Is Outsourcing Exploitation?

By Yaro Starak
316 Comments

I wasn’t going to write this article.

I was comfortable with my stance on outsourcing, comfortable enough to recommend it and promote products, and profit from the affiliate commissions, from people who use the catch-call of $2-per-hour labor and the phrase – “they do the work, you get the money“.

I’ve begun the process of outsourcing to the Philippines. We’re currently running tests to find a good graphics person, then next up will be a coder, a VA and so on until I have a solid team of talented people, all of whom will cost under $1600 a month total to employ full time. I can’t even hire ONE Australian full time on that kind of money, let alone an entire team.

I decided to write this article and highlight this issue because it bothers me. The people who emailed me to explain that outsourcing bothered them and that I contributed to the problem by promoting the idea, are to be credited for this article as well. A friend who challenged me, who pushed me to look very closely at my attitude towards outsourcing and the bigger picture, is also due credit for pushing me to shine a light on the issue and change how I outsource.

Sometimes You Need To Challenge Accepted Practices

If you’re considering outsourcing overseas, or you already do, it’s important you read this article.

Over the last few weeks I wrote several articles on the subject of outsourcing. It’s fairly obvious that I recommended outsourcing as a great way to grow your business or even start a business, and enjoy true leverage through help from other people.

The basic premise behind the type of outsourcing we are talking about here, is hiring people from other countries where labor is comparatively cheaper than hiring from your local country. This is only true if you reside in a country with a strong currency and comparably high average salary, like the USA, Canada, Australia or countries in the European Union. People from wealthy countries outsource to people in poorer countries in Asia and Eastern Europe, where there are plenty of skilled individuals willing to work for a fraction of the cost of hiring locally.

When I first heard about this concept many years ago it sounded like a great opportunity for me as an Australian earning money online in US or Australian dollars. Then, as I grew more exposed to the Internet marketing industry, when people promoted outsourcing, using language like “you can hire people for $2 an hour” something bothered me. I didn’t understand how people could be paid only $2 an hour and that not be considered slave labor. I started to wonder if this was a form of exploitation.

During John Reese’s Outsource Force launch campaign, which I promoted in my last few blog posts, John released a video which used the phrase “$2 an hour” as part of the benefit of outsourcing. This, at least to a business person thinking about reducing costs and increasing profits, is a selling point and well worth promoting as a good thing.

My readers are a varied bunch of people who come from all walks of life, with all kinds of opinions, which is wonderful because you provide me with different perspectives on what I write about. In response to some of the emails I sent out promoting John’s launch, I received a handful of messages from people upset that I was supporting what they viewed as exploitation, especially around the concept of $2 an hour labor.

While sometimes I receive negative feedback in response to my writing, it’s not often that I feel a need to write a post to respond to an issue. This time, I do – and it’s because on some level I actually agree with the negative feedback, which tells me that it needs more open discussion.

What Do People Think About Outsourcing?

I’ve interviewed internet marketers many times where the subject of outsourcing has come up. It’s such a common subject, because nearly all successful internet businesses use outsourcing in some way. In fact, outsourcing is often at the heart of the success of online business because of the leverage available from cheap labor, and the ease of access to it thanks to the digital age.

Recall the interview I did with Adam Short from Niche Profit Classroom, where he explained how he uses overseas outsourcers to build his niche websites and earn as much as $90,000 a month in income. During the call I asked Adam to justify his use of outsourcing given the claim that it could be viewed as exploitation. He explained his argument, which I came to see as a reasonable point of view, because it is based on helping people in other countries, not taking advantage of them.

More recently I interviewed John Jonas, who specializes in outsourcing to the Philippines. Due to the negative feedback I had received about the idea of outsourcing in the past, I specifically challenged John during this interview to explain his take on the exploitation issue. He had the same argument as Adam, which as you will hear in the recording with Jonas, I agreed with and supported.

When my business partner Gideon Shalwick recently hired a full time Filipino at around $400 US a month, I had a long discussion with him about why it is okay to do this and why it is not exploitation. Just a couple of days ago as I write this article, I talked to Gideon again and asked him to reiterate his stance once more. We talked for almost an hour about the subject, and agreed that the situation is not ideal, but on an individual basis, we are helping the people we outsource to.

I also asked my assistant Angela for her take, which turned out to be interesting as she had been discussing it with her husband, who had a view that I should hire locally to support Australia.

I spoke to some of my other friends to get their opinion on the issue. I also have the feedback emails I’ve received from people in response to my recent articles and emails about outsourcing, as well as feedback in the form of blog comments, including comments from several Filipinos, who explain what it is like being an outsourcer living in their country.

My conclusion after all of this is that I don’t actually have one that sits comfortably with me 100%.

Clearly the issue is not black and white, however I have decided to make a change, and I’ll explain why now.

When Is Outsourcing Bad? When Is It Good?

Before I talk about what I am going to do differently, it’s a good idea to lay out some of the biggest complaints people have about outsourcing overseas, so we know what we are dealing with and really take a deeper look at this issue.

I’ll also explain the common justification that most marketers use today to reason why outsourcing to cheap labor is okay, which you might explain as the good outcomes as a result of outsourcing.

Let’s begin the with the arguments against it…

We have two major issues at play. There is nationalism and the sense of separation of peoples based on geographical borders (the “us” versus “them” mentality). This is a belief that if you give to one nation (in this case hire people overseas), you are causing a loss to another nation (your country, because you don’t hire locally).

The other issue is fair pay for fair work, which is subjective. There are benchmarks and standards prevalent in every country, although that doesn’t mean it’s simple to know exactly what is “fair pay”.

One of the emails I sent out promoting Outsource Force talked about how I am looking to hire two Filipinos at a rate of around $300 to $500 a month for full time work. Later in that same email I wrote that I am offering half hour consultations, which I valued at $500, as a bonus for buying through my affiliate link.

Why is my time worth $500 for 30 minutes and someone in the Philippines worth $300 a MONTH?

You might claim that my time is more valuable because of my knowledge and position. It’s the same argument as to why a CEO of a company gets paid so much more than a mail boy in that same company.

(There’s an argument to say that pay scales are out of whack in Western countries too. Why does a professional athlete in certain sports earn so much more than a nurse or a teacher? But that’s a discussion for another day…)

To put it simply, we “value” certain roles greater than other roles. Sometimes this is justified due to the nature of the role requiring specialized knowledge, which could take years of study and practice to accumulate, or the responsibility for outcomes in that role is perceived as significant, thus due significant remuneration. Other times it’s the value society as a whole has decided to let something have, even if the justification might seem out of whack.

We often accept things, even if we don’t like them, because we don’t have the impetus to change them – there are other things in our lives we choose to focus on instead. It’s much easier to complain about something, than actually do something to change it.

So how can outsourcing overseas, when the pay rate seems so terribly small compared to the amount of time put in by the worker, be considered fair?

Even though $300 USD a month may not seem like much to someone living in a developed country, in Thailand, or Romania, the Philippines, or India, it’s above the average monthly wage. Sometimes as much as three times the average wage in that country, meaning this person is actually very well off when compared to others in their country.

That money affords the worker a quality lifestyle in their homeland. It may even provide enough money for them to support their family, which no one is going to argue is a bad thing. Throw in a few bonuses, some extra incentives for good work, and you have a situation where you feel like you are empowering someone and saving them from a situation where they might otherwise be earning half that money doing something like washing dishes.

That’s great right? You can’t argue against improving the quality of someone’s life, and in exchange you get a hard worker for your company?

In isolation, no, I don’t think you can argue there is anything wrong with helping people in a relationship where everyone benefits. The problem – which could be perceived as a moral one – comes from a situation where the value one person derives from the transaction is so much more than what the other person does. Of course, again we have the challenge of deciding how to “value” value – it’s different to everyone and a completely intrinsic judgment.

If $2 pays for a fantastic meal in Thailand, and the same meal costs $50 in Australia, yet the people who consume the meal all experience the same level of value – the satisfaction from a good meal – what’s the difference?

It’s also important to consider what people value. In Western culture we value “things” and focus on accumulation of material possessions as a means to feel good about ourselves, even if it is only a temporary satisfaction. In other cultures family, or community or faith are more important, and if your basic needs are met, there is no need to earn more money, it won’t result in any more happiness, and thus some people choose not to go after more money simply for the sake of material wealth.

However all of this assumes basic needs are being met, and in most countries where outsourcing takes place it is safe to say they are not – there is work still to be done to bring these countries up to developed standards.

Exploitation Or Just A Better Use Of Resources?

My friend Chris, when I asked for his opinion on outsourcing and whether it is exploitation, agreed with the topic definitely being a very “grey” issue, and came to this conclusion…

He views outsourcing not as exploitation, since the workers feel a benefit from their employment and are happy to do the work for what they are paid, however the business or person who does the outsourcing is taking advantage of a situation – a situation of inequality.

If you ask people who own businesses and outsource, would they pay what is considered an average wage in their country to get the same job done as they currently pay at much cheaper rates to someone overseas, they will probably say no, they won’t. You can’t afford to pay $4,000 a month to a local graphic designer for your business, so you don’t hire anyone, but you can afford $400 a month to an overseas outsourcer, in which case you do employ someone. In this scenario, at least someone gets a full time job, and your company grows quicker, allowing you to employ more people.

Let’s not forget, there’s nothing stopping an entrepreneur from the Philippines also hiring cheap labor from the Philippines (or India, or the Ukraine, etc) and reaping huge profits selling in American dollars on the Internet to a global audience, including Americans. Anyone with access to the Web has the same opportunity, it’s just what you do with it that counts, right?

Well sort of.

For many reasons, very likely due to the education system, values, culture, infrastructure, standards of living, and the economic and political environment, it’s much more likely that a person from a rich western country will start a business and outsource. People in third world countries face greater inherent challenges, and may simply not see entrepreneurship as an option to them. They don’t have the awareness of the opportunity on the same scale as people do in Western cultures and face more barriers to entry.

Here’s How I See The Problem

I look at it like this: On a micro level, outsourcing is helping the individual and those around him or her. It improves their lives, which is great.

On a macro level however, what we are looking at is one group of people who live in a richer country taking advantage of a situation that exists only because another country is poorer. On a macro level, the inequality is obvious – that’s why we have the label “third world country”. This means the standards of living are not the same, and we should be doing everything we can to ensure all human beings on this planet have basic standards like food, shelter and health.

This begs the question – does outsourcing help a country move away from third world status and raise the standards for everyone in that country?

I think the answer is yes it does, but it’s terribly slow.

I like using a projection based on what you might call a utopia of wage equality and financial opportunity, which could arise as a result of movements like outsourcing (others might call this globalization, but I think that label is difficult to interpret – it means different things to different people).

If enough money flows from one country into another, then the country receiving the money becomes wealthier. As it becomes wealthier the value of its currency becomes stronger and wages increase, thus outsourcing becomes less viable because it’s no longer “cheap labor” – it starts to move towards parity with developed countries.

The natural outcome as a result of this is for businesses to look for other countries where labor is still cheap. Eventually, given enough time, and believing in a world of abundance rather than scarcity, it’s possible to conceive that this process will help to equalize all nations, create a global currency of equal value and a global standard of wages regardless of what country you are located in.

This outcome may be a pipe dream, or even if it is not, we are not going to get there quickly.

The big fat reason for why this is?

Greed.

If people and companies prefer to hoard profits, which don’t forget is the purpose of a publicly owned company – to maximize profits for shareholders, most of whom live in developed countries – and this profit is made off the back of transactions based on inequality, like outsourcing to third world countries, then change is slow and one group benefits exceedingly more than the other.

How Can We Speed Up The Process?

The simple solution to this problem is to not be greedy.

That is such an easy statement to write in an article, but such a challenging concept to embrace fully and make part of your life. I’m greedy almost on a daily basis, yet I know I want this to change.

One attitude shift that I think is particularly powerful is to stop looking at the people in other countries as somehow separate from you. An American or Australian is no different from an Indian or a Filipino when it comes to basic human rights.

We are all human, and if the person living next door to you was starving and you have ample food, you’d offer some to them right? So why is this different when it comes to someone living overseas? Does the distance between you and them or the perception of differences based on race or nationality make it easier to discriminate? Yes it does, but it shouldn’t.

If you look at every human being as a member of your family that you care about just as much as you mother or father or sister or brother or daughter or son, then you wouldn’t allow yourself to be greedy while they suffered some kind of basic lack in their lives.

I’m not saying that people in the countries we outsource to are starving (although some are – and developed countries have problems too), but there is certainly an inequality that is not acceptable, especially if you continue to reap massive profits as a result of it, without doing more to give back than just taking advantage of it by paying a “good wage” based on current standards in that economy.

It’s critical that you adopt an attitude of abundance over scarcity. This process is about everyone having enough AND people enjoying wealth in exchange for passionate work. This is viable if you believe there is enough to go around if we learn how to distribute it without greed, or fear of loss.

You have to stop trying to keep up with your peers when it comes to accumulation of material possessions. Stop believing that by having more than what others have you will feel better. Avoid materialism, don’t listen to advertising and never attach your happiness to ownership of products – it’s an illusion that never lasts – you know that already. Understand that giving will make you feel good permanently, not buying things – you can’t fight this, it is part of your nature. Know when enough is enough.

One way to speed up this process is to take it on board as your responsibility to help the third world countries you outsource to, to raise their standards by reinvesting in, and supporting organizations that help people in that country.

The challenge is what proportion of the profits you reap from outsourcing, do you consider fair to return in support when it comes to helping people in other countries?

Some would say that simply choosing to outsource to a specific country is enough help. If a team of three full time outsourcers that cost you $1,000 a month helps you to make $20,000 a month in return, that’s just called good business right? You deserve to keep the profits and of course, your main focus is to make more. Once you make $20,000 a month, you want to get to $50,000, and then a million a year, then ten million and so on. There’s always more money to be made, and thus your profits should be reinvested towards continued growth.

Can you see a problem with this treadmill? There’s no endgame here and eventually the only purpose behind making more money is to make more money. Once you reach a certain amount, adding more millions really doesn’t matter, unless of course you are using it to help those in need.

I know as my truth, if you really drill down to our core motivations, the only real meaning you can derive from your human existence, is through helping and having an impact on others in a positive way.

Ask Yourself This Question

All of this comes down to choice, and your choice is based on your attitude. As you can tell, my own attitude has been in flux in regards to this situation, but deep down I’ve known something hasn’t felt 100% right, which is why I’m writing this article. You may or may not agree with me, that’s okay, but at least discussion is possible – change begins with awareness.

In my case, I’m going to commit to taking a larger chunk of the profits I make in part thanks to outsourcing, to directly support the countries I outsource to. I want to do more than just offer employment to a few people in that country, I want to help the entire population benefit in thanks for the benefits I gain.

The challenge I issue to you is to ask yourself whether, if you are outsourcing to cheap labor, you feel you are doing enough to help others with the profits you make. If you honestly feel good about the situation, that’s fine, keep doing what you are doing. If on the other hand, something is niggling at you, then consider what you are doing to give back.

I realize many reading this might be struggling to get by in the first place, and even finding $300 a month to outsource to just one full time employee is challenging enough. My intention is not to discourage you to outsource. On the contrary, whatever you can do to get yourself more quickly into a situation to help others is a good thing. Outsourcing can help your business grow more quickly, and as we discussed, it does help the people you employ. I haven’t changed my plans to outsource, only how I redistribute what I reap from it.

Just remember when you finally do break through to financial security – and that doesn’t have to mean you are a millionaire – you have the opportunity to support those who support you. If I have helped to plant that seed in you, then writing this article has been worthwhile.

Thanks for reading this to the end, good luck with your outsourcing and your business and don’t forget you always have the option to become part of the solution rather than just complain about the problem.

I value your feedback in particular on this subject, as I am far from in complete knowledge about the situation. If you have something to say, no matter what point of view you have about outsourcing or where you come from, please leave a comment.

Yaro Starak
Deal’n with issues

About Yaro Starak

Yaro Starak is the author of the Blog Profits Blueprint, a report you can download instantly to learn how to make $10,000 a month, from only blogging 2 hours per day. You can find Yaro on Facebook, Twitter and .

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316 Comments

  • Honestly Yaro that is the exactly the same thought I had since 2 years ago. Not from a business perspective slash managerial side but more as a citizen. I live here in Philippines and Im a Filipino. I heard that there in Australia a $3000 monthly income is just the minimal/average salary but here in Philippines that is exactly a dream income for most people here. I mean that is even the monthly salary of a manager or just someone who has a very high position.

    I don’t know Yaro but it bothers me in the sense that I used to really think we are really really getting exploited. bragging aside but its well known that the best country to outsource outside India is Philippines because we speak english well and we’re extremely talented and that somehow adds to the agony. People here could easily triple their income by starting their own business (if theyre taught) but instead they opt to work for other people and think they’re earning big already.

    Your post is a real lengthy and an in-depth one and as I get to become older Im starting to realize that its not really exploitation. The world is full of market imbalance and as an entrepreneur, our goal is to actually find those imbalances. After all this is a business and Im sure people understand it that way.

    But still its just hard to fathom (more from a personal side for me), why its just like that. People working extremely at the same level or pace with others but are earning income very different from each other just because of where they’re coming from.

    • I don’t think it is “exploitation” ever. You are doing a good thing providing work to someone who is willing to work for that fee. You do not force anyone. If any of your workers want to earn more by setting up their own businesses, they are free to do so. So you are not forcing them, you are not deceiving them, therefore you are not exploiting them in any way or manner.

      IF there is so much “labor value difference” that, marketers can make $90,000/m by outsourcing ALL the work, soon ALL THE MARKETERS will flood in (just look at the number of recent courses teaching outsourcing), trying to outsource all the work, and money flow will grow rapidly to Philippines and such poor countries. And then, labor prices will go up, and the labor value difference will go down, making outsourcing not-so-profitable.

      Free markets will always correct themselves. There are other things keeping poor countries poor, like IMF, WTO, World Bank, WIPO etc, backed with military supremacy of US and Europe. That’s what I call exploitation, not free trade of labor and services through Internet. If anything, it is benefiting these poor people and their countries.

      • Ozer, you are completely right. “Free markets” always correct themselves.

        The cons that Yaro speak of is found everywhere here in the US. The white man gets paid way more than the female or minorities for the same job. The female and minority can work for the same company, have the same education, same work value, everything same, but the white male will get paid more. Not fair.

        Minority students who go to the same school and have the same teacher gets lower quality of education. Due to the attitude of the teacher. Not fair.

        The problem is that here in the US, there is no such thing as “free market” due to all the regulations that the government puts on us. I can’t really say if this was a good thing or a bad thing. But something is not right.

        And if $3000 is the minimum wage in Austrailia, by golly then maybe I should move there. Corporate America has nothing on them. Families here don’t make enough to pay a mortgage, and struggle to pay rent and put food on the table. Most make the minimum wage of $7.25 an hour and have a hard time finding full time employment because the companies don’t want to be forced to pay benefits.

        Yeah, I don’t think most of the people living in the US agree that we are any better off than the third world countries. Most families here are having a hard time feeding their children too. It is just not publicized. And congress is too busy giving more power to the big corporations that caused all the problems in the first place.

        Greed, yes, that may be the root of all problems. I only hope that if I ever do get to make millions, I remember what Yaro said and take all those millions to help others and undo what has been done to ruin the US.

        • Emily,

          As a Freedom advocate, I see all governments as forces of Evil, not anything good at all. First, all governments are paid based on not what goods or services they provide, what value they create, but based on forced extortion (read taxation, inflation or devaluation). However, government systems does not work, simply because those people in charge are not any wiser than any of us, and are not “less greedy” or have “better morals” than any of us (probably even worse than average). Yet, when an individual makes a mistake and fails, he only harms himself, but when a government officer makes a mistake and fails, he harms the whole nation.

          This is why “big governments” are failing in the US and Europe. They are based on a lie. They are no better than a criminal mob “protection racket” saying “pay us our commission o

        • Well, Emilly, you are probably right. Life is indeed fair to all. As the saying goes, God is not unrighteous!
          However, America is the land of opportunity. You are missing a lot if you think you are on the same page with us in Africa. Look inwards girl, look inwards, and I bet I’ll soon hear your name ringing all over America ‘Emilly! Emilly!! Emilly!!!

    • Yaro, Thanks for your views and for creating a serious discussion. I’ve been out souring for nearly 12 mths and I’ve had to think through some of your moral challenges.

      A few points:-
      >> Your point that our neighbour these days can be our PA or IT programmer in India or the Philippines & us as Internet marketers should be the first to understand that the Internet has no international borders. So I agree with you we shouldn’t be exploiting our neighbour were ever he lives. Since we have laws to protect against exploiting our low skilled workers maybe if we can self regulate we need International lawyers to protect our international neighbour (3rd world) from being exploited by us out sources.

      >> Yes I’ve had people bid for jobs as little as a few dollars an hour but just because 25 people desperate need the work. I personally don’t want to exploit this situation to by advantage. I always pay a fair fee and often give a bonus for work well done. I’ve got a “PA” who works 24 hours a week for me she is over qualified University graduate who works for me at $8.35AUD p/hr I’m still saving and I don’t feel I’m exploiting her and I can also find other ways of helping as well. Also I employ Indian Programmers.

      >>While in BKK airport on my way back from India February this year I bought a great book “Creating A World With Out Poverty” Nobel Prize Winner M.Yunus The founder of the Micro Credit bank for the poor now 30 years later lending some 50Billion US to the poor with out security at cheap interest most funds loaned to Women for home based business ventures. This book is aimed at us in the West how we can structure our business to have a higher purpose I found this booking moving and challenging and has inspired me to think of my business to have a moral purpose as well as be profitable.

      Thanks Again Yaro
      Paul

    • Yes, I understand the reservations voiced over this whole issue. I have just hired my first outsource worker in the Philliipines and there is a little part of me that feels uncomfortable about it, and a large part that is elated on many levels, including the possibility that I might positively contribute to their career too.

      Let me tell you a tale which put it into perspective for me. Years ago when I went to South Africa from the UK I resolved not to employ any black labour in the home because I felt it exploited them. I soon changed my mind when I had lovely ladies trying to make ends meet and feed families begging me for a job, In the end I wished I could have employed more to help them out. If I had maintained my refusal to hire them I would have been mean. Exploitation is when you take advantage of someone. If someone is desperate to work for a lower wage that is reasonable where they come from it is entirely up to you whether you want to pay them the lowest possible amount, or somehow contribute more to their lives.

      I am really excited about the possibility that my potential success in getting some of the projects I have been meaning to get off the ground by utilising affordable labour will enable me to change that persons life, and I hope I will be successful enough to employ more. The good thing about John Jonas’ programme is that he provides the training for the outsourced worker and so by you giving them the benefit of that training, you are making them more marketable in the future with a higher potential earning power.

      So let our conscience decide if we want to pay the lowest wage or change a person’s life. I had loads of CV’s from excellent workers and struggled to get down from the final five to one. They are all really keen to do the work so it is for them to decide if they don’t want to do it.

  • Oh wow.

    Way to dissect the issue Yaro. Very very impressive.

    So after all this thinking, what action are you taking to more directly support the countries that you’re outsourcing to?

    – Nick

    • Assuming I find some good outsourcers and the projects we work on turn out profitable, I’ll reinvest some of the profits back into organizations that help in that country, or if I can’t find any, things like Kiva, which is a group that all entrepreneurs love to support as it supports other entrepreneurs in developing countries.

      This is more of a mindset shift and understanding how your actions fit into the big picture. I’m not sure my solution is ideal, but for now it’s the best option I have.

      • Firstly – your post is really fantastic! John Reese has been promoting his Outsource Force and all I can see are Internet Marketers promoting it as an affiliate. I understand, every business owner would want “cheap labor”, so to speak. But it only takes a Yaro Starak to properly dissect it. Brave enough to dissect the pros and cons, that is! Frankly, I made a comment on one of the videos of John Reese – against, of course but never got a reply or comment about it when he gives comments on those that were all “for” it!

        Anyway, I am a freelance writer and I do get jobs overseas through this outsourcing hype. For third world countries, earning dollars are a welcome treat, that’s why we have many of what we call Overseas Contract Workers. However, perhaps it might not be exploitation, perhaps as what your interviewees said – helping. In what way? Financially, yes! But did you guys ever consider the self-esteem and confidence of that individual working for you? Let’s turn the situation around. Given that you are Yaro Starak and I am hiring you to work for me. Given your talents and your capabilities, would you consider a $2/hour job? Assuming you are in the Phils. This $2/hour becomes viral! Especially so that there is someone out there promoting it like anything. So you guys won’t settle for anything more than $2 I suppose. You guys might be helping their pocket, our pocket but you are not helping our self-worth. Why do you think you have the courage of dissecting this issue like this? Because you are a Yaro Starak and because your self-worth is high! If someone like us go out in the open and say these things, do you think somebody will hire us? The probability would be, yes, not impossible but not as much as if you are ok with a $2/hour job! Did you get my drift? Simply put, a $2 per hour job is not at all fair the way, John Reese thinks it is. If a regular mailman in the US earns a minimum of $7.50/hour. Would’nt an internet marketer still have the “cheap labor” he longs for with say $5/hour job? You still would, right? That’s $2.50/hour savings, no benefits, no insurance – nothing! That’s an all-in thing!
        And by the way, if I were you, don’t put your money on organizations when your project profits. Give it directly to your workers – as a form of benefit. They’d appreciate that more. And would you not be happy if you REALLY SEE where your donation/money or whatever went? If I am your worker, I would not mind a free membership in your Mastermind Group. :-)

        • Your Message

          Exactly what I was thinking! Give a man a fish, right? (feed him for a day). Give him/her the tools (knowledge/empowerment) to do their own fishing! (unless you’re rightfully afraid that if you did they would no longer serve greedy fucks like us). Tools such as the free membership mentioned here!.And absolutely, treat your overseas outsourced workers you claim are “family” to the massive bonuses and profit-sharing you’d give a family member (you actually respect and love). Give them what they deserve on the fortunes they make happen for you! Or die as spiritually toxic and bloated as your pocket books and bank accounts.

      • Your Message
        So great that you’re taking the high ground in contemplating deeply the effects of outsourcing. When I say John Reese’s offering, I was very intrigued (even though I’m not quite ready for it business-wise) but troubled also. So, I’ve conceived of a way to truly empower outsource workers and help them transition into excitement and skills for discovering a realizing their own dream businesses. I would love to share more about this if you are interested. I think the concept is deeply aligned with your amazingly humanistic, yet practical style of business.

      • Yaro, great post. I would love to get the chance to meet you in person same day and talk about this. My plans are somewhat similar to yours. I want to some day start or contribute to a non-profit organization that helps train and educate Filipinos to work online in order to better their own lives. My wife and I are already doing this to an extent, with her friends and family (she is Filipina).

        My perspective on this may be unique. I am an American who has lived in the Philippines for over a year, working for an outsourcing firm there. I met my wife there, and she was once an outsourced worker who now works with me in the US actually doing the hiring of workers in her home country.

