The upside of hiring remote workers should be to allow you to get the best workers no matters where your company is located. Good employees (those that would be able to get a job in Silicon Valley) will bring profit to your company no matter where they are located.

To pay a worker less because they chose to, say, move back to their hometown to take care of their relatives puts a sour taste in my mouth. Reducing people's pay because they moved to another location makes no sense to me.

Gitlab's pricing is the same no matter what city the client is located. If the employee is able to provide the resources needed charge this price to the customers then the employees should get the same pay as any other employee.

Imagine busting your chops to close a complicated project on time only to learn that the junior two postal codes over is paid more than you to do simple tasks.

I would change employer.

In fact, have been in such a situation before. The home office was outside of the city and they later opened an office there. The new city hires were paid more than everyone else at the company. The result was that the company lost all their strong players.

I am now working even further from the city for that same salary they gave the city employees.

A lot of what you say is not false, and it can be frustrating for employees (though it goes both ways - imagine a company headquartered in, say, Chicago, and you lived in SF or NYC - you'd be better off than if you were getting Chicago market-rate)

Hiring full-time remotes in a major way is still a relatively new practice, so we'll see how it all shakes out. It may very well be that actual pay-by-value takes root, but I wouldn't hold my breath. Pricing and markets are curious things, and there is huge inertia.