Yes, you do downsize salaries. Paying Jill less than Bob where Jill is a better worker because she lives in Little Rock Arkansas and Bob lives in NYC is downsizing Jill's salary.
Jill can do better. Hopefully other remote companies seek out the Jills and pay them what they are worth.
I suppose that is true in the narrow case of SF/NYC. We're working to grow profits to make it so that isn't the case in the couple places that have the highest cost of living in the world.
Jill can do better. Hopefully other remote companies seek out the Jills and pay them what they are worth.