        The way I look at is there are 3 major price points of wages to consider.
        1. Paying the the outsourced worker the same going rate as in your own country. If you did this, though, there would be no point in outsourcing, since you could just get the same work from someone in your own country, who is more familiar with your culture, language, easier to communicate with, etc. So this price level is the absolute max, but in most cases you would never come close to this.
        2. On the other end you could just pay the market wage in the country you are outsourcing to. Basically just try to get the cheapest someone is willing to accept for what you want done. This is a win-win situation since the provider is getting work at a rate they agree too, and you get a low cost solution. From my experience most people who outsource are actually overpaying if you were to consider what local jobs in that country are actually paying. I personally have met people who work for less than $1/hr. at local companies (not online). My wife worked for around that much during college. However, I think one thing people often overlook in this situation is that even though you are paying the market going wage (even a little more) for the country in question, that does not mean that you are giving them enough money to live anywhere near the lifestyle people in developed nations enjoy and in some cases maybe not even enough to meet what we may consider basic needs. They accept it though because its the best they can do and they may not know that they actually could have a better life.
        3. The third price level falls somewhere in between the other two. This is the price at where the worker can enjoy an equivalent lifestyle as their counterpart in developed nations, but at a still lower wage because cost of living is lower. You would still reap the benefits of cheaper labor, but the worker could for the most part be equal to someone in a developed nation. This would still be far cheaper than #1 but it would make the worker richer than probably 99% of their countrymen and still be saving you money as compared to hiring in your own country. For me this is the ideal situation.

        When I outsource, I start my workers at 2. I try to get the best price at first. Once the worker proves they are valuable to me, I slowly raise their rate over time. I haven’t gotten there yet, but my ultimate goal is to get as many of my workers as possible working at #3 as long as they still at least provide that much value to the business. I know I would be overpaying, but I’m okay with that.

        • By the way, when I mention “basic needs” above, I am talking about it from the perspective of a developed nation. This could be things like a warm shower, flushing toilets, decent access to health care. To many people in 3rd world countries these are luxuries. So the lower going wage in their country probably will cover what thy consider normal, but you may be surprised with what qualifies as normal for them. They just don’t know what they are missing out on. Its a difference of perspective. When my wife first saw my parents house in the US, a pretty average size house, she said something to the effect of “wow, they live in a mansion”

          • Chris – thank you for your two replies. I didn’t address the possibility of paying outsource workers a much larger than average wage in my article, which is something I did want to discuss, and you have covered it as well as I could.

            I agree with you – start them off at the entry level wage and raise it if they prove a quality worker.

            Invest your profits back into the country to help some of them become entrepreneurs as well.

            Invest back into the country to help raise the standards of what “basic needs” are to on par with what we have.

            To me, those are noble goals, and attainable if we as entrepreneurs just decide to spend some of our profits this way.

        • Great post Yaro. The people who are of the opinion that outsourcing is slave
          labor really need to think about this again.
          Australia is a relatively wealthy nation (although with the current political shenanigans some would argue that..lol) however, let me use Australia as an example.
          If I am here in Australia and our avg monthly wage is say 3k a month and someone from a XXX country whose monthly average wage is 30k a month (Remember just an example) then, If they pay me 6k a month for doing what I was doing before, how do you think I would feel knowing that the people who hire me are making 30k a mnth on average? Well, I suppose that is up to the individual however this is how I would feel. I would be doing damn cartwheels and jumping for joy, that’s how I would feel. Can you imagine how that way above average income would impact my family and my local economy?

          Some would say, that you are taking away jobs from your country to pay outsources or Outsourcing results in a flow of cash out of your country into another. Well if my business can not remain open in the first place then whats the point? I would rather outsource which achieves 2 things. 1. It provides another human being with an above average income and 2. It keeps my business open or even can launch a new one.

          If people want to then hire staff from there own country to balance things up a bit.. then great.
          Yaro is right.. It is all about Greed.
          But it all comes down to not the system, but our morals and values as a society.
          If you are prosperous, then use it for good.
          If I had a million dollars sitting on a table, it would sit there for all eternity before IT did anything bad. Money is just an extension of our values.

          One other little thought popped into my head, If you are of the school of thought that outsourcing is exploitation… then as Yaro most brilliantly pointed out.. what football team or sports team or sport do you follow?
          Do you enjoy watching it?
          Well, if you do.. why support them by watching it and have them getting paid Millions upon millions for it and yet our Nurses, teachers, carers,disabled etc.. etc.. do not get paid enough for what they do. But again, that is just an opinion.
          There is no right or wrong here.. just good and bad depending on which way you want to go, how you view others and what you want to give back to others.

      • Instead of sending money through an organization, why don’t you send the money to the individuals that worked for you ?

        They are the ones that did the great products. Since they are educated and intelligent people, they will probably put the money to good use for their families and friends. Maybe it will be just the amount they need to start their own business and prosper.

        It’s like Google and Microsoft giving stock options to their employees. They are rewarded for making the company better.

      • I think you should pay them more but really as a spiritual teacher you are getting close to the core of a deep issue. We have to decide if we want to really help people or just use them to help ourselves. Someone once said: “Man will prey on man until man prays for man” I think those were very wise words.

        I do feel it is exploitation to say on the one hand you make thousands but only pay anyone a few hundred a month for full time work.

        I think the golden rule applies as usual; if you were in that country how would you want to be treated? Put yourself in their shoes, see yourself as them.

        Many teachers had to face this dilemma. Check out “Peace Pilgrim” and “Dorthy Day.”

  • I deal with this issue daily and as I am a Virtual Assistant and am developing my own Virtual Assistant company.

    The way I see it is that it is a choice.

    If you hire me directly to do a job – I will do it, at a premium price.

    However, before accepting the offer if the option is available I will offer to find an offshore person who can do the same job for half or may less than what I would do it for.

    At the end of the day you are running a business and you need to do what is right for you and your business.

    I personally am not materialistic I don’t need the latest ‘things’. However I do love to have experiences and sometimes getting ahead means finding legal and viable options.

    Any income I or my business makes, at least 10% if not more, goes back into helping third world Entrepreneurs through Kiva.

    So yes I am making better profits by outsourcing offshore, but I still give back.

    I don’t believe it’s exploitation as people in those countries have just as much choice as we do in the prices they charge and are willing to accept.

    But I am in the Virtual Assistant industry – I know where to source local and offshore assistant no matter what country your in and I know how to make it work for the client.

    • Dear Yaro, I very much appreciate your willingness to address this complicated issue. I also admire the instinctive integrity that has obviously moved you to think so hard about this, and the intelligence that you’ve applied to it. Thanks, and good on you, mate!

      It’s with one of your respondents, not with you, that I have a serious quarrel. This is the outsourcer who seems proud to announce that they charge “premium price” while paying minimum price to offshore workers, but then asserts “I don’t believe it’s exploitation as people in those countries have just as much choice as we do in the prices they charge and are willing to accept.”

      This last statement is utterly false and could only be made by someone who has never lived the grim, often life-threatening daily reality of having to choose between $2 an hour and starvation.

      I was listening just yesterday to a report from Afghanistan where just last week (while these posts were being written) a 30-year old father hanged himself out of the soul-breaking anguish and shame of not being able to feed his young family. Seems he was a very silly man. He should have just exercised the same “choice” that we have and started charging premium price for his services. He should have just said “I’m not accepting less than this! Right?

      No, not right! In fact dead wrong!

      The moment this man (and the millions like him) “chooses” to put his prices up, the outsourcers instantaneously choose to flick him off like a speck of dust and employ the next $2-an-hour candidate. And when the outsourcers dump him for his cheaper competitors, where will this guy do to sell his newly “chosen” premium price services? In his own country, where life is so impoverished that $2 an hour is considered “good money”? Ha-ha!

      That’s not a choice!!!!

      The reality – the daily lived human reality – is that the level of choice we take for granted in our cash-flushed western economies is beyond the wildest dreams of the majority of humans living on this planet and probably will be all their lives. This is worthy of some heart-felt reflection and serious thinking about fairness and generosity when we venture into the ethically complex territory of outsourcing.

      Success, and our clamouring appetite for it, can be a blinding thing. We have come to consider success our God-given right. Maybe in an ideal world it is. But until the real world offers a level playing surface on which that Afghani father can meaningfully ask premium price and live to enjoy the prosperity that flows from it, I think we should regard success as a rare privilege.

      And I think a good way to start honouring this privilege is to outsource (yes, I advocate outsourcing!) with 2 questions in our mind, not just 1.

      Question 1 is: “Who is out there charging a low enough price for me to make the profit I want?”. This is the mandatory question. We have to ask it. It’s intrinsic to any business decision, There’s nothing intrinsically exploitative about this.

      But there’s an “optional” question 2: “How can I give my outsourced workers a genuine opportunity to enjoy the same level of success and wealth I am wanting for myself?”

      If we brought to this second question even a tenth of the energy and creativity that we bring on a daily basis to our own business plans and strategies, I think we’d be surprised at what’s possible, how much we can do to help, how much we can positively change – both at the micro and macro level – the lives of struggling people who need our support and compassion so badly,

      Thanks, Yaro, for taking an honest look at this issue. There is a “dark side” to the outsourcing strategy, the “wham, bam, thankyou ma’am” attitude being promoted so arrogantly right now by some of the internet outsourcing “gurus”. I appreciate your willingness to question and challenge it.

      • Michael – I am open to your feedback and actually welcome it.

        We live in a world there is a lot of devastation going on, however we also live in a world of opportunity.

        There are hundreds of stories if you choose to Google them on people coming from the countries of devastation, where they had nothing and turned their life around and made it better if not profitable.

        If one of my assistants that I work with offshore put their prices up, which they have, I would not drop them like a hot cake, because it is about a healthy balance between price and quality. I don’t see the point in changing services if I am already receiving a quality product.

        I also believe that you have made a point with Question 2
        “How can I give my outsourced workers a genuine opportunity to enjoy the same level of success and wealth I am wanting for myself?”

        How I run my business is mostly motivated by this, because at the end of the day who you surround yourself with is who you become.

        I am all about making a positive difference, my business will only grow as good and as fast as those I work with. If I am helping them grow and succeed the way the want to, in my experience it is returned back to you.

        My intention was not to be a ‘wham, bam, thank you ma’am’ arrogance that you perceived.

        I just believe we all have a choice. Those choices might be limited by knowledge, and circumstances. However it is still a choice.

        • Dear Katey,

          Thankyou for being so receptive to my comments and so clear in your reply. I’m left thinking that we bioth agree on far more than we disagree on. I respect and appreciate the foundation on which your business is built: “about making a positive difference”. Fantastic! I hope you and the many people you help will thrive

          I also want you to know that I did not have you in mind when I talked about the “wham, bam, thankyou ma’am”. That was a more general closing remark about the people brandishing the “$2 an hour” slogan to promote their outsourcing strategies. I’m sure, in the light of your reply, that slogans like that are not motivated by the same spirit that motivates you. I like yours a lot!!!

          My best wishes to you.
          Michael

        • Katey, you just don’t want to get it. Stop preying on the suffering or ‘devastation’ you you say you are aware of. Don’t take a job to sub-contract it at an inhuman fee to others who cannot afford to argue with you.
          Sad, to see a woman dog-set on keeping this going on.

          • One thing you lost in your rant was that these workers do have a choice. I supposed you don’t buy from Wal-Mart and pay only premium wages to local employees?

  • Personally I have no problem outsourcing. I think it really comes down to paying people an above average wage than they already are being paid in their own economic system. Although with the advance of our modern society this was bound to become a HUGE point of contention as many of us internet marketers began expanding our businesses using foreign workers.

  • How can someone refer outsourcing as slave trade when they would probably be getting paid the same amount to work in their own country? I don’t see a problem with outsourcing. Haven’t gotten to the point where I am outsourcing yet, but I foresee some sort of outsourcing in the future.

    Thanks for sharing, Yaro!

    • @Jarrod – actually the issue is not outsourcing per se. It’s the pay that outsourced workers get. $2/hour is too small a pay, if I may say. Considering that the people who outsourced do not pay benefits the way most companies do.

    • Claims about low hourly wages being unethical almost always assume that things overseas are the same or similar your home country. No, they are different, very different in most cases.

      I am happy to pay between $320 and $400USD a month to my VA’s in the Philippines and they are happy to work for me. It is a mutually beneficial arrangement that was freely entered into by both parties. No one is being exploited.

      Would someone do the same work for the same pay here in the US? Of course not, nor would I expect them to. $320 is an average WEEKLY wage here, but in the Philippines $320 is an excellent MONTHLY wage.

      Yes, my business benefits from their work and low wage cost. I make a profit. They have jobs. Everybody wins.

      • Hi. Please can you help? Where can I find someone in the Philipenes to outsource to? I hear a lot about about it and I watched the ‘Outsource Force’ and never wrote down the websites! Can you help or recommend where to start?

        • You can find out all about this at replacemyself.com, John Jonas’ site that helps people connect with Phillipine workers. I’ve been a member of it for several months and he has a whole system that provides training to people and access to job boards.

  • Yaro, you’re right to question whether or not outsourcing is ethical. It’s a very tricky question because we have tho apply our own sensibilities to the question.

    Of Course everyone should be paid a living, fair wage for their work; but that’s different in every country, and even in different parts of their country.

    Who decides what is fair or right in some circumstances? Does every one need a flat screen TV? Do they even have TV? Video games? How about a car in a small village with out a gas station? Who are we to say they need these things just because we take them for granted?

    I’m reminded of a documentary where some “westerners” encountered a tribe of stone-age people (I think in South America) and actually gave the leader a lighter!!!! Those people were, arguably, happier without the influence of these people who “knew what was best for them”.

    So, yes, you should pay the prevailing wage for the area and then some; but be careful about doing “good” for the people you deal with. Your standards could be to their detriment!

  • This is silly. The amount of outsourcing done by website owners to the Philippines or India is a mere drop in the ocean compared to outsourcing of many things done in China. Next time you buy something made in China (and many things are these days), think how much the workers are paid there. Does it matter if the outsourcing is done by a large multinational company or an indivudual? And if it is done by a multinational company does that make it more legitimate or is it just that it’s harder to critise a large multinational company, because they have a team of PR people and lawyers when anyone questions this aspect?
    If you feel strongly about labour rates in overseas countries then make sure you give up most of your electronic goods and other stuff made in China.

    • Excellent Point Jeff.
      Here is another point.
      Person A, goes and gets himself a job and is quite happy to do this for the rest of his life. His main priority in life is to pay off his home and provide for his family in every way. This is very honorable and he should be a proud man.
      Person B, owns a graphics business and starts to outsource to India or Philippines… he pays them well for a job well done and the good profit he makes goes into paying off his home and provide for his family in every way. Except now he can make even more money than the guy who has a job and he can donate money or build another house which puts someone in a job or start up a local charity or he may even hire locally now… all of this he could not do before working 9 to 5 ( unless your boss pays you very well). He is now spending money in HIS own country which provides jobs to people.
      There are so many for’s and against with this issue and it all comes down to one thing. Are you going to use this opportunity to improve your life AND others? or are you going to improve your own life and not worry about anyone else.
      Money has no morals, PEOPLE do.

  • I recently have hired a part time Filipino worker so I wanted to comment to say that I obviously support the practice of outsourcing. Before I did this I spoke to my Filipino sister-in-law about it and not only did she think it was a great idea but she helped me find some writers.

    I also want to say that, as a new blogger, I don’t have the money to hire within the U.S. If I didn’t outsource to the Philippines then I would have to do all the work myself. So in my case the issue of Nationality really isn’t an issue.

    And, at my day job I didn’t get a raise last year and this year it is a company-wide 2% increase. I know that my efforts result in the company making over 10 times my salary but no one is concerned about paying me based on the gain they get from me. Is this wrong?

    If you are asking for a ridiculous amount of work and paying low on say Filipino standards then that is one thing. If you are paying a Filipino very well on their standards, they are happy with their pay and very happy to be working with you, is there really a problem?

  • Thanks for writing this article Yaro. I hire two women in Brisbane on a contract or “as needed” basis which is perfect for them because they’re both mums that spend a lot of time at home looking after their children and could do with the extra cash.

    I was considering hiring a Philippino with a friend later on the year but did have a icky feeling about it because there was something that didn’t sit quite right with me. I guess everything you mentioned in the article explains why.

    I also love how you talk about having our “needs met”. It’s so true. Sure having a comfortable lifestyle will help raise a level of happiness, but spending a lifetime finding a way to obtain as much money as possible is not going to bring happiness. When I think about what brings me joy in my life it’s the stuff that doesn’t cost a lot of money or even any at all – friendships, nature, lovers, food, music, sunshine and of course love.

    So I’m going to flip around my way of approaching this outsourcing situation from “how much money can I make” to “how much happiness can I bring to my life and to those around me”.

    Thanks for the insight!

  • I’m sorry I haven’t read the whole post but I wanted to say. I’m not going to run a business for the benefit of my country, it is for my own benefit. I’m sorry if that sounds selfish but it is the way I feel, I find it ludicrous that I should employ people in the country where I live, I’m sorry, I’m not a nationalist and I didn’t choose to be born here. Besides, I intend to live in those countries I employ from. Even so there are many local companies in the PH and elsewhere taking advantage in exactly the same way.

    I do agree with fair pay for fair work but I’ve not seen anyone calculate what this is based of PPP (purchasing power parity) on the countries we employ from, which is IMO the fair way to calculate it

  • I don’t see how anyone could say it is exploiting the worker. Fact is that they willingly do work for less. No one holds a gun to their head and makes them do it. If they don’t feel they are fairly compensated all they need do is offer their services at whatever price they want to whomever they want. It’s a global market now days.

    I had a guy from the Philippines who did some graphic work for me. Really cheap. Next time I went back it was a little more, and more after that. At this point it’s the same for me to hire him as for me to hire someone in the US to do the work. Like any good business person he built his reputation for good work and raised his prices. The fact that he’s in the Philippines was/is incidental. What isn’t incidental is that he does damn good work and people pay him what he says he is worth.

    • @Durant, you hit it on the head! They are willing to take the job, they are smart people, they aren’t dumb! It’s simple really… Its capitalism at work. Most people who don’t understand capitalism will put their feelings into it, which is why they think its so wrong to pay another person a lower value.

  • How many of those western people that complain about your “exploitation” buy products made in China? Why do they think rich countries have outsourced all their manufacturing overseas?

    It’s hypocritical to blast you if they themselves choose to support these systems in their daily purchases.

    While there is a case to be made against outsourcing, I don’t you’re going to get a sensible viewpoint from people like that. You are best to look into the facts yourself, and make up your own mind.

  • Oh, and resilience is valid reason for what you call the “nationalistic” argument.

    If you outsource all your expertise in a particular area (like the US is doing with food production and manufacturing), then you had better pray that nothing changes. If trade is interrupted by war, weather, politics, industrial relations, rising fuel prices, or whatever, you will have to be able to make do without those products.

    There is a case to be made in maintaining some minimal level of local expertise and capability so that a nation can be resilient to adverse external events, at least to some degree.

  • Outsourcing is not exploitation as long as the people you are outsourcing to are paid the same as they would be by a local employer. They probably earn more in most cases, don’t they? And if you are employing that person directly as a contractor it is like their own business. Surely employing in your own country and paying minimum wage is exploitation

  • Firstly congratulations Yaro on a very courageous and well thought out discussion. As the years go by it seems EJ has matured from tactical to strategic and in recent times deeper into philosophical territory. Beneath this I sense your own personal growth coming through in spades.

    The inequity in Outsourcing has troubled me, which perhaps goes some way to explaining my checkered success with it. Since your business is largely product based I imagine there is minimal back lash from your customers if they are aware the your product has an outsourced labour component.

    With my income being largely service based an additional dilemma for me has been disclosure.

    If a overseas VA helps me with the admin of my business am I obliged to discolse?

    If a overseas graphic designer does one component of a project for my client should I disclose?

    If I create a product that helps small businesses should I disclose that graphic design was done in Brazil and sub-editing was done in the Phillipines?

    Would any of the Australian businesses I have spent money with in the last four years not have taken my money if they knew it came from US, UK, or other overseas countries? Probably not.

    Like you said a heck of a lot of gray and it comes down to what you know is right in your own heart. What sits comfortably in your own conscience.

  • $2 an hour, well I guess that is a dollar more than Nike pays its workers in Vietnam.
    I have been outsourcing for a long time and not just to the Philippines. I have had people working for me from the USA, India, South Africa and Australia. I generally have small jobs that need doing as opposed to wanting a full time worker.

    I am such a fan of outsourcing that I have even outsorced myself and spend my life travelling and living in cheaper countries (Greetings from Thailand :-)

    I do feel $2 an hour is low though, there is a morality thing going on in my head. I generally pay around $3 an hour, I’m happy, I think that the people who work for me are happy. I suppose that I could pay them more, but why pay someone the same wage as a doctor?

    PS Does this mean that all your posts about outsourcing are coming to an end? They were becoming very repetitive. I understanding you promoting something, but feel that you over promoted this one to death!

  • What’s the problem? The Filopinos have every opportunity to create wealth from the internet whether they are sub-contractors or internet gurus. I don’t see any problem. Like the fellow, Michael from OutsourceToolBox said, we all reach a mutually beneficial agreement.

  • Very thought-provoking stuff here, Yaro. Right now, I can’t even afford the $300/month outsourced laborer. Soon though, I do plan on hiring one or two to help me grow my business. My big plan, however, is that once my business grows, those that helped me make it grow will also benefit. Western companies often give bonuses to top-performing employees. Why can’t we, as internet marketers, do the same to outsourced workers?

    The problem I have with the $2/hour outsourcing is when your business grows and you add more cheap labor without doing anything to help those who made the growth possible. That is exploitation. Those employees that did a good job for you will not leave you because they can’t. So you will keep riding them at bottom-rate. Nope, that doesn’t work for me. Help those who help you. If you grow, your teammates grow. That’s how we can improve the global economy.

    • @Matt Maresca, so what you are suggesting is that every worker of a company should reap the rewards? That doesn’t make sense, sorry, but its the real world and capitalism is the name of the game. By your analogy and thinking a cashier that started working at Walmart since its birth, should somehow get an automatic trip down millionaire isle, simply because they contributed to the Walmart’s massive wealth.

  • This is the first time in my entire life that I am commenting on a blog post. I don’t think it’s a high leverage activity for me, but I just feel the need to do it this once because of the seriousness and importance of this article.

    Another possible consequence that was untouched in the article.

    It’s already the case that outsourced jobs in countries like the Philippines pay more than local jobs. After browsing through resumes from the Philippines I saw many people who studied to be a Nurses, but are now looking for better paying work as article writers and VAs.

    On the micro level this seems great, but on the macro level, if the trend of outsourcing continues to grow( I fully expect it will), we are affecting the distribution of human resources and work within the country. It’s probably impossible to predict the actual effects positive, or negative, but be aware that there are consequences.

    You outsource someone to be your VA and because of that you help them earn a good salary, feed their family and have a better life. GOOD. Because of that you potentially take away a teacher from a school, or reduce the quality of care in a hospital…. not so good.

    My stand is not against outsourcing. I think it’s a great opportunity. But do it to create good. Take the time to analyze your motives, and to think of how you might be affecting others. In your plan for success, make sure to devise specific actions to negative fallouts and increase positive.

    Take steps to leave a positive mark where you are outsourcing. Like Yaro said, donating back a portion of your profits to local causes for example.

    Cheers and happy living :)

  • Second lifetime blog comment!

    Yaro, I have a counter proposition to you “don’t be greedy” solution.

    Don’t be greedy! Be selfish instead.

    I’m a selfish selfish man. Pretty much everything I do is aimed at making me feel good! Nothing else matters to me really. It’s the only true thing.

    I spend time with my daughter because I feel good when she smiles and I think she’s smiling because of me.

    I am nice to my friends because it makes me feel good and I know that they will be nice to me in return.. making me feel good.

    I will be donating back to communities where I will outsource, because it will make me feel good about myself. Knowing that if I am used as a model by others, and others emulate my actions, that the world will be a better place ( based on my standards ) makes me feel good. Much better than having a few bits of “money” in a database somewhere. I want to feel good about myself. I want believe I am making a positive difference in peoples lives( Cuz it makes me feel good ).

    Learning to focus less on what you can have and more on what you can feel ( good in this case ), is pretty powerful I think. Having stuff can be great, but only when used properly to make you feel good.

    I think that’s all I have to say about that.
    Cheers,
    Yann

  • Hi Yaro, I really like your honesty in this post, it’s nice to see someone who disagrees with paying outsourcing staff a tiny amount whilst you rake in massive profits, I am currently trying to find workers to outsource to and I shall keep your points in mind and make sure I do not take advantage of anyone, and will be sure to increase their salary as my own grows, Sally :)

  • Hi Yaro,

    One of the points you raised was that increased outsourcing will increase the cost to outsource to that country, due to supply and demand.

    This happened in India. Several years ago you could outsource there for $2 per hour. But I recently got a quote for web design from an Indian company, and whilst they are still a lot cheaper than an equivalent UK or US company, it’s certainly not in the $2 per hour range.

    It was about half the cost, from which you can still make a profit of course. But what you get in India now is a good reputation for quality work. People generally trust in the quality. I don’t think the Philippines is quite at that stage yet, but they will be soon, and once they are the prices and therefore wages will go up.

    Stuart

  • This is nonsense to me.

    All multinational companies have been outsourcing their production capacity in low cost personel countries, for years. Now that the technology enables outsourcing for individuals/SOHO, this should be considered different ¿? 15 years ago it was simple, there were no outsourcing market for Internet based services. Now there is a market. Win-Win

    If Philipinos are so great (i have no experience with them), they should increase their prices. Offer/Demand. I would never contract someone 2US$/Hour not because i feel this is Slavery, because i think the quality of the job will be poor (do you remeber marketing basis – buyers’ profile), and I would need too much hours to coordinate/correct stuff.

    What is really relevant to me, is that both parties DO PAY THE TAXES for this activity to their respective countries. Countries are in charge of take care of citizen.

    We are living a global crisis, and nationalism fears are up. Normal behaviour again. If you feel like contracting locally offers benefits for your business, then market it this way. Food products often comes with such a National label together with their brand. Again this is marketing

    If you go one step further, if you set-up a business, fully automated, with no people behind, you are the the worst guy EVER. No local employee, no outsourcer, you’re evil, you’re not even paying nobody…

  • Nice post, super controvertial sure to create a buzz like it already has!!

    Me personally, I’m an economist. I look at everything in supply and demand. Outsourcing is no differernt except your working within a global economy.

    The global supply of developers is at a level where the price point is that a certain standard of living is obtained for your skill set.

    The supply for ‘the best golfer in the world’ is 1. Thus his price point is $100m. The supply for teachers and nurses is many, thus lower price point.

    And the fact that you should be paid relative to the rewards reaped is a load of crap. Anyone working in a bank can vouch for this. Yes they may make $100k per yr but the bank profits in the billions.

    If that were true, a cleaner in a bank should earn $1m per year, and is drastically underpaid while the apprentice of a plumber is paid correctly beacuse the profits of a plumber are lower.

    If u start paying Filipeonoa $50k per year – why would u hire them? Y wouldn’t u hire someone locally. The fact is, outsourcing exists because of a discrepency in supply and demand. You can’t mess wit supply and demand!

  • Hello Yaro,

    Thanks for this thoughtful article. It’s nice to know that someone cares to think about this issue before blindly subscribing to it.

    Coming from the Philippines and having worked for outsourcing firms for most of my career, my view on this is somewhat similar to the others’ comments: if Filipinos received salaries at par with yours, why even hire them?

