The power of salary arbitrage in remote work
5 min read

The power of salary arbitrage in remote work

Starting to earn a US-salary was greatbut the fact that this salary bump didn't come with a massive increase in COL was the biggest factor to increase my savings rate and overall quality of life.


I'm Sergio Pereira, and this is the Remote Work newsletter 👋

Last week I shared with you all the backstory of how I got my first remote job earning above $100k/year. It was a lot of effort, learning and iteration. But it paid off, back in 2016 that salary bump was truly life changing.

And it was such a life changing move because I kept living in Lisbon, Portugal, where cost of living is low. However, I traded my local low wage of around $25k/year for a much nicer US-level $125k/year salary.

Have a look at this Cost of Living (COL) comparison between Lisbon and San Francisco (source):

Cost of living comparison for remote workers in Lisbon and San Francisco

Starting to earn a US-salary was great, of course. But the fact that this salary bump didn't come with a massive increase in COL was the biggest factor to increase my savings rate and overall quality of life. (Also note that Lisbon's COL became much more expensive in recent years, back in 2016 it was a cheaper city to live in).

And the impact of Salary Arbitrage is even greater for someone living in a country with a lower COL, which also means lower local salaries. See Mumbai as an example (source). Those who live there and land a remote job with a US-salary, truly change their lives:

Cost of living comparison for remote workers in Mumbai and San Francisco

This is called Salary Arbitrage. Let me tell you more about this opportunity unlocked by Remote Work:

1) Most people aren't even seeing this

Most of the conversations about Remote Work discuss logistics reduction, not financial improvement. People focus on doing their current job from home, instead of commuting to an office.

By working remotely we avoid the commute. We get back those 2 hours a day, and that's great, of course. But in my view, the biggest opportunity of Remote Work is the financial side of it.

For the first time in history, anyone can apply to roles at high wage countries (eg: US, UK, Switzerland, Australia, etc), while living in a low cost of living (LCOL) place.

This is a massive opportunity to get financially free within a decade or two, as opposed to a traditional 40 year career.

2) Empowerment of developing economies

Growing up, I used to think that living in Portugal was a curse. Salaries were low, no big companies were created here, I felt that I'd need to move out in order to have a fulfilling career.

Remote Work flipped that coin for me. Now I feel that living in Portugal is a blessing. I can enjoy living in the place where I grew up, surrounded by friends, family, etc and still access foreign jobs that pay a much higher salary than my local economy can offer.

In fact, there's a full range of tech job opportunities between low wages (from local companies), and those big US-level salaries at the top of the market. Different companies have different salary policies, and you'll find opportunities all across the range. You might find:

• Entry level remote jobs working for a local consulting company. Eg: $20-30k/year.

• Mid level opportunities working for "cheap labour" US/UK outsourcing agencies. Eg: $40-50k/year.

• Senior roles working for US startups that have a limited budget. Eg: $60-90k/year.

• Specialist-level roles in competitive application processes for US companies paying those $100k+ salaries.

Competition to get each of these jobs changes accordingly, as I described in this past newsletter edition. And my point is: by living in a LCOL place you can afford to apply to more jobs across that salary range, even the ones with lower competition. As opposed to someone who lives in a high COL place who can only go for those $100k+ jobs in order to make a living in expensive cities like SF, NY, etc.

3) Mobility for those living in expensive cities

Salary arbitrage also empowers people who live in such expensive cities, but in a different way.

For the first time ever, someone making $200k as a Software Engineer at a New York company can move to another place while keeping the same job and same salary level. This is enabled by remote work, and work cultures that values the work you do, rather than where you do it.

Actually, thousands of people are already leveraging this possibility. US tech workers are moving all across LATAM to work remotely from there to their US jobs. Otherwise touristy place have become digital nomad hubs as a result.

Living in Portugal I've seen many people from the Americas, Central/Northern Europe, Asia, etc moving in over the last few years as Remote Work exploded (remember I said COL in Lisbon increased a lot recently, this is one reason why). The same effect is happening in many other places in Southern Europe, Asia, etc.

These folks can even afford to take lower paying jobs, or working part time, given they significantly decrease their cost of living by moving to such places. Quite an impactful tendency in the market, which I'm a part of, working as a Fractional CTO.

4) Full decouple between work and location

Ultimately, remote work allows location independence. At least within a job's requirements (some jobs are truly global while others are constrained to specific time zones or countries).

By getting a remote job, people are empowered to live wherever they decide to live:

• Some stay where they were born and raised while working for foreign companies (my case).

• Others move back home after having previously emigrated (I see this a lot with people moving back home after living in the US or UK).

• Others move to cheaper+nicer places (like those landing here in Portugal).

• Others just nomad around and explore the world while they work.

All of these are great moves, and it all depends on each person's life conditions, preferences and motivations. Until just a few years ago, each of these options would come at the cost of changing jobs or being discarded in applications. So we should all take a moment to acknowledge how lucky we are for living in a time of such Remote Work opportunities.

In case you're actively looking for a remote job, you might want to have a look at this list of 1000+ companies hiring remote roles right now. I built this free resource just about 2 months ago, and since then 15000 have visited the page and applied to remote roles listed there. Have a look!

In September, I'm also launching my first ever cohort based course and private community, where I'll be breaking down my knowledge into modules, and will help a batch of remote job seekers find a remote job. The launch will be private, join the waitlist and stay tuned.

Thanks for reading this newsletter until the end. You can read all past editions here. Make sure to share the link with your friends and colleagues so they can read it too.

See you next Friday,

Sergio Pereira,
Startup CTO & Remote Work Lover

Mastering Remote Work, our course for high performing remote workers and teams.