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To answer you question. If I could wave a wand and create a pay structure it would be based mainly on results. Not location or years of experience.
At some point it just a judgement call by leadership on how they want to structure pay.
There is probably no perfect comp structure. Someone is always going to be better or worse off depending on circumstances.
In some ways what your describing is a race to the bottom. It's unlikely big company will race to the top end of pay in that type of a system.
That's how it is for most companies
I have a family member who is a teacher for a cyber school. Their payrate is the same across the state even though the cost of living in the more rural areas (Pennsylvania) is much lower than the bigger cities. She lives just outside of Philadelphia. She has a higher mortgage, utilities, and groceries. Also, if I remember some of my business classes, prices for consumer goods are higher in some areas than others. The higher price is in a place where people make more money. This allows companies to be competitive in all markets as the higher price in a city like New York will mitigate any losses as the company builds a brand in the more rural areas. In a perfect world, everything would be the same across the board. This is not a perfect world.
Some companies have set comp bands based on the position and others very clearly (in job postings) state the pay varies on location. This varies from company to company.
I'm currently on the receiving end of non-location based pay structure so I'm making the same comp band range as colleagues in much more expensive areas. It's great for me as I chose to live in a more affordable area. It's one of the factors people consider when deciding to move and accept work opportunities.
If they're remote then no. People choose where they live.