    From my point of view (not to say that I speak for my countrymen) outsourcing has been a boon that allowed us to enjoy salaries that allow us to live comfortably in our country — “in our country” being the operative term. Had it not been for these outsourcing jobs, we would be forced to emigrate to other countries (yes, Australia included, as many have actually done) so that we would earn wages corresponding to our skill — our local economy simply isn’t big and dynamic enough to sustain the kind of money needed for what we consider a decent lifestyle. Even as I speak however, many of my countrymen seek IT jobs outside the country — Singapore, specifically — to enjoy wages they deem fit for their level of skill.

    The reason outsourcing becomes important is if and when we don’t want to go abroad. Working overseas tends to separate families, with children growing in the care of their grandparents while their parents work elsewhere. With outsourcing, decent wages mean that we can earn USD10,000 a year which allows a single person to live decently in a small rented condo, and up to USD30,000 a year — which allows for a nice apartment, a car and good schooling for a small family of 4, all while staying *in* Manila.

    Of course all of these are within the parameters/assumption of a 40-45 hour workweek. Anything beyond that, in my book, will be exploitation, and four decades worth of project management anecdotes warns you about the evils brought about by burnt out, unhappy workers. Also, not everything of value can be monetized, and valuable experience in IT or other fields can sometimes only be found via outsourcing jobs.

    It’s all about balance, and it’s nice to find out that there are foreign employers for us Filipinos who do seek that balance and care about our rights.

  • Why all the hand wringing over this?

    A fair exchange between willing parties where there is no intent of exploitation and a fair bargain is struck seems fair enough to me.

    I outsource lots of things and my approach is to match the most appropriate resource for the task at hand. Wherever it is best done, is where it gets done. In-house, outsource, local, wherever; surely the establishment of any arbitrary demarcation line is artifice.

    Anyone or any business can and should seek to deploy the right resources for the project at hand. If that involves engaging a high end designer in NY, a developer in Romania, a content writer from the Philippines, or a dude from my hood, so be it.

    I see no ethical issue present with outsourcing, if and only if, it is done fairly with the right intent, and the bargain so struck, sits well with the agents involved.

    This assumes of course that the agents are informed and capable of understanding the arrangements.

    Ultimately, equity must be present for anything to be sustainable, including outsourcing.

    However, as someone who has a full time person employed in the Philippines, PH friends and family connections here in Australia, I confess I felt very uneasy with the recent Outsource Force launch, including the torrent of supporting affiliates.

    I kind of hoped they didn’t see it in the PH but not for the reason you might be thinking.

    I hope they don’t think everyone involved in IM/ecommerce likes to pose in front of their mansions and tool around in racing cars whilst suggesting we’ll all be rich if we’d just get a fleet of these ‘cheap as chips’ $2/hr PH workers.

    Puke worthy images of conspicuous consumption, supposedly attractive symbols of success, seemingly built, at least in part through the efforts of $2/hr workers in the PH, are sure to provoke objections and some gnashing of teeth as we have seen this past week.

    With that sort of objectionable messaging, I’m not surprised people are uncomfortable with the whole PH outsourcing idea, which is a shame, as I believe much good can be gained there through a mutually beneficial exchange.

    In conclusion, I say that it’s the unseemly promotion of $2/hour outsourcing that’s the issue causing the disquiet, and justifiably so.

  • If you or someone like you gets the job it’s employment, when someone not like you gets the job its exploitation.
    The exploitation argument is a move backward toward racism and chauvinism. If you say that people from other countries should receive the same wage as in the entrepreneurs host country or none at all the answer will clearly be none at all. The entrepreneur is worse off, the potential employee who didn’t get the job is worse off, and most importantly of all the consumer who doesn’t get the best service for the best price is worse off.

    • You’re right, Tyler. As long as all concerned agree to the contract, all should be fine. Do-gooders tend to do more harm than good because they gauge everything from their own perspective.

  • Hi Yaro,

    I really like your stand in this issue of outsourcing and exploitation. As an online Filipino freelancer, I am glad that someone is brave enough to take up such a taboo topic and write an article about it.

    Yes, I am a Filipino online freelancer and my employers are Americans. I am one of those people in third world countries people in first world countries outsource to. I have been in the business for two years now and honestly, I am devastated with the view a lot of outsourcers have taken on this topic lately. Luckily, my employers feel otherwise.

    When I started in online work two years ago, the minimum rate one can get is $2/hr. That rate is given to someone who just started out with freelancing. You can expect that these people have a very limited knowledge in online work. Simply put, the $2/hr rate is given to data entry – simple copy and paste work. Nowadays, people trying to outsource their work are offering $2/hr for Filipinos to do SEO, writing, even web design and programming! If you ask for a higher rate, they think you are EXPENSIVE.

    What started the trend of paying $2/hr for online work, in my opinion, are these big name internet marketers who suggested that that rate is the standard. And since these people are considered the authority on the topic, naturally their subscribers think they are right without even verifying if what they’re saying is the norm or the exception. And because this is what is being said in these outsourcing courses, people taking the course will take what is being said as gospel truth. The saddest part of this story is that Filipino online workers agree to these rates.

    Do they agree because they are happy with the wage they’re getting? It may seem so. But truth be told, $300/month is barely a livable wage in our country, especially with the dollar-peso exchange rate going down. When I started 2 years ago, $1=P48.00. Now, $1=P43.00. But, Filipinos accept this rate anyway. Why you ask? Because they simply have no choice. Nobody will hire them if they ask for a higher rate.

    It has been said, and even you mentioned it in your article, that $300/month is above the minimum wage in our country. True. But it also has to be mentioned that the minimum wage is given to blue-collar workers in the Philippines. These online workers we are talking about are college-educated individuals and if hired for a physical job, they will be white-collar workers whose wages will be higher than that of the minimum. Plus, you have to take into consideration the fact that online workers have to pay for their internet connection, buy their own desktops/laptops, in order to perform online work.

    So why do Filipinos accept $300/month without batting an eyelash? The absence of a choice has been mentioned above. Another reason is that by nature, Filipinos are optimistic people. They take the pay in the hopes that when they show their employers what they can do, they will be offered a higher wage. There are happy endings, but there are also a lot of giving ups and moving ons, and even more “Just suck it up and plaster a smile on your face. Don’t complain, at least you have a job!” going on. Another reason a Filipino will take that wage is that they will compensate it by getting another online work on the side. They will work full-time for you and work full-time for someone else. The effect? They need to work longer hours than necessary. They wake up very early and sleep very late just to cater to all their clients. Inevitably, some of their output is compromised.

    I work for an outsourcing site and my employers are advocates of paying online freelancers a fair wage. They even asked me to do research and write an article on our site’s blog about the right rate to give a Filipino online worker. Here’s a link to my article: http://easyoutsource.com/blog/what-is-the-reasonable-rate-to-give-a-filipino-freelancer/. If you notice, the only online work where I recommend a wage lower than $500/month is data entry. Other than that, $500/month and above is the reasonable rate. I didn’t take these figures out of thin air, I did considerable research in order to arrive to these rates.

    Anyways, I apologize for my very long comment. I just hope that a lot of people get to read your article and seriously think twice about offering $300/month and lower when hiring online workers. Thank you.

    Best regards,
    Honey

    • Honey,

      I loved this post in real wages. Thank you for writing it. I plan to try this site to find workers in the future, too. Great job!

      -Erica

    • I couldn’t agree more with this comment. Very well said.

      What Yaro actually said was, $300 is ABOVE AVERAGE monthly salary in Thailand, or Romania, the Philippines, or India, which is definitely far from the truth in the Philippines. It maybe above the minimum wage, but not above the average. $300 is actually a low level income and is not enough to support a family of 3-4 members.

    • Honey, thank you very much for spitting that out. I have been a VA for 2 years now, and the long hours is really taking a toll me– really. I started up as a VA for an internet marketer at $2/hr. I endured extremely long hours not to mention 2 book publications and a number of ebook under my name. After a year, I tried to quit because I felt exploited and got a .50 raise because of that. The result? I quit again but this time, I made sure I will not be coaxed again.

      The good news??? I got myself another employer who I sidelined before as an SEO writer. I am now earning $400 plus perks. I know I should learn not to settle as Filipinos, we are so good at settling and extremely so bad with negotiations. :( We do have a choice. We have a choice between settling for 2/hr or negotiating for better rates.

    • Honey, I really appreciated reading this. It confirms my suspicions that $2/hour is nowhere near a ‘fair rate’ for the work expected. I will do what I can to encourage people to contact the organisation you work for when outsourcing.

  • There’s absolutely nothing wrong with outsourcing overseas. People can complain all they want about exploitation, but without actual research to back up those claims, it reeks of ignorance on their part.

    People in countries like the Philippines have a lower average standard of living (in terms of money) so if you’re paying them fair wages for their work, you’re doing absolutely nothing wrong. You’re providing someone with a means of earning an income through honest work. The only difference is you’ve found a method that allows you to use their resources at a lesser rate.

    The quality of their work is the same, it’s just got a different price tag. Big business has been doing this for years – making products in China and selling them at American consumer value.

  • My comment above has a risk of being misunderstood. I am all for outsourcing. As I mentioned, I am an online worker myself. It’s the thought of employers offering very low wages to online workers just because someone told them that its the norm and its ok, that gets to me. Offer your workers a reasonable rate and you will surely have a loyal, hardworking contractor that will work exclusively for you and deliver incredible output.

  • I love it. Stuff like this brings up everybody’s belief about money. Most of it which is social mass media *****. Magic. Money is nothing more than an expression of your value and how easily you can be replaced. A dollar is still a dollar. If you don’t like how that dollar came about or what it paid for, that is your call. Not the dollar’s.

  • Have alot of bad exp. with outsourcing… not conform specs and very cheap labor become very expensive software.

  • Dude, you need to get out of my brain. I was literally JUST thinking about this. Thanks for tackling this issue.

  • Living in the 3rd world country, your essay is the product of an over-intellectualized padded environment detached from the cold reality of life.

    We all live, fight, fuck and die.

    Do your best, do well and try not to think so much
    -G

  • No problem what so ever.If you look at it from a different angle, most of my employees are very happy to make a good salary working online. They can pay their livelihood and have some savings. The % of unemployed is very high, lets face it … helping a family in a country far from here is not exploitation but doing one a favor.

  • Nice and well developed article Yaro. Global market allows today for a sigle individual or a small company to do what was just possible for large corporates years ago. As long as you are not imposing a price but simply paying what asked in a market where labour cost is lower I think it’s fair: You are giving those people a job and an income that probably they could not make locally.

  • Great piece Yaro… as someone who outsources overseas as well, I often struggle with that little niggling feeling you have as well. But as an entrepreneur trying to make a better life for my family, right now outsourcing over seas just makes sense for me fiscally.

    Does that mean I never hire someone in the U.S.? Of course not. But there are some projects that I can outsource comfortably here and some that I can outsource more comfortably there. In the end it boils down to what works best for my business.

    But I certainly like your idea of giving back in someway, so I’ll definitely be looking into doing that on future projects.

    Warmest.
    C

  • Yaro,
    Your statement that “outsourcing results in a flow of cash out of your country into another” isn’t true. Think about it: if your website and your internet activities earn a positive return (meaning the incremental income from projects done by your team of outsourced help exceeds the incremental costs of your team), then you are actually attracting cash and wealth to your country. Don’t use zero sum thinking! The incremental income benefits everybody, including the economy in Australia.

    Dan
    Casual Kitchen

  • Like a lot of situations, this is not black and white…and it should be brought up and talked about (rather than immediately assumed to be a good thing). Thank you for being the one to bring it up.

    My hat’s off to you for using your platform to do more than just rake in dollars.

  • Hi Yaro and Readers,

    #1
    I think those here who think its slave labour, do not understand it. I talk to my outsource employee on exactly this as it is important to understand and support your team. As well have interviewed hundreds in the Philippines.

    I learn that often its not about money, its about finding a job that pays. For many jobs are a scarcity.

    #2
    Most people dont hire to put money in there pocket only, thats short sighted, very. You would do it to grow your business and hire more people local and outsourced. However when you start, affording a outsource employee not cheap.

    If you make $80,000 a year which is a good salary and you had to hire someone local and its costed you $30,000 compared to $3600. You would choose the latter as its a reduced risk when giving up a chunk of your profits

    #3
    People think its making money of there sweat. This is a massive misconception, since you are not taking into considering that 99 out of 100 people in first world countries will lose money on there online ventures. and the 1 thats left will work for less then a outsource salary in the first to get to the point of making money from outsourcing.

    #4
    Relationships, treating people with respect and like they are your family. This is a MUST in outsourcing. I agree with you completely that you need to give back and take care of them. Example we donated $40 for each employee last year when they had the earth quakes. Ask how there family is and honestly $40 goes a very long way there, but is not much for people here.

    #5
    I was in India last year and like you said, cost of outsourcing is going up and up. However more people are throwing money to India. They are taking this money now and instead of just working in call centers, they are building the infrastructure to other things (refer to The World Is Flat as this is a huge topic).

    Treat your team like your family.

    Wow, that was a lot…I could go on :)

    Cheers,
    Mukul

  • PLEASE YOUR INFORMATION SEND IN SPANISH….REPEAT IN SPANISH….REPEAT IN SPANISH,,,,,SPANISH SPANISH SPANISH IN THE WORLD THERE IS MILLIONS AND MILLIONS AND MILLIONS DE SPANISH PEOPLE CHINGADO !!!!!!!!!!! Bye

  • I see no problem with outsourcing.

    I have a need. Somebody in the Philippines (or elsewhere) is willing to fulfill that need at a set price. That price happens to be a better wage than anybody locally would be willing to pay them, they have the status of having a good job, and I award bonuses for work well done.

    My business grows as a result of their labor. This is no different than local employers. If I hired somebody locally, I would spend a lot more money and would probably not be paying the person more than they could make elsewhere locally. My business grows, but nobody states that I need to start paying the local person more as a result of my business growing past the normal raises. If I grow from a $50k to $250k to multi-million dollar company, I’m not going to pay a customer service rep $300k to answer a phone.

    This is a win-win situation. The outsourced worker has a job and is paid well for his standard of living and local economy. Money flows from a nation with money to one without, as the local worker pays taxes directly to the government and indirectly through distributing money in the local economy.

    The business owner gets more work done than they could working alone or being forced to hire locally. The business grows. More money is raised locally and paid to the local government in taxes. The business owner’s standard of living increases, which will probably lead to more consumptive spending, also flowing money into the local economy and government.

    If everybody’s standard of living improves as a result of outsourcing, and everybody is happy with the arrangement, then where is the problem?

    Obviously, if I was exploiting somebody and paying a low-standard of living wage or was asking for somebody to do work that demeaned them or led to health problems or forced somebody to overwork, then I’d be exploiting them. However, that’s not the issue at question here.

    On a personal level, I put 5% of my gross income towards charitable causes in my local area at a minimum every year. Once I have more working capital I’d like to increase that to 10%. I could certainly see the value in donating to the countries I might outsource to as well, but there’s plenty of need and causes I believe in locally and I’d rather put the money where I can see it doing the most good.

    Hopefully my charitable philosophies are evident to my employees as well and they can also donate their spare time and money in their own communities, but that’s up to them.

    • Your Message Hi Yaro I think its a good idea that you donate to charity as you continue to grow financially someonelse is being blessed by your talent and you are able to teach others how to grow their business so that they can do so if that is their desire. Ro

  • I don’t blame you for writing about this Yaro. I imagine some people have had a go at you or others close to you for outsourcing to the Philippines. What those people need to remember is we are helping real people with families make a better life for themselves by giving them work or extra work. That’s the big picture here. If everyone stopped doing it then what would happen? How many banks do you see these days using Indian call centres as a way of saving money? I don’t know about you guys but every time I call the bank it’s an Indian and I have no objection to it. Everybody needs money to survive and how it’s shared around should not offend people. Food for thought and just to end. Yaro you sent me a link to an interview you did with a certain guru who gave away quite a few decent tips he uses and one of them was outsourcing to the Philippines. I used his tip and found a great guy there and he’s done some really great articles for me and helped my website climb the ranks and in return I’ve helped him and his family achieve a better income. It was his daughter’s birthday recently and he thanked me for the extra work I’d given him because he was able to throw a nice party for his daughter. That’s the big picture here guys and nothing else.

  • I believe that you should support the people that support you. How many people in the country that you outsource to are going to buy your services? I’m guessing few to none.

  • Your Message Hi Yaro I think that paying someone 2 Dlrs and hour is exploytation
    of the human race. If you want quality you will have to pay for it.
    Quantity doesn’t equal Quality. If you feel that that is the way to go due to the economic system today you may need to evaluatate again as quantity will not last
    quality will last as the say we get what we pay for. Why not check to see if you have someone who can give you the quality as well be able to multitask were you still have a good quality product and you also a able to supply the needs of a family who just wants to be able to survive in todays world. If you are a spiritual person seek God first as ask for guidance as to what and where you should go with this matter whereas everyone can be a winner PS your info in very good I am learning a lot from your wisdom in learning how to use the internet for good of others and to create a residual income for the future. All the best Ro

  • Ana

    Hi Yaro,

    Thank you for your article. I think this will be a good opportunity to voice out my frustration to some employers. $300 is not a fair wage for a full time work in the Philippines. John Jonas is not being fair to us Filipino Freelancers.

    If you will make the computation, $300 x 43 = 12,900. Less our monthly office expenses. Internet connection 2,000, Electricity 1,000, Office supplies 500, Miscellaneous for times when we have to work outside on a coffee shop 500. That’s 4,000. What is left of our salary? 8,900. Oh and before I forget, we also get charged for the paypal fees, roughly around P250.

    The point here is, John Jonas of Replace Myself and others are being unfair by making general statements that $300 is a big compensation for Filipinos. It simply is not true.

  • Interesting perspective, Yaro. As an newbie Internet marketer and blogger, I am seeking to find a way to balance my need for good and cost-effective business relationships and services, with the need to not exploit persons in a developing country. This is an issue that we are all going to need to address, and you are correct that the issue here is really about GREED. I know that I have so much more than many in these still-developing countries, and our current economic situation in the United States is a reminder as to how GREED can undermine and destroy the lives of many innocent people.

  • Hi, Yaro, thanks for this very complete article. It helped me get clear on the issue that was lurcing around in my conscience.

    A question I have is this: How come that on some websites there are Phlipinien experts on everything important in Internet Marketing (IM), some even trained by Internet Marketers offering to work for 300 bugs instead of doing IM business for themselves?

    • That’s a very good question Demian, and I expect it comes down to personality types, limiting beliefs and access to resources. Some people need cash today and don’t have the resources to start their own company, hence they need work and cash flow now so are willing to help grow another person’s business. Some want experience working for others before feeling that they can go out there and do it themselves. Some are just plain scared.

      Given enough time, education and effort, and a desire to be an entrepreneur, and I believe anyone can do it.

      • Yaro,
        You hit the nail on the head with this reply. The truth is that rent has to be paid while building a website, and depending on what tools you choose, some $$. Those that are learning/studying until they have the extra $$ to invest are doing what they can, and should be applauded for that instead of waiting everything to be perfect. Cuz no one gets anything done if they wait for that!

  • Uma

    Yaro,

    I love what you say in this article…if you can give back to the country you outsource from, that would be making the extra money work for everyone. I’m from India, living in the US for the past 2 years. I have seen how outsourcing has made India’s economy grow in leaps and bounds…and better the lifestyles of so many poeple.

    Having said that, I also believe that God didn’t make the physical boundaries whereby we ourselves as Australia, India and China. Man did Helping humanity anywhere should be the driver. We’re all a part of the same creation, how does it matter if someone lives in Thailand and someone in Uruguay? We didn’t choose our geographical location; we were just born there. If we have a world view of humanity, our beliefs will come from a place of abundance, not scarcity. In a universe where there’s plenty for all, let those who have more share with those that don’t. It could be money, or time or spirit. Because whatever you give WILL return to you a hundredfold.

  • The outsourcing of labor has already ruined the economies of so many countries. If you are not part of the solution, you are part of the problem.

  • Tom

    Read a handful of the comments and I have to say I agree with alot of them. Fair pay for appropriate amount of work.

    Does anyone know where I could find some reliable outsourcing people/companies?

  • I’m an US citizen, and I live in Lima, Peru. My husband is Peruvian, and drives a taxi 10-12 hours a day to earn about $20. If his English was better, he’d be THRILLED to sit at a computer and write articles all day for the same money.

    The world is getting smaller, and we’re already moving to a global economy, so I feel like the “keep the money here” mentality is really a moot point. I don’t outsource yet – but when the time comes, I’ll be happy to pay someone a wage that allows them a decent life in their own country. Better a hand up than a hand out, no? :)

  • Yaro,

    Outsourcing work to leverage time and freedom from a big workload can be abused. The individuals who are the abusers definitely know it and do not give a hoot about underpaying the outsourcers.

    This is a sticky, but interesting topic. I currently outsource inside and outside the U.S. So far, I have been fair with compensating my outsourcers and do not want to abuse the opportunity to lighten my workload.

    Best,

    Stacie Walker
    WomanInLeadership.com
    Essential Knowledge For Business Success

  • You are absolutily correct Yaro:
    I too, wonder about the explotation part of outsourcing. I beleive that “what goes around comes around”. So I really appreciate your advice.
    thanx :)
    caretakerray

  • Ed

    This is a great post Yaro, as well as a lot of well thought out and varied comments. I have recently taken on 2 VAs from the Phillipines, and feel that I have been lucky in having found some great workers who work hard and are willing to learn. I started them at a low rate until I found out whether they would be a good fit. They are, so I have raised their rate and I will continue to reward them financially as time goes by because of their dedication and effort. They make it possible for me to concentrate on creating product while they do posting, articles, link building and more. I would not be able to afford to do this in my local economy, so they will help me evolve in a quicker manner. They will also benefit from being employed and receiving training that makes them more marketable. They are excellent workers and as nice as anyone I have ever met. They have both asked to have other members of their families become involved in the business, so it seems as if it is a good fit for both parties. I enjoyed hearing the comments from some of the workers from the Phillipines, so that I get to hear what their feelings are on all of this.

  • I think the internet marketing industry could take a new stance and pay people a fair rate for the work that they need done. And share the knowledge of creating online businesses at a rate that’s fair to everyone in the world.

    Exploitation and resource grabbing for wealth accumulation for the benefit of the few is an idea who’s time is over :-)

  • Your Message Yaro, my view is that’s it’s not a question of exploitation – it’s about right thinking and right action.

    We humans are evolving at an increasing rate due to a number of factors, including the general rate of change in science, education and spirit. Our ‘ancients’, who worshiped the sun and stars did so from an Earth centric viewpoint – one that existed for over a million years. Mankind slowly evolved through famly centric, tribal centric, state centric, and are in the midst of the range from nation centric to world centric to kosmic centric. The bigger the frame of reference the less one would see it as exploitation as it is supporting the quality of life of poorer segments of the Kosmos, helping their ability to evolve and close the gap between them and richer segments. Today it’s the Phillipines and eastern Europe – tomorrow they will be producing other products and services – and Africa may take their place.

    Buying poorer segents’ services gives them the resources to evolve. How would this help African nations in the next wave. Will it promote increased education and therefore people’s expectations. With education and expectations comes more stable government (I am generalising here), the ability to put more resources into health, infrastructure, etc. In a Kosmic sense, we are making a relative greater contribution to mankind than if we were to outsource only to our own advanced countries.

    As a new blogger and internet business person, one may not be able to afford “local” rates, so outsourcing to poorer nations helps get the business going faster and more effectively. Is this not just the global village that multinational companies regularly use in quite sophisticated ways. Resources will flow to the lowest cost supplier. It’s natural.

    On the other hand, once a business is established and making high profits, there are i/net business people who do create their own local teams because they can afford it and prefer local contact/communication advantages. It becomes a choice.

    Where it becomes exploitation is, as far as I can see, only when one pays less than a fair market rate in that country. If one makes super profits, right thinking and action would indicate sharing more with those who helped create it and give more to charities or family/friends who need help. Money is only valuable in terms of what it can provide to support mankind. Although there are exceptions, on the whole, I suggest most people who make large amounts of money, whether on the internet or otherwise, do make greater contributions to the community – whether that is by donations to worthy causes or reinvesting in creating new or growing existing businesses – and continue the evolving cycle.

  • fas

    the problem lies in the profit sharing ratio and incentives.

  • I’m new to Internet marketing, blogging, etc., and just came across your site last night. I have to say that with all that I’m reading online in my learning curve, you are a breath of fresh air. I’m finding that integrity, gut honesty, and morality don’t seen to be at the top of most Internet marketers priority list. You’ve restored some hope for me, that maybe I CAN do this business and continue being an honest moral person. Your post comes through loud and clear. Your writing is wonderful, well organized, from your heart, and you even seem to understand grammar, punctuation, and other nice language touches! And I really appreciate being shown the other side of outsourcing, as I’ve been reading and hearing a lot about it recently but hadn’t heard anyone dissect it as you have. Truly I’d only heard about how it’s a great cheap way to get your grunt work done. Many thanks for your post. I’m your newest fan.

  • Yaro,

    As BADLY as your country has mistreaded aborigene people over the years, you got no room to talk about “exploitation”.

    The aborigene people of AU have been exploited and screwed out of there land yet you don’t mention them at all so, you know what man, take a hard look at your own backyard first and do something for those exploited IN YOUR OWN COUNTRY first before you tell others what you think is right or wrong!

  • I am of two minds of this:

    I do feel on some level it is unfair. Why should they work for pennies when you profit handsomely? It is much the same raw deal as the corporate structure in the US. Why should I work for big company X for $15 an hour 60 hours a week while the CEO makes tens of millions of dollars? Is it really fair? If you help build a profitable enterprise shouldn’t you share in the wealth on some level?

    On the other hand, I have been to Panama, the Philipines, and Buenos Ares and the cost of living is incredibly cheap. From what I make online I could live like a millionaire their, so I can understand why the pay level is very low. 2 us dollars go much further their than in the US itself. I could write a 5 pg post on this, but I will leave it their. Your points are all very good Yaro. -David

  • Outsourcing does not exploit the workers you hire in another country. For them it is a godsend.

    It exploits the workers you choose not to hire in your own country because of their inability to compete.

    The idea that the “best worker gets the job” is a lie. A graphic artist in the United States may charge $50 per hour, while someone in a 3rd world nation would charge $5 per hour. How much better would that American artist have to be to justify his fee? A lot. He would have to be virtually super-human!

    But that seemingly exorbitant fee is barely enough to make a living where he lives. Most contractors don’t work full-time so that artist would be lucky to make $50,000 per year. That’s chump change. He can’t buy a house on that salary. He can’t afford a new car unless he wants to go deep into debt. He can’t save for retirement. The most he can aspire to is to rent an apartment somewhere and pray each month that he can get enough gigs to keep paying the rent.

    Meanwhile, fifty years earlier, his grandparents (who worked as unskilled laborers) were able to purchase a home with ten acres of land, buy a brand new car every two years, save for retirement, raise six children, and live (for lack of a better term) “The American Dream” (which is basically the same for all first world nations).

    Make no mistake. The dream is dying. It is such a fragile thing, and we have taken it for granted. Just because we happen to have been born into a wealthy nation does not mean things will stay that way forever. It has to be zealously protected.

    From an objective humanitarian viewpoint outsourcing and the global economy is a good thing, because it will eventually level the playing field between nations. But that does not mean that all nations will be elevated to the level of the highest among us.

    No, it means those at the top will be lowered as the ones at the bottom are lifted, until at some point they meet in the middle.

    And that can be a painful transition for those who will be moving downward.

