Small Business, Joining a Parade of Outsourcing

Source: New York Times

Going abroad for cheap labor isn’t just for big businesses anymore. Thanks to the rise of online job marketplaces, small businesses are increasingly using foreign contract workers to lower their costs.

It’s a trend that has the potential to redistribute global wealth, say a group of researchers in a recent working paper published by the National Bureau of Economic Research.

... Contractors from Bangladesh and the Philippines, for example, “earn significantly more than local minimum wages, perhaps partly explaining their disproportionate use of the platform,” according to the paper. Technology skills tend to command higher wages. On average, software developers were able to make around $16 an hour, whereas administrative support paid $4, the paper said. (Projects can also be performed at a fixed rate instead of an hourly one.)

... The trend isn’t so good for freelancers in the United States and other high-income countries, who can’t compete against a contractor in, say, the Philippines, who bids $5 an hour for a tech-related job. It’s similar to the effect that occurred when American companies began outsourcing their work to factories abroad — and one that is likely to be debated as online labor continues to grow.

Read more: http://www.nytimes.com/2014/02/16/business/small-business-joining-a-parade-of-outsourcing.html