Many companies pay employees differently depending on the location of the employees. Most common claim is that companies pay employees based on cost of living differences. This means that a new york city or san francisco employee gets much higher pay than a worker working in chicago or boston for example. Here is a link to the Bureau of Labor Statistics Cost of Living Index.
The problem with this is that the cost of living is based on a basket of goods, and there is no way to tie this to the quality of the goods. If an employee is paid based on the cost of living in San Francisco, he will likely be paid more than an employee in New York City that lives in a similar apartment. The cost of rent in San Francisco is likely higher than the cost of rent in New York City, but the quality of the apartment is not necessarily better in San Francisco than it would be in New York City.
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