  • Your Message

    For the price of John Reese’s outsource force, anyone can fly to the Philippines and find someone there themselves and still have change left. I thought it was a ludicrous amount to ask for – an ‘exploitation’ I suppose of another form.

    I used to live in Hong Kong where a full time live in Filipino maid was US$450-500 a month. This enabled many families to have a double income whilst the maid did all the house work and child care.

    It shocked me when interviewing some of these women that a lot of them were qualified nurses, teachers, many with university degrees, but they just could not find decent paying work at home. A primary school teacher would earn 1/3 what she would be paid in Hong Kong as a maid.

    So they leave their families and go abroad. By contract, it will be two years before they see their families again. It is far from ideal and in fact, our very own maid went back after five years because her son needed her. He was the same age as my daughter….

    So back to the question : here are my two pennies worth –
    Good points:
    - They are working in their own country and do not need to be separated from their families.
    - It is decent work
    - It carries some sort of ‘prestige’ to work for a foreign company whether you are one or not.

    Bad points:
    - Honestly, $300/month is just ok, not great even by their standards.
    - “Them” and “Us” factor. I just wish these IM ‘gurus’ would stop talking about them like some sort of pet, and bragging about all the money they make off their backs. The idea is that they can be discarded at anytime you want, whilst you reap in the profits hand over fist.

    Yes, you can argue the countries are different and all that, but the bottom line is they are people too with families and dreams and they should be treated respectfully.

    I just find it ironic that the main selling line for all the IM products is so that you can be free from your horrible daily job, fire your boss, forget 9-5, be your own boss and then we go and employ someone to do exactly what we loathed, and treat them the way we all hated so much.

    So do it because it helps you and it helps them, but do it ethically and with a bit of compassion. It should be a partnership of sorts, not you taking all the profits, laughing all the way to the bank whilst they are just some sort of tool in your tool box that can discarded any time.

  • Some people on digitalpoint and freelancing site pay very low amount. I did wordpress theme and editing just for 25$ and that guy forced me to work for more than 1 week. Outsourcing is good for some people as they can take advantage of many people who need money. i’m doing it cause i need money and with limited internet and time i’ve no other choice than working for the cost they offer. I’m trying to make money with my blog and some freelancing and with competition i’ve no other choice than accepting these hectic and unfair jobs.This is another side of the story which many people who do outsourcing without knowing their requirements needs to know.

    Thanks yaro for this post, this post will slow down some rational bloggers and marketers who take advantage of others with lower rate.

  • Jim

    This was a good thought provoking article, although it hit me on two sides. My job in IT was outsourced to India where they are paying 2 or more people for the salary I was making here in the United States. So I guess the word outsourcing is relative.

    On the other side of things, I have outsourced jobs and continuing work to the Philippines for my websites and paid the worker what they asked for. Most of those who did work for my websites did a good job and received a bonus, and were appreciative of the bonus.

    So I guess if someone says they can work for $X, they are the ones setting the rates, not us.

    Jim

  • Great article. It is very easy for entrepreneurs and anyone else to rationalise to themselves that paying someone $2 an hour is better than that person being unemployed and not earning anything. I don’t think that argument is so clear cut.

    At the end it comes down to a moral choice for the person hiring.

    i grew up in South Africa and I heard the rationale often that paying a human being who lives in a shanty town a few bucks is a lot for their circumstances. Well, rationally that my be true – but do I want to keep a person in tough circumstances if I can easily help them live a better life?

    Doing the right thing here requires some soul searching, thanks Yaro for doing a bit of that in this post.

    What is a fair international minimum wage? Any ideas? Suggestions for a standard? $5?

    One last thing – by putting a percentage of profit to a charitable cause may help someone, but it is unlikely to benefit the person who is hopefully doing their best to lift your business to a new level. Why not give it to that person in the form of a job or monthly bonus? I think it is a way around really tackling and resolving the issue of fair pay between you and another human being done good work for you.

  • This is a fine article written by a concerned and passionate person!

    Your pragmatic business decisions do not counter your compassion
    for others.

    Should someone believe that outsourcing is unethical and decide not
    to do such a thing then all would suffer …….. the person doing business
    (because the business would suffer), the people being reached out to
    (because they wouldn’t be getting what they want) and the virtual
    assistants who are happy making more income than their peers
    (because they wouldn’t have an income).

    One of the people who commented is determined that you have
    created a ‘win, win’ situation ….. and you have!!

    Congratulations!

    Continue …. and all will prosper!

  • Having personally visited our outsource staff in the Philippines, my thoughts are these:

    1. We were surprised to learn that the members of our outsource team were by no means poor in their society, but REALLY doing well… upper middle class Filipinos. Even $2 an hour is more than a LOT of working class Filipinos make. Not saying this is right or wrong, just observing.

    2. Reality is that if they weren’t working for you, they’d be working for someone else at a similar rate, probably not with the ability to work from home, possibly in far worse working conditions. If you really care about Filipinos wouldn’t you rather have them working for you in an environment that you control rather than out there in the big bad unforgiving Filipino work force?

    3. The issues that people in certain countries earn far less than others, have currencies valued lower than others, labor standards lower than others, levels of poverty higher than others are REAL issues, that are extremely important and are a result of far more, and far more complicated factors than who we as small online business owners choose as our virtual team members.

    Bottom line for me: If we want to work on these problems in the world there are far better means at our disposal than NOT hiring people from these areas…

    Yaro you mentioned investing in their communities, using Kiva, pressuring our government officials to tackle the issues of third world debt, unreasonable IMF and World Bank loan schemes, and unregulated multinational corporate domination of third world societies (a REAL problem in the Philippines, who’s electricity infrastructure, phone infrastructure, and more physical resources are not owned by the country OR by local companies, but by US corporations, causing their government to be highly cash poor, contributing to the poverty of so much of the population) and so on.

    Anyway, hope my 2c was useful :) Great post.

    Andrew

  • J

    Thanks Yaro.

    I’m a Filipino and in my opinion outsourcing per se is not exploitation as long as it’s win-win for both parties.

    I’m working as an intern under a famous guru. Since I can’t afford to pay for his personal coaching, I offered my link building services to him. I need him more than he needs my services. He in fact generously gave me $5/hr when I was starting and after 6 months, he increased it to $7/hr.

    I find the $2/hr line of John Reese ridiculous. Some Filipinos may accept that because they don’t have a choice. Surely they’re not happy. That I think is exploitation!

    He also mentioned that one of the good reasons to outsource to the Philippines is because Filipinos are not entrepreneurial. While that may be true for many people, I think it’s exploitation if you promote a system that perpetuates that kind of situation. A better way, I think, is to help your Filipino workers shift from employee to entrepreneur just like yourself.

    J

    • I am a Filipino VA; and I am proud to be an online freelancer. Been in this business for four years.

      $2/hour is indeed exploitation for Filipinos like me whose skills, education and training are at par with my foreign colleagues. Just because I am a Filipino, I am ok with being paid at such ridiculously low wage!

      My Australian employer is happy to pay me $20/hr. I started at $15. And I accept fixed projects at the same hourly rate. My clients don’t complain because of the quality of my work.

      If you want to pay cheap labor of $2/hour, expect the same amount of quality of work from your contractors. If you are willing to build up your team, not exploit them and pay what is due them, you will get quality work from them.

      Why should I settle for $2, or even $5, when I know I am worth more?

  • Isn’t it normal in business, minimise cost, maximise profit.

    Multinational corporations do it, and they earn millions/billions..and still pay their people peanuts

    Why can’t we do it too? especially since our business income is not even 5 figures yet?

  • Part of my own income is as a freelancer. I took one of those low dollar per article jobs recently just to see what it was like. It was regimented, highly automated, and in this particular case the instructions did not even make sense as I was to write on the subject of a holiday in a location that didn’t even necessarily celebrate that holiday. I felt exactly like a slave, and I bowed out of the job in a day–the only freelance job I’ve ever given up on.

    If that’s how we treat people we hire from the Philippines or India, then God help us.

    Outsource to a developing country if you must, but make sure that you treat your employees with respect, dignity, and reasonable assignments. Otherwise, be prepared to be called the Ugly American or the Ugly Australian, a term that may be well deserved.

  • There are 2 issues that I have with outsourcing.

    First, when the jobs move out of the country, the economy suffers and your potential clients “tighten up”, so in some ways it is a long and slow way to shoot yourself in the foot. But, I guess if you’ve banked your millions along the way it doesn’t matter.

    Secondly, I see a lot of people are recommending outsourcing all the things that I actually like to do for my sites — theme development, writing, etc. I suppose that is fine if all you want to do is make money. But I kind of like doing these things myself. If you want to be a blogger but don’t like to write … what’s up with that?

    However, the flip side to this is that it does help (in a small way) the economy of a country that needs help. I like Yaro’s idea of investing back into the country to help build it up — things like micro loans and education will help a lot.

  • [...] Writing team. Thanks for visiting! This post is in response to Yaro Starak’s recent post: Is Outsourcing Exploitation? I started to comment, but the rambling was enough to warrant a post instead. Here are some of my [...]

  • [...] how to do the work and willing to do it for $2 an hour. Please send them my way. Here's the link: Is Outsourcing Exploitation? – Entrepreneurs-Journey.com by Yaro Starak What are your thoughts? __________________ Check out my To view links or images in signatures [...]

  • “Why is my time worth $500 for 30 minutes and someone in the Philippines worth $300 a MONTH?

    You might claim that my time is more valuable because of my knowledge and position. It’s the same argument as to why a CEO of a company gets paid so much more than a mail boy in that same company.”

    But it would be a pretty poor argument. It would assume that your time’s value is determined by skill whereas the value of someone else’s time should be based on location. If you moved to the Philippines, would your time suddenly be worth $300 per month because of location, or would you still base it on the value you feel you provide to a client? If someone living there now had comparable skills and experience, should they feel forced to charge significantly less than you just because of location? If they wanted to move to Australia or the US or the UK, would their time magically be worth as much as yours to clients?

    I think those are fair questions. The we place different criteria on our own value versus that of others is the moment I think we risk crossing that line from simply outsourcing to exploitation and professional disrespect.

    Just my $.02 as a freelance service provider who values her time highly as well as someone who regularly outsources (both to those in western countries and elsewhere).

    • You raise a good point. Location in terms of where you work and who you sell to is relevant, as are the skills and experience you bring to the table.

      I could no doubt earn $500 for 30 minutes of my time while living in Thailand IF I was selling that time to people who saw a return on investment worthy of my fees. However that client is much more likely to be in a rich Western country, not a third world country.

      • But if you now say the location of the buyer is also relevant, then aren’t you saying that those buyers in the west should be charged more than if a writer in a 3rd world country were selling to local buyers?

        What you essentially just said is that if you were living in Thailand with a much lower cost of living, you could still charge $500 for 30 minutes of your time if you used that magical power of the Web to target western clients who could reap more benefits from what you’re providing (and afford to pay those rates). Then why exactly shouldn’t people living there NOW charge more to the clients they’re targeting in the West?

        The argument just doesn’t make sense. But that’s okay. You’re making my case for me. ;)

  • Great article Yaro.

    I am all for outsourcing. I only outsource individual jobs here and there, but each time I send off $100 here or a $100 there I know that that money will help those that helped me, feed their families. The more I outsource the more I am helping people. Supply and demand and capitalism is a wonderful thing, contrary to popular opinion.

    How is it fair that I have to pay “$50 for a good meal” when someone in a 3rd world country can get the same quality meal for $2-5? Either I am being “exploited” or again it is supply and demand at work….and that is a good thing.

    It is all about choices and freedom. As someone commented earlier….parents, living in 3rd world countries, being able to stay home with their families, while making a good living is great! Where before there only option was to immigrate to another country, now they can do either.

    More choices = more freedom!

  • Second to last paragraph should have read “the moment we place….”

  • Rob

    Greetings Yaro, Nice post explaining the outsourcing issue. I believe it is naive to assume outsourcing to other providers or to other countries is ‘bad’. Outsourcing in a globalized world economy is a fact of business life. Paying people ‘fairly’ is dependent on the values of the people outsourcing and asking the age-old question just because I can do something, should I do it? Creating value and exploitation are not worthy bedfellows and the marketplace has a wonderful balancing effect in the long run. The fact that you are questioning your values concerning the outsourcing issue and bringing the discussion into the light will help us all find this balance. Good job!!
    Rob

  • I read your article, and I saw potential for you to be heading in a great direction, but I think you miss a huge problem with outsourcing, helping your own country. I think you should interview Angela’s husband and understand his point of view. I keep hearing about how you want to make things better for the outsourced employee and their country, but what about the graphic artists in your own country, and the graphics industry in your country? What about all the employees who are out of work in your country?

    One of the reasons our economy tanked in the IS is because we don’t have jobs for people here. Most manufacturing is done in other countries. There aren’t enough jobs here, because they are being done elsewhere. While that is good for the few rich, our country is suffering horribly. It is unsustainable. And when the middle class disappears, who’s going to buy all those precious products that are waiting to be bought?!

    Seriously, if you’re making $90,000 a month, why on earth can’t you pay someone locally $3,000 to $5,000 a month? It helps your local economy. It helps your country, your family and friends. I have many friends out of work right now, and they are actively looking for work. If I were making $90K a month, while my country was suffering from lack of employment, and a handful of my friends were out of work, while I’m “helping some guy in a third world country”, I would not be able to show my face to my friends. I think outsourcing is one of the biggest problems why my friends are out of work.

    I have nothing against hiring outside of the country. If the US were flourishing itself, I would be all over outsourcing. But for every outsourced worker, there is an unemployed worker in my own country. While you’re making your big bucks, good people are losing their homes, and not by their own fault.

    I used to be a graphic artist myself. But when the Dot.com bust happened it changed the industry. I live in Seattle which used to be a booming area for graphic artists. But suddenly at that time, we were over saturated with artists. I was a print artist, but then print jobs started going to artists who were previously web designers. It plummeted wages like crazy. Not to mention all the graphic artist outsourcing that was starting to happen. These days we have a lot of ex-graphic artists doing completely different kind of work. If it wasn’t for the greed of corporations and people like yourself, that industry would still be thriving.

    I’m not bitter about that myself, as I’ve been out of the industry for 10 years, but I do see the bigger picture as to how outsourcing hurts our country, our people, and our failing economy.

    As long as the economy is hurting in my country, I will never outsource.

  • Thank you for this article. I have worked on the international front for a long time before I decided to work as a writer. What appears so wrong in one country will be so right in another. If the deal is good for both parties, it is a good deal–period. If it is one sided, it is not. One great thing about the internet is that over time it will tend to level the playing field.

  • Hi Yaro.

    A well known UK manufacturer was criticised some time back for moving his operation into South East Asia. This move resulted in a few thousand job losses at home and protests were loud and plentiful, although ineffective.

    When interviewed on national TV, the CEO and founder insisted that he was a patriot and would have liked nothing more than to keep his entire outfit under British control. But he also went on to say that all those in competitive industries had already taken their operations into Asia and as a consequence were able to undercut his products on the high street by more than half. If he were to remain in business, there was no other choice but to follow suit.

    So you see, if he had stayed put in the UK, he would have gone out of business and the job losses would have still occurred. That means there would have been no more of his quality brand products for sale nationally or worldwide, thus removing some choices for consumers and a competitor from the industry.

    So by moving out lock stock and barrel, he was able to stay in business and provide his goods at a competitive price. This means that consumers can still purchase his merchandise, UK and global retailers can still profit from the company, and thousands of jobs have been created in other countries. The alternative would have achieved nothing for nobody!!!

    The moral of the above is that it’s not all doom and gloom. It’s simply about peaks and dips, swings and roundabouts, and an international marketplace that seems to be finding its way for all concerned. This is the system of the global economy whether you agree with it or not. You either embrace it, or you don’t, but if you’re a real world entrepreneur or netentrepreneur in the twenty-first century, then you won’t be much good at it if you reject globalisation, and this includes outsourcing.

    Let’s not forget too (also mentioned in your piece above), that those companies and individuals where the work is outsourced to, often fare much better with regards to pay, conditions, and fringe benefits, than if they worked for local national employers.

    When all things are measured, outsourcing to people in poorer countries is all relative! An air conditioned taxi in say Bangkok starts at around $1 (US) for the first mile or part thereof, whereas an average taxi fare in the UK starts at around $5 US (outside off London), for the first mile or part thereof, and a whopping $2.50 for each subsequent mile. For the Bkk cabbie, it’s just $ 0.09 for each subsequent mile.

    What I’m trying to say is that you get a lot more for your buck in poorer counties, meaning those cheap employees are getting more equal opportunity than you might at first think. So what’s considered low-cost labour to you is perhaps a great little earner for the receiver who can take your one dollar a lot further than you ever could!

    Finally, there are many expats who live in these poorer countries like kings and queens. They enjoy a lifestyle at a fraction of the cost the same existence would cost them back home. The truth of the matter is that they could probably never afford the same standard of living in their own counties, hence the reason for their expat status.

    Are these types (expats abroad), also exploiting these countries by living the life or Riley abroad? And what about the issue of spending all their accumulated wealth in a country that’s not theirs? Some would say the expats aboard also turn their backs on the motherland by taking advantage of poorer nations. The debate continues….

    Aitch

  • Alotta – Hula-Baloo about “bloody.nothing”
    God gave each a conscience.

    The greatest gift God gave to puny mankind is FREE.AGENCY….thepower to CHOOSE.

    In choosing there is RESPONSIBILITY !!!

  • Yaro, while I understand it’s possible to feel some guilt for succeeding at a higher level than others, I think you’re wrong on this outsourcing issue.

    Look at it this way. John Reese and Frank Kern and Yanik Silver (and indeed you) have worked hard and gained more knowledge than your customers have. You’re are all making a great deal more money than most of your clients. So are all of you exploiting them and taking advantage of your knowledge differential by charging unfairly high prices when you teach those who don’t have that knowledge yet? Should you all be slashing your prices in the interests of fairness? Exploiting? Taking advantage? Give me a break.

    Of course you’re charging high prices. And I hope you’re making good profits. Frankly, I don’t see anything wrong with that, and I don’t see why you should, either. I also don’t see any difference between making more money than your customers and making more money than your subcontractors or employees.

    There will always be people who resent it when they see somebody having more money than they do (but they may camouflage their resentment by accusing you of taking advantage of “those poor downtrodden and exploited folks” you’re hiring). That seems more than a little disingenuous to me.

    Is the owner of a restaurant or a department store taking advantage of his employees, and building his fortune on their backs? No. He’s asking if anybody wants to avoid the risks of starting and running an enterprise by working for his company. He takes more risk than they do, solves the harder problems, carries greater responsibility, makes the bigger decisions, and he’s rewarded appropriately for it.

    If both parties to an exchange are genuinely satisfied with it, what business is it of any bystanders? If you’re not happy with what you’re doing, fine. Then fix it. But such angst along the way…

    To put it bluntly, I think this is the biggest non-issue I’ve ever seen you belabor.

    Cheers from warm and smiling Thailand,
    Charles

  • “the problem lies in the profit sharing ratio and incentives.” bingo, well said.

  • Hi Yaro,

    It would be great to see you do something right away. How much money did you just make as an affiliate for John Reese? Why not take that an do something with it. Why wait to see if you are profitable from outsourcing?

    You could even take it a step further and give John a call and all the other affiliates and ask them to kick down a chunk of money from their profits and do something to help.

    Best, Wendy

    • Hey Wendy,

      I have some charitable things going in my business, but of course I could always do more.

      I did well enough off the promotion of Outsource Force, but for the moment I choose to give most of my profit to my immediate family, at least until they are financially free as well.

      That being said, I’m looking closely at how I spend my money and make adjustments – I’m constantly revaluing what I do and need to remind myself what’s important to me, which is partially why I write articles like this.

      I’m pleased that so many people have responded to this article. I believe the run-off impact of spreading ideas like this can cause an incredible amount of positive change because of the change in attitude it stimulates, most of which I will never know about because of the degrees of separation.

  • “Even though $300 USD a month may not seem like much to someone living in a developed country, in Thailand, or Romania, the Philippines, or India, it’s above the average monthly wage.”

    Here’s another question:

    Isn’t it at least a little bit hypocritical to justify something by saying it’s “above the average monthly wage,” when as a business owner you clearly wouldn’t be happy with the average monthly wage where you live? I doubt $500 per 30 minute consultation is anywhere near average. If it is, then make some room, ’cause I’m coming over! ;)

    I don’t know. Just playing devil’s advocate. But this goes back to my previous comment — I don’t see how someone can justify location-based pricing when they don’t practice what they preach in their own pricing. I mean, shouldn’t you also be happy just settling for “above the average monthly wage” for the better-than-average services I’m sure you provide? You can’t play both sides. Either pricing should be based on location, or it should be based on skills and the value provided.

  • Thanks for addressing this issue.

    I don’t believe it’s exploitation of workers in the Phillipines or elsewhere in developing countries because their purchasing power for $2 is so much greater than those of us who live in Australia, US, Canada, UK. Therefore they get great value for what they’re paid.

    The issue is back here in the “developed” world. Freelance websites seeking, article writers, SEO writers, content writers of all kinds expect to pay $4-5 an article, or something incredibly cheap which works out on an hourly basis at less than minimum wage. That’s exploitation.

  • I’m disappointed that you chose to state that outsourcing is “slave labor”–and presented it as a fact.

    Wikipedia defines slavery as: “A form of forced labor in which people are considered to be the property of others. Slaves can be held against their will from the time of their capture, purchase or birth, and deprived of the right to leave, to refuse to work, or to receive compensation (such as wages).”

    Are you seriously equating paying people more than the prevailing wage in their country with the horrors of slavery? That is disturbing, and is an insult and a disservice to the millions of people whose lives have been severely damaged or taken away from them because of slavery.

    I addressed this topic in my latest post about outsourcing (I even used a similar subhead as your headline!) and really what it comes down to is that we know YOU wouldn’t work for that wage, but many people are quite happy to…just as many people in my hometown in Indiana are happy to work for minimum wage and have a job at Walmart, a local restaurant, or as a store clerk. Many of these people have college degrees, too. Here’s my full post comparing prevailing wages in my home town to more expensive locales:
    http://www.erica.biz/2010/odesk-review/

    I’m happy that this has encouraged you to give more back to the countries from which you hire workers. I think that’s awesome. But it couldn’t be further from the truth to look at outsourcing as slavery.

    -Erica

    • Hi Erica,

      Actually he didn’t say it was slavery, but suggested that some people argued that it was. It was an essay on all points of view and obviously he doesn’t think it was slavery, otherwise I doubt that he would have written this post.

      Now I’ll go check out your post..

      Benoit

      • Yep, thanks Benoit, that was my point – but thanks too Erica for contributing to the conversation with your comment and blog post.

        • Your expose runs the risk of increasing cost of outsourcing, and this could be detrimental to newbies like myself. If you have guilt feelings you could ease them with a scholarship to Affiliate Silver Bullet to someone like myself who has to face the crushing blow of exchange $ rates.

  • Another interesting post–

    There are also the effects on foreign economy to be considered!

    Some years back, when MacDonald’s opened their first restaurants in Russia they were paying workers more than a medical doctor was earning. Needless to say, that pushed the governments buttons as was quickly corrected.

    Should automobile manufactures be forced to work only in Michigan where the UAW demands wage/benefit packages that are twice what they are in the Carolina’s?

    Here in the U.S. government creates huge incentives to outsource. Among them are taxes, unwaranted environmental considerations, and policy mandates.

    One major consideration is that the Liberal’s have virtually destroyed our educational system. Making local source scarce.

    Barack Obama’s half-brother, livies in Kenya on $12/year. Barack could send him $12 every year and double the standard of living; but that is another story.

    If we are wrong to hire less expensive labor because we believe it to be “slave labor”, shouldn’t we also stop buying clothing from China, imported cars, electronics products made in Asia, and foods from South America and Mexico for the same reasons?

    • John,

      As far as US politics is concerned the Democratic party has a fairly protectionist stance on labor and if they stay in power I expect that the incentives to outsource overseas will be replaced with a dis-incentive to outsource. Currently the politicians in power in the US are against outsourcing and are slowly working to make it harder. They have already made it more expensive for foreign companies to trade with us.For instance, there were some interesting protectionist policies in the last stimulus bill to protect steel companies in the US. You should search for “obama protectionism” or “congress protectionism” and you will see where things are headed.

      So at least some people in our government (the Democrats) do think it’s a problem.

      That said I don’t think

  • Apples and Oranges. People used to think that we were exploiting China.. In the not so distant future, they will have the upper hand on us.

    It makes no sense to compare 2$ there to 20$ here. Manila is one of the cheapest places to live. It would be like asking us to pay 1500$ for rent there.

    The only thing that business of our relative size should be considering, like Yaro says, is to not be too greedy. Give back to either your community, or some other country that is even poorer than the Philippines. If you can, hire someone in your city to help you manage the outsourced team. Maybe give internships to students coming out of school.

    But to try and guilt people into not doing what makes business sense to everybody concerned is foolish. Addressing the issue the way Yaro has is commendable. It has probably done more good than if he paid his whole team 10 times more.

  • Yaro, I appreciate this work you’ve done laying this all out. It’s important for people to be aware of these darker sides of capitalism and the global economy. I’ve been employing overseas contract workers (from the US) since a couple years, mostly for web design and advanced web development projects.

    My clients reap the benefits from me being able to charge them less, and I reap the benefits of being able to actually make a living from this work, which as you know is very competitive. Anyway, I wanted to mention something related which bothers me much more than this issue:

    In Australia actually, the wage standards are much more fair, even though the cost of living is a bit higher. In this country (supposedly the world’s richest country), the legal federal minimum wage is now $7.25/hr., which after taxes amounts to something like $200-250/week I presume. I was just watching Morgan Spurlocks 30 days ep.1 in which he and his girlfriend take min wage jobs for a month and survive on that (see netflix streaming), so it’s fresh in my mind.

    So many people are left behind, and the rampant violent crime, drug trade and gang warfare results from this culture of neglect, in which the ethos and motto is essentially each man for himself.

    No wonder then people are going crazy all the time, and everyone’s obsessed with watching their own ass. We need to think about more than just our own selfish needs and interests, and rise up the people in the worls along with us.

    Much love, S

  • This point has been niggling at me too, and especially since seeing the $2 an hour. I am a very unprofitable business still (in fact no profit at all) but am still trying to make it work. I have a lovely lady from the Phillipines who helps me from time to time and at least her pay is quite a bit better than $2 an hour and well worth it. I had already decided that if and I hope when I start to make a profit instead of a loss that I could increase her rate of pay still further. Hope that day comes soon.
    I am glad you took the time and trouble to go deeply into this question and I found the replies on your blog very illuminating. Thank you.

  • Yaro, great post… Gives people a lot to think about and a great discussion to have around the topic of outsourcing. I recently posted a similar post dissecting my own opinion on John Reese’s “Outsource Force.”

    http://www.erinblaskie.com/john-reese-outsource-force/

    My opinion comes from a different place than some of the people who have commented already. As someone who runs a Canadian based outsourcing firm (that has serviced over 300 entrepreneurs around the globe), I have a business and personal interest in the general attitude around outsourcing.

    The problem with hyping up cheap labour can fall into many different categories – many of which you’ve already covered here. The primary problem that I see happening is the attitude around the “value” of outsourcing. If people tout outsourcing as a way to effectively place cheap labour into your company (to then create more profits), thousands and thousands of North American based outsourcing companies quickly have to begin justifying their rates OR they have to close up shop because some of their clients or potential customers have been told that $2/hour is the “Power Hour Formula.”

