I'm in a company that doesn't do this—everyone gets paid the same amount, which is way above average for most of the country—and some of the Californians are actively lobbying for location-based pay.
I don't think they realize that they're actually lobbying for most of the company to get a pay cut so they can get a greater percentage of the total salary budget, but that's what it would amount to if they got their way.
They expect you to compete with nearby employers. If not, you should hire from less active markets and probably go more remote.