In my experience, hiring managers are acutely aware of this. When recruiting from out of state, hiring managers and recruiters in an expensive area will be prepared for this topic to come up.
Essentially, "worth" is defined by the success or failure of their previous recruiting efforts:
- If a business can get good employees in your field from your area for $40K, then they'd probably still consider your worth to be similar, no matter what you think.
- If a business has only had success getting employees to move from your area to theirs at a minimum of $60K, then your worth is probably more like that.
- In the end, the maximum worth is going to be what they can get similar-level employees for in their own area (or else they wouldn't be looking).
Specifically speaking, hiring managers in Silicon Valley know it's expensive to live there and salaries are, on average, higher than many other areas to account for it.
That being said, the recruiter is not going to just give away money that they don't feel they need to, as with any negotiation.
They will be prepared to have the discussion — if you say you currently make $40K in a cheaper area, they'll be prepared to hear that you need a significant "cost of living increase" — but you must be prepared to ask and hold up your end of the negotation with real numbers.
You should know your relative worth in your area
- Are you on the low, middle, or high-end of the pay scale?
- If you are considering a new job, can you justify moving up the ladder in addition to a cost-of-living increase?
- Some areas pay more (relative to that area's broader average salary) for certain jobs due to demand. Are you in high-demand or low-demand in your area?
You should have a good idea of the relative cost of living of the new area
You can find out relative salary differences by searching for your job title in the Bay Area on glassdoor.com or on a salary comparison tool like indeed.com - Silicon Valley vs. Nebraska (Nebraska is for example of "Midwest").
It's still a negotiation
For your own sake, you should be in the drivers seat of any salary negotiation discussions. You should be aware of the cost-of-living differences, the demand for your position in the new area, and you should be prepared to cite numbers and justify them when asked (and potentially without being asked, to avoid wasting their time or yours).