    I have an abundance mindset and an attitude that there is enough work for everyone. At the same token, I would much rather explain to my clients where outsourcing cheaply makes sense and where it doesn’t. Instead of blanketing the entire outsourcing idea to companies overseas for cheap, it would make much better sense to talk about the differences in the two types of outsourcing. This would be an excellent alternative to John Reese’s overhyped marketing and to the numerous blog posts that focus on outsourcing overseas vs. local.

    I’d also be curious to see what these business owners, who are of the greed mindset and only want the cheapest labor and largest profit, would do if their business started shifting to overseas providers who were willing to do it for less. They’d understand that the issue really is about balance… and they’d try hard to educate their market around the “value” of what it is they do.

    Erin

  • Yaro, loved your article as it addresses many issues. I live in Southern California and it is very expensive here and almost every neighbor outsources their yard work. Yes, cheep labor is right here in your back yard. Each and every one of us outsource what we buy. Thus, any business should operate under the premise of “what is best for my/our business and if outsourcing works for them than they should utilize that source. If any one has contacts for outsourcing web content like WordPress, please contact me through my website or email, as I’m looking to outsource the stuff that takes me too long to do. Do what you do best and hire the rest.

    Brad
    http://www.howtoburnfatquick.com
    10poundslost@gmail.com

  • Hey Yaro,

    Excellent post. Since 2006, I have seen the market in the Phillippines open up to SEO and IM industry. From PPC, link building to content creation, these skills are quickly being learned and applied to their resume.

    When it comes to outsourcing in the Philippines, its NOT exploitation since there is an agreement to both parties on the rate per hour or project. If the worker agrees to your proposed project then all is good. Remember, as your VA is completing your assigned tasks, they are also gaining VALUABLE experience and knowledge, which would otherwise take months or years to learn.

    In fact., some of my previous VAs ended up offering their services to other clients. All is fair in the business world. I’m happy to see them improving their lives and being part of it.

    $2 per hour is just marketing talk. Depending on the task, it really all depends. Look at Mturk on Amazon, is that exploitation? I believe everyone would agree its NOT.

    There is more gained by the VA than JUST the hourly wage. Education, education, education. The exposure and knowledge learned from each and every task is priceless. They are learning your expertise and knowledge on the job, where you have paid your dues to learn yourself.

    Is it slavery?… NO way. (IMHO)

    As more and more business owners saturate the market in the Philippines, rates WILL go up. I’ve seen increases every year.

    My $0.02

  • and yes, “$2 per hour” is JUST good copy writing. YMWV.

  • This is my first time posting a comment on this blog though I get on your blog pretty much everyday. I want to thank you Yaro for bringing up issues that might get overlooked by others like myself especially when venturing off to the IM world and looking into outsourcing. I feel that its not only the money that they will be getting when they work for our company, but our plan is to bring something of value to their lives. To see these people as a mere means to an end is where most IM people can run into a problem with outsourcing. Yes its great providing them with a job and amazing pay rate but we can go a step further by finding out their needs, desires, or goals. I know that will take too much time from all the gazillion things we are doing. But I feel that if somehow they can find the value in what they are doing for you and for themselves and its interwoven in their work thats a start in not only changing the world economy but the individual’s life. Thanks Yaro

  • Hi Yaro

    That’s great post – many thanks! I have been following all the outsourcing stuff and have been seriously looking at it myself, but this has been one of the questions I’ve been mulling over as well! I think your approach is the best and most honourable. I’m all for capitalism but making money for just the sake of making money is pointless, unless you have well-defined end. What better than to make a humanitarian cause that goal? After all, that’s what Bill Gates has done! Nice one! You’ve inspired me to take the same approach!

    regards

    Nick Davies

  • This has been bothering me too since I first saw that Outsource Force video. I’m so glad you decided to talk about it so thoughtfully, and that you made the decision you did. Have you thought of another way you can help the very people you are hiring, by mentoring them to be entrepreneurs themselves?

  • Outsourcing is what has brought the Canadian and US middle class to its knees! It is disappearing at an alarming rate. That’s the segment of the population which was the largest, paid their taxes, sent their kids to school and led responsible lives. Hundreds of thousands have been wiped out financially – when they once lived in their own houses, paid their mortgages, they are not living in tent cities all over the country – thousands of people! Good solid citizens living the “Canadian or American dream”.

    How about our immigrants? More and more immigrants are being allowed into Canada and the US. Many were managers, attorneys, doctors, nurses, etc. in their home country – they come to the US and Canada and must accept minimum wage paying jobs to survive – to feed their families. Are they better off? Many have gone back home.

    Despite all the great stories of recovery – the economy is not recovering. In both of these countries, what we have is a growing chasm between the rich and the poor, most people ending up on the poor side. Why? Because people have done all the right things – saved, raised their families and hoped for a great retirement based on what they had saved. They’ve been wiped out – some in their 30′s, 40′s and 40′s – with no prospects of jobs! And finding a job in the US and Canada is difficult beyond the $8.00 per hour jobs available in the service industry and even those are difficult to find – try living on $64 per day and pay your rent, food and transportation at ever increasing prices.

    Big corporations went to the “have not” countries many moons ago – now these countries have the jobs because they have the manufacturing plants. Those jobs are gone forever in these countries. Ever increasingly, governments in the US and Canada are raising taxes to cover the escalating tax burden for the many who have lost everything – good people displaced by outsourcing. Those paying the taxes are in their 30s, 40s and 50s, not realizing what is happening and they too, as mortgage rates rise, will be displaced.

    So, if you want to outsource, outsource in the US and Canada – many people would gladly take your $500 per month and do your work for you – they may even take your $8 per hour – no one realizes what is happening in Canada and US at the “grassroots” level because those who report are not there – they are the big money earners who haven’t a clue. In the US and Canada, you can buy “big talent and experience” for very little –

    If Nike, General Motors, Walmart, and other “big business” people had not “outsourced”, the jobs would still be here – they are not. No one seems to understand the devastation which outsourcing, in the long run, produces. It’s great to help people in other countries but not at the expense of your own. I believe in helping your own before helping others. Once a country or a person is financial stable, it’s easy to help others. It’s the same as your own health – if you are healthy and strong, it’s much easier to help a frail person cross the street or pick up a child who has fallen. A strong economy in your own country allows your country to help others while maintaining a good standard of living.

    Next time a person thinks of outsourcing, think about finding someone at home first – it’s in your own best interest because those you are paying will likely circulate the money to allow others to buy your services in a symbiotic relationship. It’s incredible that other countries understand the concept of helping their own before helping people in other countries, and yet, Canada, the US and Australia can’t seem to fathom that concept.

    There’s a lot of hype on the internet about “big bucks” – $90,000 per month is obscene if that person is outsourcing at $2 per hour. Sure it feels good to have all that money in the bank but at what human costs. Yes, I know, many business people are so wrapped up in the “things”, they don’t care about the human costs – after all, who cares about a bunch of losers! Are they? Next time you talk about losers, ask their children and their grand children – get the story straight.

    So, for all the “big internet operators” out there, I’m glad you’re making a lot of money – it’s a good thing – but I hope you outsource in your own country first – your profit may be smaller but at $90,000 per month, how much do you really need for yourself?

    Because this is the reality of what will happen . . . those people you are outsourcing to will learn what you know and they’ll be making the money. Soon, they’ll be paying your children $2 per hour!

    • Well said Lorraine! I think the point is “what goes around comes around”. Really we are all greedy. We all want stuff cheap, at the lowest cost. So Walmart moved everything to China Inc. and now we wine that all the jobs are gone. We did it to ourselves. You can’t even get decent programming jobs anymore. Java jobs used to pay $75 /hr now if you post an ad on Craigslist you get tons of responses of guys from India charging $10.

      Check out China Blue:
      http://www.pbs.org/independentlens/chinablue/

      and Manufactured Landscapes:
      http://www.zeitgeistfilms.com/film.php?directoryname=manufacturedlandscapes

      At the end of the day we are just taking away from ourselves. Maybe if we start giving and sharing more, asking “How can I give” instead of “How can I get” things will improve for all of us.

    • Yes great post Lorraine.

      Personally I think there is a bit of selfishness in all this, even if people don’t want to admit to it. Even I can see the temptation in it all.

      I can understand why it’s done and I can also understand people don’t want to look at the big picture, just like our climate issues.

      I do outsource some of my work, but mainly to Australian’s (my own country). There’s just something nice, knowing I am giving someone in my community a chance to have a better life.

  • Hi Yaro:

    I signed up for your email list after listening to your great podcast with Pat Flynn of Smart Passive Income, so I have only been following you a short time.

    I was one of the people that emailed. I am on email lists for 4 popular bloggers, and 3 out of the 4 sent me the affiliate link to John Reese’s Outsource Force all within a 2 hour timeframe. You happened to be the only of the 3 that I emailed and I hesitated before sending the email. I actually felt you would be the most responsive. While I hadn’t expected a reply, I appreciate the fact that you brought up the issue for discussion.

    I have only wanted to follow bloggers who are in their integrity about how they run their business. They are a lot of successful bloggers out there who I feel are good at what they do, but aren’t in their integrity.

    To be honest, had you not written this post, I might have unsuscribed now or down the road. Thanks for presenting and writing a thorough post on the issue.

    - Wendy

  • Your MessageYaro.

    Yours is a classic case of what development author William Easterly calls ‘The White Man’s Burden’. If you get a chance, (or haven’t yet read the book) read Easterly’s fascinating thoughts on aid, development, misguided self righteousness and basically the struggle of folks and governments in the developed world racing to save the so called third world from themselves.

    While I was reading your post as well as the varied comments, I couldn’t help but think of ‘The White Man’s Burden’, an excellent book by all accounts.

    My two cents though, the issue here isn’t about outsourcing. It’s a global market and a brave new world and outsourcing is here to stay. The real issue here is the “how” it’s done – a classic example of how not to do it being that of John Reese with his sunglasses waxing lyrical about his earthly riches for the cost of a Filipino grafting for $2 an hour in the corner of their bedroom for 18 hrs a day.

    That picture is just unacceptable.

  • Yaro

    I am bother by the language of slave labor. And I am also troubled with $2 per hour wages. If minimum wage is $1 USD in the Philippines, then $2 USD would be twice minimum wage. The point is this, anyone looking for work in the Philippines maybe very happy to stay at home and work for twice minimum wage. And if they did not like this arrangement they could either ask for more money or they could not accept the contract.

    And as you pointed out this will eventually raise wages in countries like the Philippines. It would be hard to argue against out of control wage practices of Western Society. From a practical point, how could we possibly control wages at the global level? Any attempt to control wages would undoubtedly lead to control of communications.

    The genie is out and there is no turning back.

  • I have been challenged as we all have with the greed of the banking, insurance, and real estate industries and I think the discussion revolves around the fairness of what the lowest paid person in an organization gets paid and what the highest person gets paid. It’s then an easy mathematic formula to determine the multiple of what the highest gets paid vs. the lowest (i.e. $2,000,000 / yr vs. $20,000 is a 100 times greater).

    I’ve heard of people with ethical challenges saying the difference should never be higher than 7 – 10 times. It you adhere to that, then if you paid someone $300 / month than you shouldn’t be making more than $2,100 – $3,000 per month. Or if you use the bigger companies models then you would be fine with making $30,000 per month. Do you see how you might feel if you were making $300,000 per month? You’d be ranked as more scandalous than the people that American’s are tagging as the villians in the current economic crisis.

    Give it away (the amounts over a certain amount), give it back to the worker, all come down to how you feel about yourself at the end of the day.

    It comes down to this question, once the basic needs are met, “How much is enough?” “When will I be satisfied?” I believe it was John D. Rockefeller that answered the the first question with the answer “one dollar more”. So it’s left to what’s in your heart.

    Andy Collins

  • Yaro:

    I stumbled across your blog a few months ago and have been following you ever since for 2 reasons:

    1) You live in Brisbane, a town that gave me some of my best childhood memories. (I’m now living in the US but planning my first trip back to Brisbane since my childhood in the next year — couldn’t ignore repeated annual requests from our former Australian neighbors. Aussies are the best and warmest folks!)

    2) As a former national business journalist in the US, I was thrilled to find someone who wrote exceptionally well, who has integrity and offered transparency. I raved to my colleagues, many of whom are still in traditional print journalism.

    Thanks for your thoughtful post – it examines the moral and ethical considerations in life and business — not just how to make money in business. It’s a great example of how you can differentiate yourself in the online marketing businesses.

    I also posted to John Jonas when I saw him referring to his outsource staff as “my Filipinos.” My point there was the importance of paying attention to how we use language: The Filipinos that he pays clearly aren’t “his.” Better to say: “my great outsourced staff in the Philippines.”

    Would love to meet in person when I make my first trip back to Brisbane since my childhood!

    I the meantime, I keep spreading the word about your great blog.

    Warm regards,

    Marie-Jeanne

  • Yaro, As one of the folks who wrote a very negative response to your outsourcing stuff, I am very impressed that you have thought about this; are willing to do some uncomfortable internal work, and are out here talking about it all. I have watched a huge proportion of US jobs go away to cheaper places…added and abetted by a government that is so pro corporations and corporate profit, that eviscerating their own country means nothing to them. Since I am a citizen of the US, there is another piece to add to the whole discussion…people need to be aware of the effects of all of the policies and actions from their own country, to other/third world countries. Corn subsidies in the US allowed us corn to be sold in Mexico at below what it cost to grow…putting 1.5 million farmers out of a livelihood. In an effort to survive/feed their families many of these farmers headed north to work at anything they could get hired for here in the US.Now some so-called patriots are slamming and vilifying these people, saying they need to go home…not knowing that the US is the cause of them being here! Farmer suicides in India-complements of Monsanto GM crops they were forced to grow; that needed expensive chemicals so lost their farms. Food issues may be a long way from making money on the Internet, but the principle of knowing what your actions do in all arenas, is the same anywhere and crucial. Humans need to learn that no matter where we live we are all connected and that there is enough to go around if those of us who started out with more by virtue of accident of birth-place stop being so greedy. I applaud your decsion to walk your talk…with your money. What ever I do with my Internet goals, however much money I eventually make, I will not do it on the backs of those less fortunate than I am, fully knowing that even on my worst day…I have lived (for 60 years) better than 2/3rds of the rest of the world, just because I was born in the US.
    Thanks for a great post.

  • Your Message
    Hi Yaro,
    Thank you for bringing up this subject of outsourcing as exploitation. Kudos to ya for having the courage to address it head on! I think you pretty much covered the moral dilemma that most “outsourcers” and “outsourcees” maybe struggling with. However, on the subject of you changing your perspective and extending help to the countries in which you outsource from, MacSwitcher is really on point and I would suggest maybe using that extra income in directly benefiting the employees you currently have by teaching them how to fish. By this, I mean, give them access to your membership program and maybe start like a scholarship program to benefit the individuals from the country you outsource from. That way, you see your donations working directly to benefit the people who have directly benefited you!
    Thank you for being inspiring and for being a leader in your field of work. Godspeed!

  • Very thoughtful article on a complicated issue. We can not/should not view the world of others through our own expectations. $2 an hour is slave labor in the US, but is above average income other places. Does paying higher wages increase wages over time for the entire country? Looking at China and India, the answer is “yes”. Does it take away jobs in your country? That depends. If the wages in your country were high enough that you could not afford to create the position, then no, it did not steal a job. If you could afford to pay local wages and chose not to, or did but then let your people go to outsource cheaper, then yes. It’s all a matter of what’s true in your situation and what your conscience speaks to your heart.

  • Hey Yaro!

    I have been a reader of your blog for quite a while now but have never commented on any of your posts before (I think). Dun know why… maybe I just didn’t have anything significant to say.

    However, for this post, things are different. It is because the issue you touched on is one that is extremely close to my heart. I totally get where you are coming from.

    For the longest time, not only was I uncomfortable with the idea of leveraging (some may call it exploiting) other people’s efforts for profits, I was actually uncomfortable with the whole model of entrepreneurship as how most people understand it…

    Set up a business –> Make as many sales as possible (good customer service optional, practically) –> Minimize all business costs –> Make as much profits as possible –> Reinvest some profits into the business to grow it and make even more profits –> Distribute to all stakeholders in the business as much profits as possible.

    That is the pure capitalistic view of entrepreneurship… and I had problems with it. I somehow didn’t feel that it is THE answer to the world’s problems Probably because of my socialistic leanings.

    Don’t get me wrong though, I appreciate capitalism and do subscribe to some of its philosophies. But yet at the same time, I do think that socialism has its merits too.

    You may call me a socialistic capitalist… or a capitalistic socialist. In any case, this is how resolved my internal conflict…

    I decided that entrepreneurship is still THE best way to affect positive changes in the world. My world and everybody else’s world. Why?

    Because I think money is the best leverage anyone can have in the real world. I may be wrong but from what I have learnt, seen and experienced, money is the best leverage we have to achieve any type of results.

    Yes, some may say that there are other types of leverage that can be as useful or even more so… such as energy, time, persuasion skills, compassion, etc.

    However, for all practical intents and purposes, I believe money is the most effective AND efficient form of leverage we have in this real world we live in.

    And the best, meaning the most effective, efficient and morally & ethically correct, way of getting money is through free market entrepreneurism. At least it is the best way I know.

    However, it is how we use the money that we get through our entrepreneurial efforts that is the key here. Too many entrepreneurs are too focused on spending their money on material pursuits.

    To me, the key reason why someone becomes an entrepreneur should be financial freedom & security, not financial decadence. The objective should not be to gain as much profits as possible so as to accumulate wealth for wealth’s sake.

    An entrepreneur’s bottom line should not just be financial, it should be social too. And that is how I conduct my business life now… it is tied very closely to my personal life.

    The way I figured it, I don’t need that much to live in this world. My apartment’s modest; bigger than most and slightly on the higher end but it is no luxury penthouse or mansion.

    My car is Japanese (read as long-lasting), comfortable and reasonably spacious. I don’t see a need for a Ferrari, Lamborghini or Porsche.

    I don’t eat gourmet food, neither do I eat out all the time. Fun-wise, spending quality time with family and friends doing low-cost activities such as movies, bowling, picnics, etc. is already extremely fulfilling.

    And I am extremely happy with things being as they are… my current standard of living is more than enough to meet my financial, spiritual, developmental and familial needs.

    And that is why I have made it a goal of mine, while maintaining this standard of living, to go from currently giving 20% of my income to charitable & humanitarian causes to giving 60%.
    (20% is for savings & investments and the remaining 20% is for expenses)

    That is the goal for which I am growing my business, not for a more extravagant lifestyle. Once I reach that goal, I may consider expanding my lifestyle given continued business growth, nevertheless 60% of my income will still go towards charitable & humanitarian causes.

    With that, I am considerably at peace with myself. I have no qualms about pursuing business growth aggressively and paying, what is perceived to be, peanuts to my remote employees.

    Because the main reason for me then to grow my business will be, to put it simplistically, to leave the world a better place than the way I found it.

    Thank you for the time.

    Andy

  • For me one of the questions would be if you don’t use the outsource option when you need to would fewer projects get done because of cost implications?

    Particularly important to those just starting in internet business who don’t have much money to spare.

    There are other long term implications to working internationally in this way – international outsourcing is the best replacement for charity we could hope for and the people receiving these wages will hopefully go on to develop their own businesses (if that’s not where they are already at they are connected to the path that can lead them there).

    International employment is also one of the best anti-war; anti-prejudice strategies I can think of. I don’t think we should get too smug in our criticism of this process – it may be in a few years these countries will be outsourcing to us.

    The true judges of whether or not $2 is an acceptable wage are the people on the receiving end. Aren’t we all in the same boat? I’d imagine, Yaro, some of the money you earn or save as a result of this will go back into Australia – and would it be wrong to think more money is coming into Australia from international sources than is going out in wages as a result?

    What goes around comes around in all kinds of ways.

  • For me, one paragraph sums up the vision all must have – “must have, not should have”
    Yaro wrote:
    “Just remember when you finally do break through to financial security – and that doesn’t have to mean you are a millionaire – you have the opportunity to support those who support you. If I have helped to plant that seed in you, then writing this article has been worthwhile.”

    Double edged sword?
    Jon Limjap wrote:
    “Had it not been for these outsourcing jobs, we would be forced to emigrate to other countries (yes, Australia included, as many have actually done) so that we would earn wages corresponding to our skill — our local economy simply isn’t big and dynamic enough to sustain the kind of money needed for what we consider a decent lifestyle.” –

    In the western world we have two types of criers – “The keep them out” and “the don’t employ them” We dont want an influx of immigrants into our countries and yet we are doing nothing to help them stay rooted in their own land. Surely outsourcing is a good thing in the sense of helping the people of a specific nation grow and prosper instead of driving them out of their home land and into our back yards where we don’t seem to want them. I say let them grow as you grow and while you do that, revisit the above paragraph by Yaro and start that ball rolling – slow as it may be, at least it is rolling and with more people taking up the challenge it wont be long before we get there.

    Hats off Yaro for such a well thought out article – you touched on all sorts of points that can be argued for and against the topic. There is no right or wrong stance on this topic just as the issue with vegetarians and non-vegetarians – in both cases the right stance is for you as an individual to do what you believe is the right thing and let others do their right thing even though it is not in agreement with your “right thing”.

    As someone said above – “I get the work then its a job, someone else in another country gets the work then its exploitation?” Time to wise up and drop the “them and us” mentality.

  • Hello Yaro,

    I don’t think the pay difference is exploitatory, it is mutually beneficially. At the start paying someone in a developing country $300 to $500 a month to work for you may seem small, but I can assure you, if the person is smart and satisfies you well, and asks for increase in pay later, you will definitely top it because you wouldn’t want to lose him/her, you may even make them partners somehow, its a possibility.

    It will also offer them the opportunity to learn Internet marketing and develop their business from the experience gained working with a guru like you.

    Remember that in the developing countries $300 to $500 monthly could be of big help for them to maintain a living and assist their families. If outsourcing opportunity doesn’t exist, it would be tougher for these folks.

    The bottom line in what I’m saying is that outsourcing tend to favor those who get the job in developing countries than the outsourcer from the US or Australia, however, you should have the mind of later increasing the pay, sharing profit, or making the employee a partner in the business based on their performance on the job.

  • i find this to be a very good article. I have never done any sort of outsourcing. When i got the chance to see the John Reese videos , I decided to test drive the idea. It worked. I received plenty emails of people interested from the Phillipines. i am not running any internet business, yet. But idea is to hopefully start one and use outsourcing as one of my tools of having a successful business.

  • Yaro, you lay out a complete, compelling, and well formulated discussion of the topic. I have to fall on the side of “it’s a global economy now and outsourcing is part of the dynamics, get use to it”. I outsource to India the technical side of my online business and hire locally for the graphics because the graphic work takes more communication and understanding between designer and customer. It is simply easier to do without the additional issues of cultural and language differences. Technical work is easier to explain, language difference matters less. For me, it is about expediency. There is no exploitation involved. The Indian I hire is free to work for as many people as they wish and can earn a higher wage simply by putting in more effort. The opportunity is there for them to even hire other Indians to work for them and grow their business even bigger. Capitalism works! The prime minister of India, Manmohan Singh would agree, he sees economic growth (over government entitlement programs) as the best answer to poverty. Who am I to argue with him?
    By outsourcing to India, I can afford to grow my business in ways I could not using all American labor. This allows me to generate income to purchase goods and services I would not otherwise have been able to buy. Thus stimulating the local economy.
    As a personal choice, 20% of all my business profit goes to support a school in Haiti, so it becomes a win/win all the way around.

    You touched on the topic of abundance mentality. That is the heart of the problem for many people in wealthier nations. We can get into the mindset that there is a finite amount of wealth in the world and someone else would have to lose money for us to gain it. Not so. Entrepreneurs are innovators, we come up with new ways to generate income and provide value in the form of new goods and services. We create new wealth. And, paradoxically, the more I give away, the more I gain, both materially and in other ways. .
    I can see outsourcing as a way small business entrepreneurs can substantially impact the lives of people around the world, for the better, in ways that were never possible before; both by hiring people in developing nations and by sharing their resulting wealth. Your friend Chris is a good example of one person making a difference :)
    Thanks for sparking the discussion!

  • You might consider adding benefits to their wages. Perhaps in a way that wouldn’t interfere with any legal definition of independent contractor in the Philippines. Find a local health insurance provider and start your workers in a small retirement fund or pay them the extra and require receipts.

  • Yaro, I think it’s great that you are so considerate of others’ opinions and views that you are willing to step back and reassess your own actions. IT’s always great to keep an open mind because that’s the only way we will be able to learn. My parents came from a third world country so I asked them how they felt about outsourcing to poorer countries. In their opinion, any work is greatly appreciated and welcomed because honestly at the end of the day, the income you’re paying them is allowing them to put food on the table.

  • Fantastic thoughtful and thought provoking article. And what courage to put yourself on the line. I’ve come across a few people recently who have outsourced to the Philipines. These are people who I admire and respect yet I’ve struggled with the notion that they are exploitation those less fortunate.

    I also know however as you discuss that like many complex issues in the world this is not a black and white decision. There are so many variables. Love the notion of putting back into the country. True equality may be a pipe dream but if we can find ways to support and more importantly empower others to improve their lot then we stand a much better chance of closing the gap.

    Thanks for your honesty, your guts and your integrity.

  • [...] durchaus provokante Artikel mit dem Originaltitel Is Outsourcing Exploitation? geht der spannenden Frage nach, ob es nun Ausbeutung ist, jemanden für 2 Dollar die Stunde zu [...]

  • Hi Yaro,

    Thanks for opening up the discussion.

    The issue is justice I think (there’s a word you don’t see much these days). I have a few comments.

    1. Those who object to outsourcing don’t seem to object to people in their own countries being paid less than the wealthy. I read this is a marketing book: Imagine you are at the work picnic, the setting is beautiful, the free food and drink wonderful; the boss gets up to give a speech and says, “Just imagine, if you work real hard, I could own all this someday”. This means profit sharing (or affiliate sales) or something as a way of addressing this inequity.

    2. I don’t mind the wealthy exporting their wealth to the poor in other countries. In fact I think this is better than the current usual practise – of the wealthy taking the wealth out of poor countries. I think outsourcing can be a win-win, so long as fair wages are paid.

    3. What makes a fair wage is tricky. Some people are paid millions for playing dress-ups in front of cameras while those who care deeply and well for their children aren’t. Garbage collectors are paid less than doctors but probably do more for public health. I think that if I was employing someone full-time in the Phillipines I’d want to find out if I could pay them some margin over the usual. “Frugal comfort” would be the minimum. I’d also want to have some sort of continuing commitment to them to keep employing them and paying them more as my business became more profitable.

    4. If I ended up making lots of money through outsourcing in, say, the Phillipines, I think I’d want to set up some kind of fund that returned some of the profit to help alleviate poverty there. Either through direct relief, education or funding micro-loans or all that and more.

    I think justice requires that we find better ways to do business. I think global communication gives us the opportunity to do this. We have the opportunity to do so much good – we just need the ideas and courage to take the opportunities available.

  • Yaro, I think you did a good job presenting both sides of some of the issues in a manner most people van understand and resonate with, regardless of their point of view.

    I have no direct comment/opinion on the narrow slice of “outsourcing” bloggers and Internet marketers are currently discussing.

