Once it has been determined that your position can be effectively filled with someone working remotely, you will be competing with all those in the same timezone/jurisdiction.
If the current tolerance for remote work persists, I fully expect salaries in companies of the S.F. Bay Area to drop significantly. With a fraction of the rent, this might still work out for the employee.
Luckily I don't live in the Bay Area or California. I live outside of a major city and just deal with a longer commute most times.
I'd guess the super inflated Bay Area pay is likely going to deflate but the average global pay for SWEs will inflate as those companies start looking for people who can add the same value as a local employee for a reasonable price. Where I work we've been hiring engineers from outside the US recently and we've been giving them US-like salaries which are massive jumps from previous local jobs they had in their country.
I'm assuming other scrappy companies who are in a growth phase right now are doing the same. This is likely especially the case if you need to wisely allocate capital.
If the current tolerance for remote work persists, I fully expect salaries in companies of the S.F. Bay Area to drop significantly. With a fraction of the rent, this might still work out for the employee.