“The act of converging and especially moving toward union or uniformity.” This is how Merriam-Webster defines the word convergence – and it’s a good way to describe what’s happening to American salaries these days. Remote work is driving a quiet shift that some have dubbed The Great Salary Convergence.

Let’s say that you’re a fast-growing tech company. You need good talent to keep growing, and you need it ASAP. You’ll gladly shell out a San Francisco salary to a strong candidate from Dallas who can work remotely – you were going to spend the budget anyway, you just have more options now that you’re not restricted by geography. Now let’s say that you’re professionally hunting for a job. Why would you limit yourself to the jobs in your area when you can make New York money in a smaller market? This sums up The Great Salary Convergence in action. 

“When someone can hire an engineer in Salt Lake City just as easily as they can in San Francisco, or a marketer in Bloomington can compete for a job with one in NYC, the ability for companies (or employees) to ‘demand’ specific salary changes. Those in higher salary areas will feel downward pressure and those in lower salary areas will be able to reach higher, “says Jon Sadow, Co-Founder/Chief Product & Technology Officer at Scoop, 

Why staying aware of The Great Salary Convergence is key 

Dominic Ashley-Timms, CEO of management consultancy firm Notion, says that leaders should pay attention to these shifts because they affect an organization’s ability to recruit and retain the best talent. Not to mention the fact that salary disparities can also have a negative impact on morale and engagement.  

Additionally, The Great Salary Convergence is an indicator of supply and demand in the labor market, says Sadow. According to him, you can almost think about it the same as opening up international trade or globalization. 

“The world has ‘shrunk,’ which expands the geographic boundaries of where a company can find people eligible and able to work (and where people can find companies willing to hire them),” he says. 

“The GSC is an indicator of (1) how quickly and (2) to what extent those shifts in supply/demand are happening. Salaries will converge across geographies as geographic boundaries become less meaningful, and monitoring that can be really informative as to how companies are staffing their workforces.” 

Nuances to consider about The Great Salary Convergence 

So, what now in practical terms? “Leaders need to know that they don’t need to be constrained by geographical factors when recruiting or indeed retaining employees. We’re no longer looking for the best person in Austin, Albuquerque or Atlanta, we’re now looking for the best person in the world,” says Ashley-Timms. 

That’s a compelling argument for having a hybrid workforce – you need to be able to compete with organizations that aren’t restricted by geography when it comes to the pool of talent. 

It’s also important to note that convergence doesn’t always mean that salaries are going up, even though there is an upwards trend right now. Things can – and will – keep shifting. “Convergence is about coming together and equalizing, and it’s yet to be determined how that will impact the average/median salary statistics by geography and industry. It’s going to depend greatly on the historical supply limits created by geographic boundaries,” says Sadow. 

According to him, the impact of The Great Salary Convergence on yourself and your team will also vary depending on who you are and where you stand: “A company who previously hired only in San Francisco will perceive their company’s average salary coming down while the average salary nationally in that same industry might increase.” 

Pros and cons of The Great Salary Convergence 

Salaries trending upwards and the pool of talent opening up are upsides to The Great Salary Convergence for both employees and employers. But, as Ashley-Timms puts it, there are two sides to this coin. 

“If firms are having to pay more to hire and retain staff, that may have a negative impact on their growth and their appetite for recruiting. Employers may also look more closely at the value being contributed by employees in order to ensure that they have a mix of net contributors in their organizations,” he says. 

“Salary convergence is ultimately a reflection of an evolving labor market that has fewer non-performance factors impacting job acquisition and salary. Put another way, geography is historically a poor limiting factor in finding the best talent. It’s a labor restriction not tied to capability but rather proximity,” adds Sadow. “Without it, you get to see the increase in performance-oriented hiring factors.” In other words, performance expectations will grow too, for better or worse. 

Higher labor costs also tend to affect other aspects of the economy – hello, inflation – so forces are bound to shift in the other direction at one point or another. One thing is for sure: The pandemic has completely disrupted the way people work, and now the way that they get paid.