    I am an American (who lives by choice in the Philippines) and thus know a little more about the effects of outsourcing on the “other side” than the typical outsource who has never been here, or who made a flying two week vacation trip here.

    To call paying someone $300USD per month as, say, a graphics designer “exploitation” is ludicrous. Not only is it a fair wage for honest work, but more than that, it is giving a person who likely spent years studying for a career and can’t find even entry-level work, a real foundation and start on life.

    Bloggers should each weigh the factors for themselves, because, as you point out, there is no clear “right” or “wrong” here.

    But to call paying a fair wage for honest work “exploitation” sounds mainly like the cry of those who never gad to actually work for a living in their lives.

    Just to pose an example closer to home for many of the readers here” Wal*Mart pays starting wages of $7 or $8 an hour (in round numbers), while CostCo pays $17 or $18 an hour for similar jobs?

    McDonalds also starts people for $7 dollars or so, yet In and Out burger starts people at $15 or $16 and hour.

    So who is exploiting whom? And how many of those who believe in this rather specious use of word exploitation, almost as an expletive, are willing to boycott Wal*Mart?

    It’s easy to pontificate from the comfort of you home (using your Chinese-made Apple iPad, perhaps), but when you want a gallon of milk or a package of cheap underwear, I can pretty much figure you’re heading for Wal*Mart … I know I do. (every few years when I’m in the US, that is).

    What intelligent and right-thinking person wouldn’t? Yet, perhaps, you are “exploiting” the “poor” workers in the store, and the undervalued truckers who delivered the goods, and the long-suffering Filipino seamen on the container ship that brought the goods to the USA, and the Chinese workers who produced much of what’s there for $100 USD a month, etc., etc.

    God, Dave, all that is involved when I buy a pack of undies? I don’t want to save the world, I want to cover my butt and get on with the rest of my life.

    My opinion? Outsource or don’t outsource … it’s your decision … but don’t make a political “cause” out of a business deal between willing participants.

  • HI
    Thanks for the interesting and timely topic. I have signed up with John and hope to start his course today once his website recovers! :-)
    After living in Malaysia I realize it is often misguided to view another culture through the lens of my own. I would have one take on things and then talk to locals who had a perspective that was basically juxtaposed to mine.
    If you really want to make an informed decision go walk in their shoes for a considerable amount of time … like 12+months. Only then will you have a small chance of understanding the positive and/or negative benefits of your actions on their lives and community.
    I wonder if it is not equally amiss to impose our social norms and values, however well intended, on people whose culture we do not understand?
    Seek first to understand before taking action might be the wisest way to appease self imposed guilt! :-)
    Thank you for this fascinating topic and providing the opportunity for me to take a step back. I think some cultural experience and education is on high my agenda for the near future.
    Cheers
    Faith

  • I don’t think that paying someone what is a fair wage in their country or economy is exploitation. I think that word is being misused in this conversation. Exploitation is using someone meanly or unfairly. Paying someone a decent wage in their own economy is not using them meanly.

    Sweatshops are exploitation, not outsourcing work to someone in another country.

    There is the point that we should utilize someone in our own country, and I also understand that view.

    Personally, I think people have a right to make their own decisions as to who they hire when outsourcing work. I’m not for or against what country I outsource to as long as they perform up to my expectations. I certainly would never use someone “meanly” and would pay them what they are willing to receive.

    Too many people seem to want everyone else to believe what they do, and if others do not agree with them, they start pointing fingers and making negative comments.

    This whole issue is one that each person should decide for themselves without repercussion.

  • Hi Yaro,

    First off, you have a lenghty article here and a very good one.

    Outsourcing to other countries is not exploitation and definitely, definitely not slave labor as @Erica clearly pointed out. Coming from the Philippines and based on my own experiences, outsourcing significantly changed the lives of many people I know, including me – fresh college graduates who have had a very stressful time looking for a local job. Like many of the comments above, $300 – $400 a month may be worth a week’s salary in some countries, from where I come from, that’s almost worth a bank manager’s salary over here! To think that you work from home, not having to wear a uniform, commute daily to work which contributes to the pollution, I think outsourcing is the best way to earn a living IMHO. Like you guys, everyone has to start out small, eventually growing bigger as you establish a name like B. Durant posted on comment #18 but don’t feel guilty when you outsource – you’re helping someone at the other side of the world earn a decent living and feed a family. My friend here started out at $200/month, but because of his excellence and dedication to his job, he is now being paid by his American employer $800/month. Take note guys, he is now able to send his younger brother and a younger sister (ages 12 & 10) to a decent school. Now, tell me, how does that make you feel? Next time you outsource (and my I suggest Philippines because we speak damn good English) :D think you’re HELPING someone. It’s always a win-win solution.

    Best,

    Melissa (fareastern)

  • Your Message
    A brilliant article Yaro, and a good read. You put it so well. In my mind people who can only afford to start their business using outsourcing are helping themselves and those folk in the Philipines or wherever they outsource. Is it a job lost for their country of origin? Maybe not, if they cannot afford it any other way. I’d hope that the profits made by the business will be used in one’s own country and perhaps eventually one can afford to hire one’s own countryman/woman that was beyond them initially. I do think it can be a win/win – but I’d hope that there is no real exploitation along the way. People in developing countries really can make a difference earning good money and using it wisely.

  • Excellent thoughts and discussion Yaro – it truly shows your integrity. I thought the latest Abraham post also attests to your thoughts and your ability to be giving back in other ways.
    “What better way could anyone spend money than back into the economy which gives more people work? What you call your economy is the exchange of human Energy. And so, think back a few hundred years about what your economy was in this nation. And what has changed? Have more resources been trucked in from other planets? Or have more people, over more time, just identified more things that they desire — and the Nonphysical Energy that is endless and infinite supplies that? We never hear any of you say, “Well, I have been well for so many years, that I’ve decided that I’m going to be sick for a while to allow some other people to be well.” Because you know that whether you’re well or not doesn’t have anything to do with them not getting enough wellness. You’re not using up the wellness and depriving them of it. And it is the same thing with the abundance. People that have managed to find vibrational harmony with abundance, so that it is flowing to them and through them — are not depriving anyone else of that abundance.”
    — Abraham

    I think you deserve all the abundance you receive. Good on you!

  • Hi Yaro,

    I like to keep things simple and what you have to say is compelling. But I’ll keep it as simple as I can. Maybe what we all need to remember is we should step inside others shoes and look at something from their perspective. Outsourcing from a third world person’s perspective could be like a pot of gold at the end of their rainbow. You, and other people who outsource, could very likely be offering opportunities that otherwise wouldn’t exist. These people you are employing are in third world countries after all and may live in what we would consider appalling conditions. Their next door neighbors simply may not have the money to employ them.

    Looking at the big picture isn’t without merit either and your idea of giving back to these people’s wider community is great. So many of these people may not even have clean drinking water, for example, and if something can be done to contribute to improving their plight would be mind blowing. Something like good health, which many of us take for granted, is a huge benefit. So outsourcing, from my point of view is a great idea.

    Thanks Yaro. Have a great day and thanks for the thoughts.

    Cheers

    Jann

  • I’m not going to quibble over names of things. But deep down I feel that outsourcing “just for money” will come back to kick us all in the but one day. Just file this post away or keep it on this board and mark my words.

    One day who know you rich folks will be the poor ones of whom other nations will seek to outsource to. What goes around always comes around.

    I find when I have doubt about something, then there is something deeply wrong. I prefer to be lead by peace in my soul and not nagging doubts. No I’m not telling if I’ll be the one to use this method of “outsourcing” or not. Because what I do is not the issue.

    But I know that I think many folks are purely just plain greedy and will stoop to any plan where they can for example put up 1000 blogs overnight and get filthy rich and then placate themselves with a 100 dollar donation to KIVA. If this is not you then great . If it is you and you can go to sleep at night oh well.

    All I ask is that you search your heart, look at your objectives and don’t pretend to be interested in other cultures when you’re not or just to make yourself feel better.

  • I was glad to read this article here. While many people read Tim Ferris’ mantra that outsourcing your life is the way forward, few stopped to actually think that there are complicated moral issues involved. I think that this is an emerging trend in internet marketing to look only at the benefits, sadly despite its more pure origins internet marketing is slowly going down the same path as traditional businesses

  • Very good points Yaro, but I believe it’s not exploitation. Outsourcing is the same as hiring employees in your home country. You can make more money as a business owner than as an employee in the scenario where you’re hired to work for a company in your country and likewise when you outsource labor.

    Here’s an example from a “traditional outsource perspective”

    I used to work full time as an Enterprise IT Sales rep. I earned the company I worked for over a million in profit in the course of a year on millions and millions in total revenue. Of that million in profit that I earned for the company I worked for I saw about $60,000 for my wages. That’s a nice chunk of change, but because I want more and to be in control of my own destiny I started earning a full time living from websites instead.

    In the past scenario I don’t think I was being exploited? No – the company I worked for spent years building up a business and adding clients just like you have spent building up your online presence and creating great products. I got to walk in and sell to those clients without the pain of building my own business to do so and I believe they had the right to pay me what they wanted to. Granted, I thought this wasn’t enough and so eventually I started my own business so that I could take 100% of the profit, but that’s a choice anyone can make. Want to earn more money? Start your own business.

    At the end of the day you can either be an employee or a business owner and there will always be differences between your income earning potential in both positions. People should never cry about how much someone earns – you’re living in a capitalist country why do you want to be a socialist and spread the wealth to others that didn’t work as hard (or a more accurate word – effectively) as you did to get to where you are?

    If you feel as if you are earning too much money from the people you employ give it to charities where it will go to people that really need it? That’s what I intend to do (this year’s goal is $10k to charity and I’m on track to do it as long as I sell the website I’m working on for six figures).

    Chris Guthrie

    • Just re read my comment and noticed several punctuation errors – doh! Know I’m not an idiot I just didn’t proofread enough.

      Seriously though the other thing to consider is how much $400 a month can buy for someone in the Phillipines. If they can pay for rent, food, utilities and some entertainment than how is that any different than the $60k a year I used to get from my day job where my rent was $1,500 a month, utilities $200 a month, food $400 a month, entertainment $300 a month.

      People are getting upset over a different in total income NOT relative income which is what is the most important factor to look at.

  • Yaro,

    Fantastic article. And you are right this is a very gray area and as such I don’t have a strong opinion on what other people should do in regards to outsourcing.

    I worked in the computer industry for about 20 years in the US and I saw a lot of my friends lose their job because of outsourcing initiatives at the companies I worked for. The last company I worked for had a pretty strong outsourcing policy and it most likely was a huge factor in my being laid off. Prior to being laid off the only people we were bringing into our business organization were outsourced help from Inida and Brazil. I still don’t have a real moral issue with outsourcing except in the case of real slave /child labor issues like you have in China.

    Anyway, in our business we have chosen to primarily outsource work to people in our country (the US). We don’t make as much profit but we personally feel more comfortable with that decision. We can still make plenty of profit and the people we pay can make a nice profit as well. We have talked about potentially outsourcing to other countries but at this point don’t feel the need to.

    I imagine that over time the pay in third world countries will rise and the pay in wealthy nations will go down and there won’t be as much of an advantage to outsourcing overseas at that point.

    Anyway, it is a very difficult topic and I get where you are coming from. We all have to choose the road that makes sense to us.

    It’s been very interesting to read the different perspectives on the topic.. great post.

  • Hi Yaro

    Good post, and really got me eager to leave a comment.

    In no way do I think outsourcing is exploitation, and it’s actually going too far to say that it’s slave labour.

    The dictinary definition of Exploitation is “(n) use or utilization, esp. for profit”

    ….er….sorry to burst any “high and mighty bubble” that some people are on, but this is THE definition of BUSINESS. Ie the entire basis of the Capitalist ideaology. If you don’t agree with it, you have no business reading this blog. Exploitation is using things and people in order to make a profit. Simple. If you work in a company, then that company is currently exploiting you. They are using you, to gain a profit. They pay you for this privilege, so there is no difference when you cross borders, apart from it being cheaper.

    Thats not exploitation. Thats being smart about business.

    If people want to argue the point about why we (as outsourcers) can benefit so much while they (the workers) gain so little, have a look at your standard corporation down the street, in your own city. Most of the time they are turning millions in profit, while their workers will only be getting a small percentage of this. Lower the amounts, and it’s the same ratio that we are essentially talking about here.

    Here are my points of consideration:

    1. If you don’t provide the outsourced job, then that person doesn’t have the opportunity you are providing, and therefore must look elsewhere to make money. Therefore; win-win.

    2. I think it’s imperative to provide a “fair and generous” salary. I’m just about to start outsourcing myself, and after a 3 month trial period, I will be offering 2x the standard wage (during the trial period I will pay standard wage, but also cover lunch and dinner expenses, as a way to look after them). If the employee is a fast learner and good worker, I will further opt to increase this by another 2x within the first year – so essentially they will be earning 4x the standard salary in their country. This amount is still lower than a local salary for me. Therefore, win-win again.

    3. A lot of people argue that the money is going AWAY from your country, therefore propping up the outsourced country’s economy, as you pointed out. However, once again, especially for start-ups with no capital – if you don’t outsource, you either fail in your business, or you will take a longer time to become profitable. Therefore, your economy DOESN’T benefit from you in ANY WAY, anyway.

    Therefore, once the business is doing well (from outsourcing), I guarantee your local enconomy WILL benefit from you, regardless of the fact that you are sending money overseas. Show me any person who is doing well successfully, who hasn’t changed their lifestyle patterns and way of life. They go out more, they buy nicer things etc etc. To argue that it doesn’t benefit the local economy is redundant.

    Once again, win-win.

    In the end, I completely agree with your summary. Greed will certainly bite you in the lower behind. I think the ideal case is keeping in mind a “win-win” sitation for everyone involved.

    • “after a 3 month trial period, I will be offering 2x the standard wage”

      I think that’s an admirable goal. But if you really want to make that happen, don’t forget to crunch the numbers properly. Their “standard wage” for employees isn’t directly comparable to earnings as an independent contractor. As low as you might think that person’s expenses are, they still exist — any business taxes in their country that employees don’t pay, basic office equipment, Internet connection, any benefits involved in a typical employee situation there if you really want to treat all things equal (which you have to if you want to make a fair wage comparison), site expenses if they have a professional site to market themselves, fees they might have to pay to bidding marketplaces where you find them, etc.

      Without accounting for all of those things and anything else that’s a business-related expense (because these people are indeed operating as entrepreneurs in their own right), calculating twice the standard wage would be impossible. And when you’re already paying someone on the far low end of the spectrum, those “little” expenses can take a pretty big bite out of what you think they’re earning.

      I’m not saying you haven’t already thought about those things or that every example I gave applies to every outsourced worker. But this is a huge problem we see specifically in the freelance writing industry, even in the West, where companies take advantage of desperate people by offering half-true comparisons to make them think they’ll earn more than they really will when they sign on. And I think the rate vs wage distinction is one that more buyers need to start to understand — globally.

  • Hi Yaro

    I have been reading the comments from everyone and the reality is that everyone is an individual and entitled to their own beliefs and thoughts. What one person believes to be wrong the other believes is not and life hands each of us our own situations to work through.

    For some of us we experience life at it’s hardest and can remember how we were going to make it from one day to the next. I know first hand from the time when i could remember when we didn’t know where our next meal was going to come from or when we were going to have running water or electricity. No shoes to wear or clothes and mocked because we were so poor. I remember when I lived out of my car with my baby because no one would hire me because i had a child or no address but I was determined to pull myself up and support myself even if it was making less then my co-worker doing the same job and no one wanted to help not even my own family. Where was this you might ask, that’s right in the good old U.S.,

    My take on outsourcing is that, you do what you have to do to make your company work and the people that accept the jobs for 2.00 have made a choice for their particular circumstances in their life whatever it maybe. If you are outsourcing and feel bad about what you are paying them then you have the free well to increase their pay if you continue to use them or give them some kind of bonus. What ever makes you feel better about it.

    The fact is we all look at the bottom dollar and we all want to make as much money as we can and it is just the reality of it all. The big corporations are doing that right and left to make that profit margin higher than the last and the sad part about it is that thousands of people are loosing their jobs and unable to find jobs equal to what they have lost.

    Myself personally, I would use outsourcing but if I had to pay what was equal to what I would have to pay someone in the U.S. and the performance and quality was the same then my loyalty would have be to hire a person in the U.S.

    Everyone involved has to make their own decision based on their circumstances and what is right for their particular situations at the time.

    You all present good view points but remember that till you live and experience the other side of the situation you can not dictate what is right or wrong for the other party.

    I could go on and on about this and comment on each remark that was made but that would take forever and I am sure everyone has better things to do.

    I hope everyone is able to come to terms with this and do what they feel is right for themselves and not be so quick to judge.

  • Hi Yaro,

    Great column. I was quite surprised to see the effort you put into writing it, researching it, and wrestling with it.

    I’ve only recently heard of you, and your article and wisdom made me a fan. That’s a hard ask, as I’m a Yank who’s been in PR or journalism for 30 years. I’ve seen it all…and much of it is not very pretty – especially real estate and internet gurus who want to make me rich.

    I’ve lived in New Zealand for decades, and my daily contact with outsourcing is mainly through call centres and manufactured goods. Getting my head around the concept of VA’s is a big ask, a new reality. Could VA’s really help me as I move from 30 years as an employee to, hopefully, 20 years as a successful businessman who works less and less to earn more and more AND who helps more and more people? Hmmmmmm? I’m going to add this to the list of possibilities to be explored.

    The ‘evil’ side of outsourcing, to me, is found in child labour plants and general mfg sweatshops. Paying a VA a rate that is more than fair locally, which would help me succeed in ways that otherwise simply would NOT be possible, is not an ethical challenge at all. It is straight up. The fact that I tend to try to help people more than make money would, doubtless, mean “my VA” would do very well indeed in the long-run, if the relationship and business opportunity worked out.

    And I’ll make one last point. Before a caucasian condemns outsourcing to the Philippines or China, he or she might think down the road a few generations. When Chinese (my wife’s lineage, by the way) are running the global economy and outsourcing to caucasians in Aussie or NZ or the US, will our progeny be unhappy to get the money, or glad to make a dollar? And, knowing how China does business, does anyone believe Chinese outsourcers will debate the ethics of outsourcing, or just fill their rice bowl?

    Anyways, Yaro, good post and discussion. I look forward to reading more of your stuff.

    Cheers

    Bill

  • Dear Yaro, please allow me to tell you from my own experience what happens when people like you begin to think as you have been thinking
    Years ago I was going to school in Mexico in San Miguel Allende, it is a beautiful small town with an accredited college.
    I watched as “Rich Americans” came down to attend the college in droves. The local economy was set and running perfect. As more and more Americans arrived, many thought as you seem to be thinking. These poor people are working for such a small amount of money! How can they survive on such a salary?Not considering that their economy had been set and was extremely stable.
    Americans began to overpay by tipping and adding more money than an item actually cost.
    A strange thing began to happen! Prices began soaring! The merchants soon realized that Americans would pay much more than the usually asking price of an item or meal!
    Several months after the “American plan” took effect, the locals were finding it hard to afford what they had always been able to afford. Prices shot up and it actually made the poor and border line citizens much, much poorer.
    To be blunt, the Americans fucked the economy up royally. The poor citizen were having to take a bus to the next town to buy their basic food stuff and other items they needed. You see, the next town over was not effected because it had not suffered the ” American overpay plan” on their economy!
    What you also seem to be completely dismissing is the fact that the people in the Philippines are a free people with free will!! If they do not like the salary, they won’t take the job, or work for you.
    Also, if you ask, or check around, the Filipinos consider it a status symbol to work for a foreign boss. Especially one who gives regular raises and throws a bonus when things go right.
    You problem is that, like what I witnessed in that little Mexican town, you are judging their economy by yours. You simply cannot compare the two.
    The Filipinos have been doing just fine without Internet Marketers! And, they would do just fine if tomorrow we all disappeared!!
    But I have some very good advice for you Yaro: Because this difference between the economy in the U.S. versus the Philippines seems to be disturbing you so, my advice to you would be: To forget all about the Philippines and only outsource all of your work to people here in the U.S.. This will alleviate all of you guilt about taking advantage of the “Poor Filipinos” and if the amount of money you pay to outsource you work is your gauge of fairness, I am sure the American outsourcer’s will more than assuage you guilt about making more money than the people who you outsource to, because what they will charge you for their work, will make you feel much better about yourself and the pay differential.
    This shall set you free Yaro! You will sleep well my friend, happy dreams, bob

  • Hai Yaro. Your argument interest me as lot. I live in Indonesia, one of developing country and maybe have similar or below standard living with phillipines, India , etc. Some of you from developed country might feel outsourcing is exploitation. But for our man, outsourcing is opportunity!! You may knew that in our country, there’re many unemployment who cannot find jobs because there’s always more people than jobs available. That’s why we would be very happy to find an alternative, and a good one is working online for western people. Actually, you don’t have to feel bad because of it. You even have to feel proud because you have given an opportunity, to help our country in this aspects.

    However, you may consider paying more than 300usd for your people when they play an important role in your business. That would be a great mutual relationships.

  • Hey Yaro….
    Look at the banks, the big corporations, the mining industries here in Aus…all making humungeous profits & our Aussie workers take home a pittance in comparrison! Same story.

    The trouble here is…most of the big multi nationals rape Australia, pay next to no tax, courtesy of Govt investment incentives & head off back to their home base with all our money as their profits!
    You must understand this in Australia…most of the big companies are all foreign owned, so don’t feel bad about helping a family or 2 in a foreign country by employing them honestly.
    There is no such thing as exploitation in these cases if you are fair to them in their culture.

    Unions are slave keepers here in Aus, keeping people enslaved where they can’t negotiate their worth to a company, too don’t forget.

    Globalization is here…
    I can’t make a business here if I hire Aussies, because the unions won’t let me pay what I can afford to get a biz going, so, sensibly, I find a person who will work for what I can afford.
    My business benefits, the money comes to me here in Australia, I spend it here on a new home, food, a car etc, keeping people in work that would not have been able had I not had my business outsourced.

    My workers earn good money by their standards, I get a thriving business, I then improve all around me by spending more locally, better food, clothes etc.

    I don’t know what all the fuss is about.
    It’s progress.

    I’m sure the people who are out of work over seas & who consent to working for “$300″ a month are very happy to have a regular job with food on their table every day. Is there the dole or pension in those countries? Don’t think so!

    The cost of living is vastly different to here & we should not judge on cultures we know little about!

    That’s my thoughts anyways,
    Kindest,
    Poppie
    .

  • Totally I agreed with you, outsourcing is the right way to save cost running a company. Do not think in term of slavery. What is good for them basing on their living standard and wages and currency exchange rate. Further more, it save you a lot of time and money instead of doing yourself.

  • I don’t think it is so much expolitation as it it taking advantage of a helpless pehaps even desperate person. I think it is fair to test their ability and skills and then to negotiate a fair and reasonable rate if they prove to be good. Especially when you are making huge amounts from their labour. Perhaps a percentage?

    This is why Unions were started, to protect the weak and vulnerable from the rich and greedy.

    Remember what goes arond comes around. The mills of the god’s grind excedingly slow but they grind exceedingly fine.

  • Sue

    What is a fair wage?

    I have to admit that the phrase rubbed me the wrong way, too – until I thought about it. The “tone” still makes me cringe a bit…..

    Can you help more people in more ways by paying several people $2 per hour rather than one person $10?

    What matters is that you are fair and forthright. You can even be “more than fair.”

    How many people do you employ? What is the main reason for paying the wage you’ve decided on? Is it the going rate for them or better? What is your purpose for hiring someone? How many people can you employ at that wage, versus more money? What increase in value to you provide by employing anyone at all?

    Does the wage you pay SERVE your employee in his situation as well as it serves you in yours? If so, get some sleep and stop fretting over it.

    If someone lives in an area where the average wage is $1 per day, then $2 per hour is really good money. Nobody says you can’t give raises…

    After all – that is $5 per week as opposed to $80. It wasn’t that long ago when that was the going wage in the RICH nations. (It was within my lifetime, and I am in my 40′s.)

    What happens when people in our “rich” countries win the lottery? They are broke again in two years because they can’t handle that much and don’t know what to do with it. How much better is that than paying someone WELL for what they do?

    If you live in an area where there are no jobs at all, $2 MIGHT be a fair wage. How far does one have to go to find employment, and how much of his wages would it cost to do so?

    If you want to pay $2 per hour and the going wage is $7 per hour, well, then you have issues far beyond your obvious need for abject rejection.

    People in “rich” countries are under the utterly arrogant delusion that everyone on the planet should live the same way we do, or at least that they should want to. Some do, to be sure – but it never occurs to these people that most don’t want to.

    Sharing the wealth is a noble deed, but you can never get poor enough to make someone else rich, and if you are not running a 501C, you are in business to make a profit, not to break even or lose money so someone else can live the way SOME people in the US or Australia do.

    Look at Europe – particularly Greece, Spain, Portugal, Ireland and Italy. Their standards of living are dropping through the floor, and threatening the rest of Europe. The US, despite illusion and media spin, is not far behind.

    While the bankers get richer, the rest get poorer – are those of us who can hire willing to let people starve ANYWHERE in order to make some nay-sayer feel good? I wouldn’t lose sleep paying someone $2 per hour if that was better than they could get without me!

    I agree that there are situations that need to stop. We’re all so shocked that slavery on this globe did not end with the American Civil War and the 14th Amendment!! Slavery has always existed, and until there is a massive shift of consciousness it always will.

    That consciousness is not about paying $10 per hour to a person in a country where most earn far less than half of that. We don’t have to make people rich, but we do have to provide AT LEAST a good and at worst a livable wage.

    That consciousness is about being FAIR. About caring and compassion. About loving and serving as many people as we can in the best way we can. You cannot give what you do not have.

    Factories full of teenage girls in horrid conditions, taken from their homes for months to years at a time and paid only $3 per month in China could be stopped. Children forced to work out in the sun, taking radio-active and mercury-filled components out of our trashed cell phones and computer hard-drives in Indonesia could be stopped, too. Entire families in sweatshops working for dollars a month in MANY countries is abominable. Having to sell your children to feed the rest of the family is intolerable. (I won’t mention that some of these things still happen in America and Australia – can’t go THERE, now can we?!)

    We see these things on TV and we feel guilty, but we don’t really DO anything about it except talk.

    First of all, in some cultures, children work. Get over it. Our’s used to, but we’ve somehow gotten the idea that we’re “better than that” now. Better than WHAT??

    What the problem is, is what they are forced to do. OUR WASTE has caused that. Factories in China? OUR EXCESS.

    Yes, our governments could issue sanctions. But it is OUR LACK of personal involvement in our political process that keeps them from being enforced.

    Before we tell someone who may not see $2 in a week, or month even, that we oppose someone else paying them that on an hourly basis, we need to take a look in our own mirrors. Asking that person about it might be a good thing, too…. What WOULD that $2 per hour mean to that person?

    Would it keep a family in Ethiopia from having to sell off their eldest child? Would it mean one girl in China could stay with her family? Would it mean a family in India wouldn’t have to send their son away for months at a time to earn a minimum wage he could barely live on while sending part of it home to help his family? If so then what’s the problem?

    Before someone tells me that I cannot pay someone $2 per hour, they need to look at some things:

    When was the last time they called or wrote their state or federal legislator to complain about working conditions in the country in question?

    How active are they in charities and other organizations that help to alleviate some of these situations?

    What is the average wage in the area where my employee works?

