage work. There are also millions of people who work for a fraction of typical US compensation via near-shore and off-shore operations.
But what happens if a talented, well-spoken, time-shifted, highly-skilled, Nigeria-based software engineer asked to be paid on-par with a NYC-based software engineer?
Are you feeling any tension as you consider this dynamic? I know I am. I’m nervous that my client would have a much higher expectation for the Nigeria-based developer than the NYC-based developer. There’s a certain prestige that comes with living in NYC, and our society is willing to pay a premium for that prestige. Fundamentally, NYC has a stronger brand than Lagos. And this is where market price and our psychology intersect.
There’s nothing rational about paying as much as we do for high-end brands like Gucci. Consider the difference in cost between Gucci slides ($750) and Adidas slides ($25).
Similarly, there’s an emotional component to how people are paid based on their geography. We have different emotional reactions and biases when we think about software engineers in Chicago vs. Palo Alto vs. São Paulo vs. Johannesburg vs. Kiev vs. London vs. Lagos. Each of these locations conjures up a different stereotypical story, which has nothing to do with any specific engineer’s abilities.
As someone who is inspired by human potential, I chafe at the idea that folks in less prestigious areas of the world should be financially penalized by the reputations of their geographic locations.
And so I will keep asking how much money people want to make, and see if I can work to hit their targets. Over the course of the coming decades, I think global compensation for remote software engineering talent will begin to converge and stabilize. I’d like to help push that process forward!

