Choosing a location on today’s salary differential is buying a depreciating asset.
The spreadsheet moment is familiar to every CFO: engineer salaries in Location A are 40% below Location B. The model lights up green. The decision starts writing itself.
Here’s what the spreadsheet doesn’t show: that differential is a snapshot of the most perishable variable in the entire model. Wage gaps exist because demand hasn’t caught up with talent yet- and your arrival is part of the demand that closes them. Attractive differentials draw employers; employers bid up salaries; the arbitrage you underwrote quietly erodes, fastest precisely in the locations attractive enough to have made your shortlist. You’re not the only one who saw the number.
What compounds instead of decaying? Three things worth weighting far more heavily. Talent depth- a location that produces two hundred relevant graduates a year can absorb your growth and everyone else’s; a shallow pool turns your year-three hiring plan into a bidding war. Productivity trajectory- output per salary dollar, and its direction, matters more than salary alone; a slightly costlier city where teams ship faster wins over a decade. And cluster effects- as an ecosystem thickens, everything gets cheaper in ways payroll never captures: hiring cycles shorten, suppliers appear, your second and third moves get easier.
The practical shift: stop asking “where is talent cheap?” and start asking “where will the total cost of a productive team be lowest in year five?” Those questions produce different shortlists more often than most boards expect. Occasionally the cheap location still wins- but then you know you’re right, rather than hoping the snapshot holds.
Our Locations Assessment & Facilitation practice models exactly this: trajectory over snapshot, depth over headline rates, across North America, Europe, the UK, the Middle East, and Australia -then we facilitate the government conversations to land you there.
Talk to us at zoe@nueconomy.co.
Related: Optimal Is Fragile. Choose Robust.