    What is the employment situation?

    What is the exchange rate on that $2? What is that $2 worth to that employee?

    How much of his wage does he get to keep? Is it a wage that would allow that person to increase his standard of living?

    How many items do they have in their home that came from countries that actively use slave or near-slave labor that they complain about what I pay someone else?

    Have they joined in a program that offers micro-loans (as little as $25) to people in developing countries so that they can start their own businesses and employ their own neighbors?

    Do they financially or physically support organizations that provide for clean water, adequate food, clothing, medical care or education in poor countries (or in their own)?

    Do they have a business that is comparable to mine? Do they employ people and for what wage? Where?

    If a person wants to be financially “rich,” then it is their responsibility to get there, not mine. I am an employer, not a fairy god mother. Employers are stepping stones. Fairy god mothers are gift-givers. While I have responsibilities to my employees, making them financially wealthy is not necessarily one of them.

    If I can pay my neighbor $10 per hour and therefore serve a few more people and keep my employee from losing his house, I will likely choose to do that.

    But – if I can keep 5 families housed, clothed, fed and give them a luxury or two with that same $10 per hour, as well as serving even more people through the business, I will at least have to consider it heavily.

    Some won’t like that, but I will sleep perfectly well anyway.

  • Great debate. I outsource to the Philippines also. To be honest, the project i’m outsourcing would have never got off the ground if I was paying Aussie rates! People are not always paid based on the value they provide. I have worked 20+ years in the hair and beauty industry, literally for peanuts. My knowledge and training are top shelf, however, who pays for a haircut to the tune of $750.00 (based on $500.00 per 30 mins?) Already, with far less training and skill and time and patience and always smiling, I have replaced my salon’s income online…Hairdressers and beauty therapists earn well below the monthly average, so if we are paying our outsourced staff above their monthly average, I can sleep at night.
    ps. I have emails all the time from my guys in the Philippines thanking me and really grateful for the pay they receive. Maybe we could all be a little more grateful here too.

  • Yaro, I salute you for being brave enough to address this issue, and to call a spade a spade. $300 is pretty close to minimum wage here in South Africa, and that is what it is. Minimum wage for unskilled labourers. When you start looking at skilled people the value of their time goes up exponentially. So even for us it would be much more affordable to outsource.

    The excitement and family team environment that is created by employing locally will be missing though, and that is half the pleasure of getting out of bed and heading for the office or to clients every morning. There should be floor limits set for certain skillsets / levels, so everybody can compete fairly and across borders.

  • Hi Yaro,

    funny that you are in the Phillipines too (-:

    I guess it’s a hype right now, but for me it has been the best investment ever – on a financial and the social / emotional scale. My content producers do not only work very very well, but they are also some of the most interesting people that I have met.

    I wish I would live closer to the Phillipines, so I could hang out with them. And well…to the topic of modern slavery…it’s not true. Ask the people over there: They tell a VERY DIFFERENT story than to small minded moralists that condemn outsourcing. I guess it’s a question of values.

    Treating others with respect has never ever been wrong in my opinion. Giving someone a job & being thankful for their work = respect.

  • I agree with Sue.

    As long as both parties are willing to do their part of the deal, and find it is in their own best interest to enter into this contract willingly, I see no “exploitation” whatsoever.

    2$ per hour will seem like nothing to an American, for sure. But did you know that more than half of the world’s population today lives on less than $2/day? I mean, there is 3.5 Billion people on earth that would be more than happy to earn $2/hour.

    If IM courses like that are spreading wider, soon there will be so much demand for outsourcing that, you won’t be able to find Philippians to work for $2/hr anymore. There are people who are “differentiating themselves” in the outsourced work market already, who are working for $5/hour or more for “quality work, fast”. You see, an Internet Marketer is not in fact paying for “hours”, but results of work done. There are people writing articles for $2-3 each, thats true, but there are also people who are writing articles for $10-15 each. The difference is how useful each article is to the Internet Marketer. One article gets %1 click-through to an affiliate link on an article directory, the other gets %50. So if you can write articles which get %50 click-throughs, consistently, you can ask for 10 times more price. And the marketer is still better off, if he’s making 40$/m per article, even if he pays $20 for that article. And that article might take 10-30 minutes to write. And no one will care if you are in India or Philippines.

    “Value” is not in the time invested, not in the “effort”, or not in the “lifestyle supported” etc. Value is in the results. Whatever $ a worker earns today, can earn more per hour IF and WHEN he produces more value for his clients (outsourcers), and market himself better.

  • OK I’ll admit I haven’t read all of the comments but i did read the entire post, and I’m sorry but $300/month is NOT nearly enough to support a family, and for heavens sake I live in Pakistan (a developing nation poorer than Philippines) I own one small car and have one child aged 3, no luxuries, haven’t taken a vacation in 5 years, and am running an online business from home. And no $300/month wouldn’t support us for 2 weeks here, and I’m talking just the basics – rent, utilities, primary education, groceries.

    I run a fairly successful content development firm and am on both ends of the outsourcing spectrum. I frequently work on Elance and have big names/firms, especially Australian ones, outsource their content writing needs to me. I also have a team of local writers I outsource projects to. I pay them 80% of project cost and keep 20% for myself for marketing, business-building and promotion. To make ends meet I need to be making at least $1000/month and thats just me, not the company.

    I provide quality work, couldn’t spin or pliagirize artices if mylife depended on it, and am damn proud of my business ethics. $2/hou is no just isukting and demeaning to me, it’s a poor reflection on thosethat do it.

    Yaro I appreciate your honestly in this post, but please don’t ever justify this kind of payment as being enough to support a family, cause thats BS. I should know, I live in one of these so-called third world countries.

  • You have great comments here Yaro, I admire you for creating community and audience participation on your blog. (OK, I have a bit to learn there.)

    I have a short but hopefully insightful comment:

    Are these people in 3rd world countries BETTER or WORSE off if you decided not to outsource?

    The socialist line here seems to be that it is exploitation. I counter that it is only exploitation if the people/country are WORSE off as a result of the move.

    Slave labour is exploitation because the slaves are better off if you hadn’t interfered with them. Outsourcing is not exploitation because you are providing a job to someone who didn’t have one.

    Sure $2 an hour isn’t great, but it is BY DEFINITION more than what they could have earned if you didn’t offer it to them. I say by definition because obviously if they could earn more they would.

    As we pour money into the Phillipines and India, their economies grow (much faster than ours) and their standards of living are increasing. Soon the cost of employing an educated English speaker in those countries will be a lot more than $2 an hour because they can get better jobs. That’s how it should be.

    Globalisation has many flaws, but outsourcing is not one of them.

    My 2c.

    Simon

  • Hello Yaro,
    This is a wonderfully-written post and despite the pressures of time, I was compelled to read to the end. You brought back memories of when we lived on Bougainville Island in Papua New Guinea. There it was expected that we hire locals for gardening, house cleaning and the likes.
    This didn’t sit well with either my husband or me, because local wages were abysmally low for the educated Papuans, so you can imagine what we were advised to pay the uneducated!
    We got around this by giving them more than the going rate, providing them with food, and passing on clothes and toys. It served to ease our conscience just a little.
    As for outsourcing, $300-$400 per month seems like chicken feed to many in Australia, but it is true that In the Philippines their general living expenses are lower, so they live relatively well on our support.
    I see the people of the Philippines as living perhaps one generation behind us. I gew up in Scotland where people were desperately poor, and you know what? We survived. We didn’t feel poor. We had shelter, food, love, and warmth. My parents ensured that we were educated and now we live in OZ!!!
    People in third world countries need our support. They are proud and want to work. Having honourable work is a status symbol.
    I am pretty new to online marketing, and I so look forward to making some money, in which case I will have no hesitation in hiring a virtual assistant. And it will be my absolute pleasure to be able to support the country in other ways as you do.
    Do you think having you visit my blog might start the ball rolling???????????

  • A very heated topic.

    We all, put food on the table, take care of the ones we love through commerce, the exchange of goods and services.

    You can make decisions for selfish reasons or for the best out come on both ends of the spectrum, for everyone involved.

    Only you can make that decision and others will interpret any way they want.

    If you’re honest and make your choices based on what will be the best outcome for all and not so much what is politically correct, you’ll be able to sleep better at night.

  • Yaro,

    As far as the argument that when you outsource, you are taking out cash from your country is concerned, I have this to say: if you spend (say) $500 on outsourcing for a project from which you earn (say) $10000 as an internet marketer, then you are ACTUALLY bringing in cash into your country, because your customers are not going be only from your home country.

    As far the issue of exploitation is concerned: as an Indian, I have seen outsourcing play a major role in the middle class boom in India. I have seen thousands of jobs created, I have seen thousands of youth gain employment when otherwise they might have been jobless, or work as menials, which would pay them much less than they earn from outsourced jobs.

    yes, there is a major element of exploitation when you spend (say) $500 to make (say) $10000. But what you do about it is up to your own conscience. This is very definitely a very gray area.

    To be truthful, I have seen much worse exploitation locally in the organized sector: local companies that take up outsourced jobs in bulk squeeze their employees mercilessly, paying them a few meager cents on every dollar they make from overseas. The rest of the money goes to the fat cat promoters in their air-conditioned offices, and to the voracious shareholders.

    Now THAT is exploitation!

  • You need to remember that economies differ in different countries. $300 a month is nowhere near enough to life off in the UK – but that is a lot of money on Bolivia or maybe Philipines.

    It is only relevant to thhe LOCAL cost of living.

    A few years ago when I first hired an outsource person I wrangled mentally with exactly this issue – that it is slave labour, exploitation etc – until after one month of this outsource programmer working for us he emailed me to say how crazy-happy he was because finally he was able to afford a new Executive swivel chair which no one else in his town could possible afford and which he had never been able to buy before – and he thanked me for enabling him to do this.

    Regional differences in economies are a natural state and needed for people to interact. To attempt to homogenise all countries would kill the entire global.economy.

    Think about why people buy… Becuase they need that thing and are prepared to trade for it. Whether I want to buy something with my time or with my money – it is because the thing I am buying is worth MORE to ME than the money/time I am using to pay for it with. The reverse is true for the other person in the transaction.

    If we valued the 2 things being traded equally then no transaction would take place

  • I have read a lot of comments and MOST, not all, business owners who post their opinions say that outsourcing is not exploitation. You are all internet savvy, guys. Check out the synonym or the meaning of exploitation. It means TAKING ADVANTAGE! While OUTSOURCING PER SE IS NOT EXPLOITATION, giving the freelance workers the rate John Reese is promoting, i.e. $2 PER HOUR, IS DEFINITELY TAKING ADVANTAGE! And I think, based on that rate, is what Yaro is talking about. We are all humans, here, right? If someone like John Reese can get away with something like that, would you not envy him and tell yourself why don’t I try that? And from a business owner’s point of view, saving on overhead costs is definitely tantamount to more profits, right?
    MOST of the posters say that $2 per hour is a pot of gold considering that a minimum wage earner in the country you are outsourcing to is definitely way below the $2 outsourcers are giving. That’s correct! BUT – do you give other benefits besides the $2/hour that you give? Minimum wage earners in the Philippines have paid leaves, social security, gets time and a half pay in excess of 8 hours, housing loan benefits (we call it Pag-Ibig Loan), hospitalization benefits, to name a few. If you give those, other than the $2/hour rate, then I rest my case. Besides, as you say, you can give something like that and still save considering the standard of living here. Then you have compared apples to apples. But if not, then I think $2 is an EXPLOITATIVE RATE!

    Another point to consider – you do get resumes from your prospective workers, right? Do you evaluate it based on the education and experience they have? Surely you would not want a worker that is uneducated. Most uneducated people here in the Philippines cannot speak straight English. Well, ok we can forego that because I am definite that aside from resumes, you ask for sample works. That’s where you base your evaluation. Are the samples not proof enough of the quality of work they can give assuming that you hire them?
    Another point to consider – since most business owners do not live in the country where they outsource, how sure are you that just because you pay above the minimum wage, they can already live a decent life? As one poster said, $300 a month in Pakistan, which is a poorer country compared to the Phils and she’s a business owner at that, is not enough, hardly enough! Remember, we have business owners to contend with physically here in the Phils. Meaning, just like your mindset, they would want profit as well. Yes, as one poster also said it could help but since it is not enough, they get other jobs to augment their income and chances are quality suffers! Would you like that as a business owner? Definitely not i suppose!
    Another point – you say it’s a choice. You don’t force this people to work with you if they don’t like. You don’t point a gun to them or scare them if they won’t say yes – BUT – would you say yes, if we say otherwise? Chances are you’ll go somewhere else and look for someone who you could coax into working with you at $2 per hour right?
    So it all boils down into – because this $2/hour is viral, much more so now with John Reese’s outsourcing thing, we will be forever at the mercy of business owners who actually would not care less just as long they get what they want. And if you know Filipino workers. They just don’t work for you based on the job description they have when you hire them. If need be, they work even more. Beyond their call of duty. Most of the business owners who has Filipino workers can attest to that. We are lucky if we get employers who are not slave drivers. Mind you, there are. They ask you to work your butt and give you unimaginable deadlines and when you don’t deliver, they take it against you and drop you like a hot potato!
    See? Now tell me, do we have a choice? We need to survive. And just like one of the posters said, a lighter for an aborigine is a pot of gold!
    But please – help us preserve our self-worth. Teach us how to fish so that someday, we can all be together and talk in one conference room at a posh 5-star hotel perhaps in one of the great countries you guys have visited and not worry about the job we left because we outsourced it in one country. But this time, these workers, get more than $2/hour. Because at one point in time, there was a discussion like this that indeed $2/HOUR RATE IS EXPLOITATION!

    • Very well said, MacSwitcher! This is what exactly what I want to say here. That $2/hour job or even the $300/month that online workers get from these outsourcers does NOT include other benefits that the minimum wage employee/local workers normally get like medical benefits, transportation allowance, social security, paid leaves, annual bonuses, and more. In fact, online workers have to shoulder the expenses required for doing these online jobs like owning a reliable computer, fast unlimited internet connection, electricity bills., etc.

      People, please stop saying that that $2/hour or the $300/month is higher that the average monthly wage for workers from the third world county like the Philippines, because IT IS NOT. It can hardly support a family even with just one or two kids. We just accept these jobs because we don’t have a choice. And when these outsourcers take advantage of our lack of choices, IT IS CLEARLY AN EXPLOITATION.

  • A couple of extra thoughts:

    Inequality – it exists in every relationship – which is why we each get something from every relationship – whether emotional or financial. Think of the inequality of the company employee who is paid a ‘fair wage’ (read as “subsistence”) compared to their boss Director who makes hundreds of times more.

    TAX: OK – so if I outsource I am not paying a local person to do that job, but if I cannot afford to pay local wages then I have no option – or if I was forced to pay local wages I might go bust – and then no longer be a business to pay taxes. On the flip side, if I outsource, while I am not employing locally, my business can do better, and I will pay more taxes – which helps out the local economy

  • Thanks Yaro,

    It is about time someone addressed this issue with thoughtfulness and compassion.

    This is a question I have also had to think about long and hard.

    Some time ago I was really moved by a documentary I saw about how Walmart reconciled their use of outsourcing.

    According to the documentary (I am not in a position to verify this), Walmart established a factory in India (yes, with very low paid workers) to manufacture products at low cost. However, they indentured each of the workers for four years. In that four years that were provided a good standard of accommodation and food and each worker was given a tertiary education and became fluent in English – which were seen as the key to gaining opportunities, higher wages and an overall better standard of living for the future.

    It was not a perfect solution – but did go some way to begin to address the inequality that exists between countries and currencies.

    I love India and I love the people I met there. I have no desire to exploit anyone, and I have also seen what a difference income and opportunity can make. So, after much reflection, I made a similar decision to you. If ever I was in a position to financially profit from outsourcing, I would also consider how it might be possible to give back – in a way that is meaningful.

    Thank you again,
    Cath

  • Your Message
    Remember New World Order? The theory sounds good for the morally lacking, however it is the genocide involved that is necessary for progress. It is happening today, Darfur, stir any emotions? Probably not, spell checker doesn’t recognize it. how does this relate to outsourcing and exploitation. When will your country be reassigned to a “3rd world” status and subject to population restructuring? People hollow themselves by saying they are helping outsourced persons when they are in fact driving down wages worldwide.

  • Hi Yaro!
    Excellent analysis of a tricky situation, as well as solid solutions. I really admire the way you do business. What a blessing of inspiration you are!

  • Your Message
    Thank you Yaro for advancing this issue. I used to live in a West African country where it was essential to have people working in the household. I remember getting flack from other expatriates because we paid the people who worked in our home more than others in the neighborhood. In addition, we treated people as valued employees rather than servants. The next level of that is what you are talking about–investing back into their countries, communities.

    I am currently not yet where I need to be with my online business and can afford to hire someone from else where. I have hired an intern for $12 an hour but can’t afford to have her do much for me. If I outsource, I can build my online business and help myself get into a better position to help others. Thanks for “connecting the dots” between outsourcing and giving back—for stating what will now be “the obvious” for me.

    Edree

  • I’ve pondered upon this exact topic. I personally would rather hire someone within my country (USA) and more importantly within my state (Michigan). But, and I mean a big but, the ones doing the outsourcing here in the USA expect to be paid a lot more than what someone overseas expects. What we are accustomed to is what drives our expectations – in both payment and job performance.

    A few years ago I signed up with one of the big online outsourcing banks in the hopes of performing simple virtual assistant duties for a reasonable pay. I set what I thought was a fair price for my work based on my past employment experiences. I was amazed at how many people “kicked my tires” but then told me they weren’t willing to pay me what I had proposed. To be honest, I was shocked that so many people wanted so much for so little.

    We here in the USA are not accustomed to receiving $300 – $400 a month to work full time. People in other countries are more than willing to receive that much a month. I personally would not hire someone from Asia or Europe simply because I would prefer to pay a local outsourcer. But I would not begrudge anyone from doing it – it is their smart business decision.

  • Don’t kid yourselves, you’re not helping anyone. Not the designer who does a GREAT job for 200 bucks, not even your client you lie and charge 10 times more. If your client KNEW exactly that you invoice him this much and somebody does all the job, I assume that client won’t be too pleased.

    Yes, I have worked as “source of cheap labour” when starting freelancing. Theoretically it’s OK: I get constant work from an agency and I eat pretty well. Yes, life in my country should be cheaper (in some areas), gas / food / clothing / electrical stuff are still 2 times more expensive than in the US for instance.

    Still, once my portfolio gets to a reasonable size and I am not desperate to find ANY work, I can become more picky with my clients. Which has already happened. I made it a rule to NOT work with agencies anymore. I work with direct clients, those you people charge 3000 for a site and I can do it for a fraction of the cost. For the price you would pay me and then have them pay way more, just to “support the local businesses”.

    I can understand the frustration of many people in the US for instance over the fact many “3 world country designers” charge way less for a GREAT job (I don’t believe in the “small price means bad work”, since I have done enough work for agencies that would just supra-charge and not change 1 single CSS line I created) and you’re losing market. This is why many clients are still willing to pay “top dollar” so that they can support you. It’s super OK with me, it’s solidarity in the end. We do play “low” because we can afford to get paid less.

    Still, when you charge 3000 USD for a site for instance and get it done by someone for 300 and then just get the money without breathing a word to your client who’s “supporting” you, then it’s not OK with me anymore. I can understand a PROFIT, you’re not in the business to lose money or become a charity, but still, it’s unethical in the end to charge this much and do nothing but intermediate the discussion.

    From what you can see, I kinda handle my English, so I assume my client won’t have issues with understanding my ideas. I have a paypal account, talent and time. I have successfully worked with clients from all over the world, clients who still refer my work and have been very pleased with it. Yes, they didn’t pay thousands of dollars. And more and more clients come to realize you can have a good site for less money.

    In the end I think we’re all wining from this. Some freelancers are OK with working for agencies to get steady work. Some agencies still make a lot of money from other people’s work and (some) by hiding this issue to their clients, who still pay a lot to ‘support’ the local web design shops. Others have started working with direct clients and still earn a decent buck, thus directly competing with the local “shops”.

    I’m curious to see how this will evolve in the following years, that’s for sure :D

  • Hi Yaro from a fellow Aussie (in Perth). Very good timing this article, because I have just hired my first outsourcer from the Philipines today.

    The ONLY reason I have hired someone offshore is the cost factor. I work full time, pay all the usual bills one would expect, and cannot afford to pay an Australian full time employee $30-40K/yr to fulfil the job I have. My outsourcer, by virtue of living in a country that has a weaker economy than Australia, will cost me less than $400/month for now. That I can afford.

    Now, here’s the thing. My current employer pays me between $50-100k/yr to perform my job. I’m damn good at what I do, and it will ultimately bring in $500K – $1M/yr in revenues directly attributable to my efforts. I don’t know what my company CEO makes, but I’m guessing it’s a HELL of a lot more than I make. 10 times more wouldn’t surprise me in fact.

    If, through the efforts of my outsourcer, my business is making 10 times what I pay him, does that mean I’m exploiting him any more than my employer is exploiting me? In AU, people see my situation as fairly normal. Yes, they all wish they could earn that kind of money for doing the job they currently do, but that’s just wishful thinking.

    You do the work, you get paid what is a “reasonable” amount for your time & effort. I chose my job, knowing the pay rate & the work required, so it’s totally my choice. I think most outsourcers are in a similar position – it’s just that our economies are vastly different.

    In the Philipines, the cost of living is a lot lower than here in Australia. By luck, we have a resource-rich nation which we exploit for all sorts of purposes, which explains why our economy is very strong compared to most. However, we could fall into recession or depression as well, & crash and fall, so it’s not guaranteed we’ll always be doing well.

    Having said all that, I have NO desire to exploit my new employee (and if this goes well, I will definitely be hiring more people). I am paying him what HE requested for the job (l didn’t specify a pay rate with the job – I asked them to tell me what they thought was fair) and I am more than happy to pay him bonuses for quality work as time goes by, and raise his pay if he performs well.

    I LIKE the fact that I can make a financial difference to his & his family’s life. If he didn’t have a job, they would struggle, just like I did last year when I was out of work for 3 months due to illness. No income sucks, I can tell you!

    For those who are getting too moralistic about this, I say: if you own any products (clothes, electronics, utensils/tools, etc.) made in 3rd world countries, drive a car made in a cheap labour economy, travel to & enjoy the pleasures of that sort of country, you are a hypocrite! I doubt there would be more than 1 in 10,000 people who did none of these things.

    Get off your twisted moralistic high horse and start hiring these people who DO want jobs, pay them FAIRLY and treat them well, even if it’s not the same wage as someone in your home country might earn, and get on with building a successful business.

    Once you’re doing well enough, go to that country, set up a charity and make sure it is well managed by a paid employee in that country who will do a good job at seeing your generosity actually benefits those who need it most.

    Every country in the world has a different economy, and wages are all relative. If $400/m is a reasonable wage for the work your outsourcer does, then there’s no need to feel you are exploiting them. Pay them bonuses if it concerns you. Of course, if you genuinely are exploiting them that’s a different story all together!

    Anyway, thanks for bringing up the subject Yaro. I enjoyed the post & reading the comments.

    Eran

  • Jen

    A lot of people are repeating the same happy talking points, yet the icky nagging feeling remains for me.

    The problem is not outsourcing. On the individual level, in most cases, both parties benefit.

    The problem is the institutionalized inequality from which outsourcing derives those benefits.

    As the economist pointed out, for labor to remain cheap, there must be a large supply of workers who need jobs. What’s the best way to guarantee a large supply of cheap workers? Value some people (royalty, ceo’s, developed nations), while devaluing the rest (serfs, slaves, third world countries).

    Call it slavery, feudalism, indentured servitude, sharecropping, or outsourcing. They’re all different forms of the same institutionalized systems of inequality which generate huge profits for some, while leaving many to struggle to eat.

    Just imagine you are a farmer or merchant in the colonial US. The wealthiest men in town have slaves. New slaves are shipped in and sold everyday in the market square. Your friend says his slaves are happy–”like members of the family.” Your pastor says they were naked in Africa and now they are clothed; they were godless in Africa and now they know Jesus. You are doing them a favor…

    Besides, it’s not like you’re going to stop this slavery business if you buy one or two to take care of your family. It’s bigger than you, and you’re not responsible for what other people started. Plus, you are a good person and will treat your slaves well, so if they have to be here anyway, they’ll be best off with you.

    Happy talk doesn’t make it any better.

    Somebody mentioned choices. Yes, we all have choices. As citizens in the so-called “free world,” we can choose to lend our weight to institutions that depend upon and perpetuate mass inequality. Or we can choose to find other ways to support ourselves, share the wealth, and have a good life.

    P.S. Are wages up in India because so many people were outsourcing there, or because of changes in government and education? I suspect the latter.

  • hey Yaro,

    It was great to read this post.

    Well, I am an Indian and I used to work with Oracle till very recently (Oracle, India).
    I was an analyst and we worked in a global team. So, there were europeans, aussies, and americans in our team :-) Truth is we were definitely not paid as well as those in the developed countries. And please note that we were never less qualified for the job. All of us who were recruited went through 5 rounds of interview before getting the job! ( though i think the gruelling rounds were uncalled for :-D)
    But, did I think that this was exploitation? Actually, NO!
    The reason is that the company paid us what the average Indian market would provide. We were able to afford a very good lifestyle. So, it did not affect me that my fellow co-American was being paid $60 dollar an hour whereas I was given a fraction of it..As long as both of us can manage the same lifestyle in our respective countries, does it really matter?
    Moreover, fact is outsourcing is here to stay..The people in developed countries need to be more competitive to get employment and people in developing countries need to get even better to stay put with the competition.. As Thomas.L.Friedman says “The world is flat” :-)

    P.S: You write really well.. love your blog!!!

  • If I were to find a 2.00 per hour person to do the tasks I needed them to do,
    once they ended up doing a great job, resulting into an increase in revenue,
    I would pay them much closer to what I feel that person should be paid.

    I as the employer would not be greedy, as I believe in several universal laws.

    It is however of my opinion that if a person chooses to “accept” working for 2.00 per hour for the work that they do, and an employer does not increase the 2.00 per hour to a higher rate for the employee, and the employee chooses to remain working for this employee,
    I believe then that this employee should be considered to be making the same choices
    similar to a person let’s say in North America, Australia, Europe, who “accepts” a minimum wage job.

    Both persons individually have opportunities in time to ask for a raise,
    and or increase their knowledge, education and experience,
    and use that leverage to turn all of this into a gradual increase in revenue for them.

    I could of course also feel sorry for a person here in North America who works for minimum wage. But I myself started out as such, and used my own drive and motivation
    and determination to work my way up.

    Over the years I was still not happy, as I needed more free time and more revenue etc,
    so I started my own business and now work from home full time.

    That in itself was “up to me” and the choices I decided to make,
    based on whether I was happy with my income, free time etc..

    Therefore, here is where I feel it’s also up to these 2.00 per hour individuals,
    to better themselves and find ways to move up in income eventually.

    Those persons could “choose” to eventually market themselves to marketers
    who pay 10, 20, or more per hour, once they gain the confidence to know that they are able to ask for more.

    Who knows, maybe they can market themselves for 10, or more per hour “right now”,
    instead of accepting 2.00 per hour.

    Is it not based on the same resume game that we play in our countries?

    Experience + education + skills, = demand more income?

