> This shouldn’t matter to the company and shouldn’t have any impact on how they value the employee.
Your mistake is thinking that compensation is solely based on how much they value the employee. Companies only need to pay enough to outbid the competition, and the amount of competition for workers is a lot higher some places than others.
Think of it in basic supply and demand terms - the amount that a company "values" an employee only reflects the demand curve; the other half the equation is the supply curve, i.e. how much a company has to pay to beat out the competition and persuade employees to work for them because all the other options are worse. The supply curves are shifted right in LCOL areas, which drives the equilibrium prices down.
Your mistake is thinking that compensation is solely based on how much they value the employee. Companies only need to pay enough to outbid the competition, and the amount of competition for workers is a lot higher some places than others.
Think of it in basic supply and demand terms - the amount that a company "values" an employee only reflects the demand curve; the other half the equation is the supply curve, i.e. how much a company has to pay to beat out the competition and persuade employees to work for them because all the other options are worse. The supply curves are shifted right in LCOL areas, which drives the equilibrium prices down.