    Arnold Stolting – Stolting Media Group

  • Yaro,
    Great article. I’m glad to see that someone successful, as yourself, is willing to look deep inside yourself and see if “greed” is devouring your soul. I commend you. This discussion is needed. You are absolutley correct – how much more money do you need to make once you are living comfortably? I do believe the markets do some correction, but I do not believe that greed does not keep the markets from correcting fairly. I believe in entrepreneurs, as they create jobs. Unfortunately, these past 2 decades have created some entrepreneurs to believe that they MUST make more and more and more money no matter who they hurt or take advantage of. That greed has brought the global economy to near disaster. The results of that greed are still not over.

    Your article is a glimmer of hope that we, as humans, have started to come back to reality. I’m from the US. Our western ways of accumulating things has become sick. I am not saying that free enterprise is bad – or all of us would not be in business. I think we have lost our way. Your article gives me hope that we are getting back on the right path.

    Yaro, I agree with you that outsourcing does help those in 3rd world countries. It gives them the ability and hope to better themselves and others around them. I do agree with your idea to start giving to others in those countries to help them live a better life. I think assisting with education is the best place to start. You can give once, but if you teach, you keep on giving long after the gift is used.

    I realize the US has opportunities. But not everyone is meant to be a business owner. Someone has to do the work. When my business grows to the point that I can afford to hire someone to help, I plan to hire someone in the US. I only sell to the US and Canada, so I feel obligated to give back to my customers. I only sell products that are made in the US or Canada so I am keeping someone employed.

    That is my opinion. I wish you well in your endeavors and appreciate your courage to question outsourcing.

  • Hi, Yaro. I just want to point something out. I don’t know about the Philippines or Thailand, but the average wage in Romania is $500 and that’s not enough to get by even for one person if that person needs to pay rent.

  • While it’s certainly noble to take this discussion to some humanitarian level of equality, it’s just not what the reality truly is.

    And I’m sorry, but in my opinion, it’s like this post was created simply to justify in some way the promotion of Reese’s product.

    You never really DID come out and say what your position is – only that it’s some kind of moral dilemma.

    For me, it’s simple.

    From an outsource worker’s standpoint, if I were working in one of these third world countries doing the same work or better than someone from a nation like Canada or the USA, I would be completely resentful. Why should my geographical location make ANY difference to the value placed on my work?

    Now, an outsource worker in the USA wants to put food on the table for HIS starving children. And he has no choice but to charge more for his services. Why is he passed over? In his case, he is forced to lower his prices to compete while people in other countries get to send their kids to college and go on vacations because it’s cheaper to live there.

    To me, it’s not a dilemma at all. If and when I outsource, I do so in my own back yard. In doing so, I assist in my local economy. I don’t have issues with time zones or language barriers. I can get high quality work right here, and frankly, people in OUR countries are far more likely to go the extra mile to keep your business.

    A few of the commenters here made some excellent points. And Michel Fortin had some great points as well – which was where I saw your link, on his Facebook inside that discussion.

    But reality intrudes.

    As much as we all wax poetic about some utopian global economy, it isn’t a reality – and likely never will be. There will always be the “haves” and the “have nots”. The thing is, if you need a moral ground on which to base your outsourcing decisions, then take a look at the unemployment and welfare lines in your own city, your own country.

    And to those outsource workers actually accepting $2/hr for work, stop undervaluing yourselves! Get a domain and hosting in the USA or Canada and charge what you’re worth. Don’t compromise based on your geography! Who needs to know where you reside?

    I’m sure I could go on at great length, but I would imagine that this comment will get lost among so many anyway… but I felt the need to respond.

    Warmest regards,
    Lisa Preston

    • Hi Lisa,

      If there is a person who has a company with only a few hundred dollars to invest in employing someone because they have just started up and no one in Canada or America or Australia will do the work at that rate because it is too low, yet someone in Thailand considers the money very fair for the work – what should that person do?

      • Frankly, I think he should put his money back in his wallet.

        I don’t think that outsourcing in the initial stages of business development is the wisest use of the tiny amount of capital available. I believe that initially it’s important to shape your business structure and learn as much as possible about all aspects of your new venture. As you learn, you can streamline your processes and develop a system that is profitable on a consistent basis.

        Once you’ve spent the time needed to really learn the skills and processes that you plan to outsource, you’ll have a far better grasp of what to expect from outsource workers – and exactly what to ask for, and how long it should take. Now, I’m not talking about becoming a professional in any of these skills; I am talking about learning enough about every aspect of your business so that you understand the value of the work required, the time it takes, and if it’s truly necessary to outsource.

        Outsourcing is a great solution to removing rote tasks or time consuming items from your own “to do” list, but it’s not recommended for anyone who doesn’t have a firm grasp on his business – someone who is making a profit, and enough to afford it.

        One last thought – if I had a consultation with a new business person who (for instance) wanted to outsource the writing of a new ebook, and he only had $300 in his wallet to get the job done, I would recommend that he consider creating a relationship with a writer (jv perhaps) instead of parting with his cash so early in his new venture.

  • This is definitely one of the most thought-provoking posts I’ve read this month. I personally think outsourcing is not exploitation. It is because I tend to focus more on the positive side of outsourcing in that its main goal is to help people and not to take advantage of them

  • As a jeweIry designer in NYC, I would love to manufacture locally 100% of the time for the sake of quick turnaround time and good quality but consumers are so cheap and so uninformed about labor costs and the price of quality. I feel pressured to go overseas at times against my will because no one will pay for U.S. labor (though they sure want to be paid for their labor). Just today I got some great press but there’s a sort of obnoxious aside about my price: http://www.nytimes.com/2010/05/20/fashion/20scavenger.html

    I don’t produce poor quality items in the thousands…I produce high quality one at a time and in these days of Wal-Mart, it takes a special person to appreciate such a product. I wrote about the issue more here: http://wendybrandes.com/blog/2010/01/get-smart-about-manufacturing/

    Thanks for this article…hope lots of people read it.

  • This is such a nice post and a great eye opener. I realized I’ve been working as a slave worker as I’ve been in the outsourcing industry for almost a year now. I am Mon from the Philippines.

    Great job! thumbs up!

  • Hey Yaro and Everyone else, very interesting topic, it took me ages just to be able to scroll down in order to write this. I think the fairest thing to say about the topic is : If a person is willing to work for a set price then allow them to do it. You set out what they are going to be doing for you in certain periods of time, they get the job done, they get paid. Very simple math. The biggest problem I see is when someone does a really good job and they don’t get any bonus’s or pats on the back. If you listened to John Reese he spoke about how he would buy computers and give bonus’s to those that did really good work for him. This knocks down the exploitation. If the people that are doing the work feel as though they are being exploited in the first place, why do they agree to work for the said amount in the first place ??

    This debate can continue for days and months but all in all it comes down to the most simplest thing. When you agree to work for a certain amount then that is what you are going to be getting paid. If you want to improve on how much you are being paid then you must negotiate being paid at a higher price. If you are a good worker and you want more money, because you have proved yourself valuable to a company then negotiate to get more money. Isn’t that what so many people in the “western world” do ???

    I pretty sure that if you had a good worker that proved themselves to be a benefit to your company, that one day turned around and said “can I have a $100 per month pay rise?” A lot of people in the internet marketing business would without battering an eyelid turn around and say yes. If the person doesn’t prove themselves and asks the same thing then more than likely they will just be replaced. A bit like what happens in any country at any time, the words “If you don’t like it then sod off” comes to mind when I think of that.

    So it’s not really a matter of exploitation, it’s more to the point of differences in the cost of living vs expenses vs willingness. If you don’t like what your getting then change it, if you agree to what you are getting than that is what you are going to get. There is also the point of, when you outsource you are taking a risk that you agree to pay someone a certain amount but the work which they supply is not up to speed, and because you have given them a contract you may be going out of pocket in order to discover that true person who is going to give the best to your business, instead of just going I’ll work for said $ then give you dribbles of work.

    Exploitation is in essence the decree to one person’s acceptance of what they are worth and the acceptance of another to just pay them what they ask for no matter how good or bad they have worked.

    “You get what you give … the more you give the more you’ll get”

    Klay

  • Thanks for your post. I’m an American living in the Philippines and I think this post brings up several points I have wrestled with a bit. First of all it does bother me when I see companies exploiting the resources here – from Call Centers to Korean English school. However, I do appreciate outsourcing companies that offer employment to the massive qualified workforce here because it really does help the people.

    As a small entrepreneur who is trying to develop a system of outsourcing that could satisfy both ends, this is the approach I’m trying to take. First, I’m keeping it small. The reason for this is so that I can monitor the workers and give continual training to improve the quality of life of the workers, qualifying them for better positions (and better pay), and providing quality service to the clients.

    Next, our rates are not $2/hr rates. Instead, they are rates that are still below what Americans would pay to hire someone but I hope they would still see the value behind what they are paying for. It also allows us to give extra training and make sure that we pay the workers well.

    One other thing, is that we want to be fair with our employees giving them the benefits they deserve and fair rates. It bothers me to hear applicants tell me of bad experiences they have had with other employers who have made them work unreasonable hours without paying overtime, etc.

    In the end, cost of living in the Philippines is much lower than in the States. If a person is willing to be fair with whoever they are doing business with, and not consistently ask for a cheaper price, it benefits both sides. The person who is outsourcing, makes more money to spend in their economy while the person receiving the work, earns money to spend in their economy. I guess the other option would be hiring in their own country, keeping their profit margins down, which would result in less of their spending . . . this doesn’t necessarily help their home economy either.

  • If you have enough money to take care of yourself and your family already, then you should pay the worker a standard, fair pay that you would pay any human being.

    However, what if you don’t have heaps of money your self, and outsourcing is not fair but is an improvement on the situation of these people. So wouldn’t it be better in this case to outsource, which is doing some good, and is making things improve, better than not outsourcing at all? And as you make more money, you also increase their wage?

  • Ok. This is my 3rd post and I just can’t stand not commenting based on the most recent comments. And Yaro – since you have access to John Reese, perhaps you could share with him as well that the statistics surveyed/compiled by the Trade Union Congress Philippines on Poverty Line Threshold as of February of last year was P15,490.00 per month converted that would be approximately $362/month. When you say poverty line – your access to the very basic needs, as in basic. No cellphones, no internet connection, no laptops, no telephones.

    So suffice it to say, the $300/month is, yes, above the minimum wage but definitely below the poverty line threshold.

    • Totally agree!

      I just had a conversation with my lawyer and he was telling me that the Public Attorney’s Office offers free legal services to poor and indigent citizens. I asked, “Who are considered poor and indigent?”

      His answer? If you are earning Php14000/month, you are considered by the Philippine law as indigent.

      You know how much Php14000 is? That’s USD341! So listen up, you guys! Don’t think that the Filipino outsourcer that you are paying $2/hr is rich “in his own country”. Hello! Your worker is “poor and indigent” while you are raking in thousands for your business!

      So tell me, is $2/hr exploitation?

  • That’s interesting MacSwitcher…your comment on the poverty levels.

    Have a guess what the Govt in Australia classed as poverty level 8yrs ago?

    $1,000 a week !

    The majority of hard working family men doing labouring jobs on & around the Gold Coast in Qld were only bringing home $480 a week in 2007-8….

    Australia is fast becoming a “rice bowl” economy, where workers compete to be the lowest paid here too! Check out the taxi drivers in Sydney & Melb.
    Check out the trolley boys in the supermarkets here…haven’t seen a 15 yr old kid doing those jobs for a few years now.

    Globalization is here, is changing the way we think, work & where we live.

    Money always follows value, always has, always will. The people who do work for your outsourcing dept will grow in skill sets & will become more valuable in time…same as here, only we have the unfortunate problem of unions preventing exceptional workers being paid more in their current job.

    My friend’s son worked in a supermarket a long time ago & he used to get an extra $20 note in his weekly pay envelope & would say so to the boss. The boss said…”Take it & be quiet. I can’t officially pay you extra because of the unions, but you are worth every penny & then some, but as you are only 15 yrs old, your wage is $120 a week…you do 3 times as much as the others, you keep that extra cash sonny”

    Nothing new under the sun…

    Kindest,
    Poppie

  • @Poppie – just an update. :-)

    The Poverty Lines for the December Quarter 2009 – The Melbourne Institute of Applied Economic and Social Research has updated the poverty line for Australia to the December quarter 2009 Inclusive of housing costs, the poverty line is $753.49 per week for a family comprising two adults, one of whom is working, and two dependent children. This is a decrease of $4.67 over the poverty line for the previous quarter (September 2009). Source: http://www.melbourneinstitute.com/labour/inequality/poverty/default.html

    Simply put, if you would compare it as one is to one, the per week equivalent of the $362USD poverty line threshold for the Philippines, would be $90.50 per week. If you would compute the $2 hourly rate by 40 hours in a week, that would give you $80 per week. That’s still $10.50 below the poverty line threshold. :-)

  • I agree that the ultimate solution is to not be greedy, but there’s also a win-win opportunity here. There is a small but growing sector of social outsourcing organisations that provide a “fair trade” alternative. The ones I know of are solvepoverty.com and samasource.com.

  • [...] be seen as being exploited. I was interested in what yarro Starik had to say about outsourcing at Is Outsourcing Exploitation? – Entrepreneurs-Journey.com by Yaro Starak the post generated over 200 comments in a very short time. One of the replies took me to this [...]

  • Hi Yaro,

    I come also from low-middle income country. I live in Indonesia. In my country, most blue-collar worker will kill each other to get a job with 500$/month. And none of them will consider it exploitation. Even the white collar worker (who graduated from universities) only get 300$/month in their first job, but of course they get an increase after that. But for real, that amount of money is not enough to live, maybe that’s why my country has a big rate of corruption. And many people search for second job in order to make a better living. You can outsource people from my country if you want to, but those who speak English well is not as much as in the Filipin though.

    In saying whether this is exploitation, i think you must ask the person you’re working with. Whether they consider this as exploitation. If they say no, that’s it. It would be better to have some money to earn rather than starving. But of course, if you want to make yourself feel better, to get a peacefull mind, give them a raise every year, or something else you can give them…
    Trust me, they will be even more loyal to you. and do the best in everything.
    At least that what i’ll do if I were them.

    Thanks anyway to make this as a topic
    Noveline Sagita

  • I personally dun see outsourcing to third world countries as a means of exploitation. In fact they are paid more than what they work for. Even if you don’t employ them and they work for someone, their boss is making big bucks and they are paid even lesser than what you can offer.

    To me, I think that you are indeed helping to improve their lifestyle.

  • Bravo, Yaro, on an excellent, thought-provoking article. You’ve raised all the important issues. As you rightly conclude, outsourcing per se is not exploitation. Nor is it a black and white issue. There are many shades of grey.
    Most of us don’t know for sure whether $2/hr represents a ‘fair wage’ in the countries concerned. But I think we have more than a sneaking suspicion that it is not, no matter how much we like to rationalise to make ourselves feel better.
    We all know that $2/hr in the Phillipines has no relation to the same sum here. Let’s forget the actual numbers. The real question is: does $2/hr in the Phillipines allow an equivalent lifestyle to an ‘average wage’ here (I’m in Australia)? I think not. An average wage in Australia allows a reasonable lifestyle. In the Phillipines, it would seem to provide merely a subsistence level. The ‘average’ lifestyle is poverty.

    I’m grateful to Honey for presenting her viewpoint and providing an avenue for outsourcing at a fairer rate. I hope numbers of you avail yourself of the opportunity.

    What I don’t like is the attitude that it’s OK for us to aim for making mega-millions in ‘passive income’ while getting essential work of a skillful nature at the lowest possible price (regardless of where it comes from).

    There is much one could say, but time does not permit. I’d like, however, to respond to some of the comments:
    —-
    “I intend to live in those countries I employ from”

    Presumably on a wage of $2/hr?
    —-
    “As long as all concerned agree to the contract, all should be fine.”

    If it’s a case of surviving or not, people will agree to anything, no matter how unfair. If you’re used to having nothing, a little is great.

    “People in countries like the Philippines have a lower average standard of living (in terms of money) ”

    Why the qualification? They have a lower than average standard of living period. And by paying them peanuts we are supporting this.

    “I have a need. Somebody in the Philippines (or elsewhere) is willing to fulfill that need at a set price”

    So if some desperate person came to you in your country and offered their services at $2/hr for highly skilled work, you would take it? If you are caught doing that in Australia, you would be prosecuted.

    “To call paying someone $300USD per month as, say, a graphics designer “exploitation” is ludicrous”

    Why so? Is the graphic designer on $300/m equivalently better off than someone who enters data? Apparently not. Graphic design is a highly skilled profession, requiring intelligence, talent and specialised training. Paying them the same as an unskilled worker is what is ludicrous.

    “But to call paying a fair wage for honest work “exploitation” sounds mainly like the cry of those who never gad to actually work for a living in their lives.”

    What a silly totally unsupported statement! The question is “IS it a fair wage for honest work”. Citing other cases of exploitation in our own societies is not a justification for exploitation in another country. After reading Honey Young’s post, I doubt that it is a fair wage for honest work.

    “when you want a gallon of milk or a package of cheap underwear, I can pretty much figure you’re heading for Wal*Mart … I know I do. (every few years when I’m in the US, that is).
    “What intelligent and right-thinking person wouldn’t?”

    Getting things at the cheapest possible price is not necessarily intelligent, though it’s certainly self-serving in the short term. I make merely an average wage in Australia (partially because my work has been undermined by outsourcing :-). I wish I could say I always live up to my principles, but I’m as self-serving as the next person. Nevertheless, I often ‘suffer’ by paying more than I have to to avoid places like WalMart. Yes, I buy Chinese goods, if there’s no option … and often there isn’t. The sad thing is that companies that prefer to employ Australian labour can’t compete.

    I wonder what our ‘entrepreneurs’ will do when there is no longer cheap overseas labour to contract … possibly draw on the increasing number of desperate people right here at home who no longer have work because of outsourcing. Oh but that won’t work, will it, because our unemployed get more from social security for doing nothing than you are prepared to pay for skilled work.

  • From my own experience I learned that a $2-per-hour makes a catchy headline but it’s unrealistic if you look for quality. Together with my business partner I started outsourcing just to learn that we had to put so much time in recruiting that in the meantime we could have done the job ourselves. That was the point where we stopped the whole project.

    From the beginning we decided to pay a higher wage once the product sells well. In fact the question is this ‘How to outsource without feeling bad about it?’ because the main reason for all the concerns is that you are looking for arguments that make you feel better.

    By the way I’m pretty sure if you really find a Filipino who is doing the job as good as you need it to be done and you pay for example $6-per-hour (what still is a low wage), this same Filipino will outsource his work to another Filipino for $2. In this case 2 Filipino’s will win, you win and most important you will feel better.

  • @Carmel – you hit it right on target Carmel. I agree with you 100%. Online freelancers like us should be treated with some respect as human beings and not some pets. :-(

  • Because of the disparity in US-Peso exchange with US dollars having a higher rate, many Filipino freelancers will bite that opportunity for $2/hr. But if the ratio of the US-peso exchange is 1:1, that’s a different story and there would be an outcry among the Filipino freelancers since the average rate per labor hour in the Philippines is almost Php 40. Dollar earners in the Philippines is now concerned of the peso evaluation as this trend is continuing. And not just perhaps, but it is a reality that $2/hr seems minute because freelancers are mostly college-educated and have the tendency to seek for a white-collar job much higher than $2/hr in the Philippines.

    My point here is that outsourcing can be bad or good and there will be exploitation if you fail to account the situation of those you accept to outsource certain jobs for you.

    There is nothing wrong with outsourcing when you know who you are dealing with and that you also provide benefits to your subcontractors. But sometimes many Filipinos sometimes take the chance of the meager pay out of desperation or perhaps they want to be competitive. There are many reasons. It is not about poverty( although that is also a factor). It is about motivation or the lack thereof.

    Many freelancers are professionals here. They seek freelancing to augment their income because the standard of living here in the Philippines is increasing and they want other jobs that don’t require intensive manual labor but techie/talent/ skill-based. Knowledge economy, although I don’t have exact figures, has begun to rise in the Philippines with IT and outsourcing among the major industries where many Filipino professionals are now part of.

    And many of these professionals are also into Internet Marketing but they seek freelancing to supplement their income. But then, it would be better to provide the freelancers the proper rate that corresponds to their skills and experiences as well as performance. Actually, there is a problem with outsourcing here in the Philippines because of the high turnover rate.

    Why I know this is because I am a Filipino freelancer too. I want a better life and better opportunities for my country. The Philippines has a lot of potentials and many people here don’t see the gold that are just sitting right on their backyard. The sad truth here is that many who find it have to undergo exploitation.

  • Just a thought — doing the right thing never needs to be justified.

    I can’t remember where I heard that, but I believe it is true. If you need to justify doing something then perhaps your conscience is trying to tell you something.

  • There are definite benefits to outsourcing – inexpensive labour being just one of the many… however (and this can be a HUGE however), be aware that there are certain rights that you can fore go with using international outsourced labour. IP rights are a growing industry and there can be major hiccups dealing with this issue if you are outsourcing to an international company or individual. You must keep local laws and rights uppermost at all times when looking for a contractor. Time frames are also an issue you cant exactly knock on the suppliers door if delivery is not made on a finished project. I don’t feel it necessary to outline every failure point in international outsourcing here but the biggest is trust. You are entrusting YOUR BUSINESS to someone that you may have no reasonable way to pursue if there are issues that may cost you the business you outsourced in the first place. I will however mention an analogy that comes to mind when thinking of outsourcing – you can buy 40 fry pans at $10 a fry pan and get the same life time use as one that cost you $100 in the first place and came with a 20 year warranty. Sometimes in the long run it is better to pay the extra price for the quality goods with the warranty and the local service centre!

    • Your Message

      Yes, buyer beware. I purchased a website in February from Blogging to the Bank, a UK based service, and it has never worked. Despite many emails to the designer no attempt has been made to fix the problem. Having been told to be patient as they are very busy I’m now handing it over to a more local service.

  • wow..so many comments..agree with the topic though..some nice comments from the readers

  • [...] This is a response to Yaro Starak’s Is Out­sourc­ing Exploitation? [...]

  • There are two reasons for outsourcing , first people don’t have knowledge about thing which they outsourcing second they want to earn more by saving their time. Normally outsourcing trend is to outsource to those how want to have work at low cost they don’t care about quality and most of time harm the whole project.

  • Just a follow-up…

    We sometimes fail to recognize the differences between outsourcing and off-shoring, as well as outsourcing and employment. That is what I have observed so I have a made a blog post on it.

    This might help and I hope it’s okay to have a link here:

    http://www.bjornbern.com/2010/05/contrasting-outsourcing-employment-and-how-to-exploit-in-outsourcing/

  • I just want to say that by the end of the day, there’s just one main thing that’s important – everyone needs to be happy. If the business manager is happy, if the outside project manager is happy, if the company or person overseas, from whom the project manager orders the service is happy, then where’s the problem?

    And you don’t even need to think or talk about outsourcing to Philippines. Not necessary. Independent of the country you are talking about, there are people and businesses, doing exactly the same thing, but one is earning 10 or 100 times more. Even though we might not consider this is unfair, it often comes from the facts that 1) Some people and businesses do something different than other 2) some people and businesses need to make more even just to survive. Even in small countries, the average income levels in different towns may differ 2x simply because of the costs involved in living in that particular town.

    I agree, $2 an hour is not much. But you do need to think of the bigger picture. I might get a cheap beer in a bar for $2, someone from France might have to pay $6 to get the same beer, and someone from Philippines might get 4 beers for $2.

    What I want to say – obviously, if I do the same work as you do, we’d all want to be paid the same amount. But at the same time, it would be good to think about the background system. And what I mentioned before, as long as everyone involved are satisfied with the number you’re getting, where’s the problem? Even within our own small communities we often choose the one supplier with good quality and best prices.

    The topic is complicated, agreed 100%, but I think the happy-factor is the most important here. I might feel being exploited because I don’t make as much as Donald Trump or even you, Yaro, but that’s just life.

  • Hi Yaro,

    First off, I’d just like to say thank you thank you thank you for this blog. I came across it a week or so ago and can’t seem to find enough time (minus the 2 jobs I have) to devour the content.

    That said, I don’t think of outsourcing as exploitation. My stance is if you’re on a limited budget (like me), can’t do all the work in your business yourself (like me for lack of time), willing to work with your team (assuming you’re hiring more than one persons), willing to give bonuses and incentives for loyalty and service, etc then I don’t see it as exploitation.

    One last thank you Yaro. I’d like to say a special thank you for Membership Mastermind and Become A Blogger Premium. As soon as I can afford them I plan to make them a part of my online repertoire.

    God bless..

    Lady J

  • I was glad to see you tackle this Yaro. In a country where people are obsessed with “cheap” clothing, fast food, and other such goods–few think of what it means on the other end.

    If you support those types of commerce, the chances are you are support slave labor and the substandard environments those products are produced in.

    As a professional writer, when I first heard of people selling articles for $2-$5 it made me ill since it has taken a lot of work away from people who produce good, original content.

    However, as someone who has been limited by budget–outsourcing sometimes fits well but the one I use gets paid a fair wage–which is about a third to half of what I could hire in my area.

    You see I looked first.

    Then when I hired someone through an online service, they were protected and so was I. But, I was looking for a fit, someone with a skill set AND that I could afford.

    In the future, I’d love to see how others not only provide regular work but also reward those workers.

    Outsourcing is not something new, people have always hired other labor and skill sets at lower wages to get a job done. What is different is the online movement toward it brings the awareness of it to a different group of people–and we should take notice.

    Most people fail to understand the cultural and wage differences that exist and so pondering such things is worthwhile–and implementing a fair and conscious choice is a good answer for me.

  • Yaro,

    I enjoyed the post but allow me to play Devils advocate here. Reese did mention hiring $2 an hour labor from overseas but he also stresses to treat your staff fairly with bonuses, incentives and so on.

    On another issue, when it comes down to it, one thing I didn’t see in your post was the great value that those in countries with deflated currency benefit from the exchange of a stronger dollar earned. For example, i’ve know someone earn as little as $20,000 USD and build a house in their own country.

    Of course, there are those that exploit people regardless of location, ethnicity or any other factors. These people in my opinion need help. My take on outsourcing is that’s its great to build your business and you should support local talent as you can afford it as well.

    If you can’t afford to pay your outsourced workers bonuses or incentives. A ‘thanks for your help’ or ‘I appreciate your help’ can go a long way until you can.

    Dwight Anthony
    Financially Elite Blog
    http://financiallyeliteblog.com

  • Well in my experience its hard to choose a good team thats capable of working on your project. Even with good reviews on the net most of the time its just a waste of money, few exceptions here and there.

  • Gideon Shalwick recently hired a full time Filipino at around $400 US a month?
    In Indonesia, You can hire full time Indonesian for $80 US a month.Seriously.
    $400 US a month in Indonesia is umm..maybe it’s a little too high.

  • Is Outsourcing Exploitation?

    Here is my 1 million-dollar question for Yaro or anyone who can help shed light on this ??

    Jay Abraham talk about paying based on performance. I bet a lot of US based marketers will NEVER propose that to the Philiipinos; and we say we are really helping them to grow their economy?

    We know damn well that our business models will make thousands for us. and these “poor folks” are the ones who do the dirty work so to speak.

    So how do we define exploitation in this context?
    What is help, what does it mean?
    We make a profit of 100,000 dollars on a project and give the poor phillipino worker 500 dollars bonus and that means what?
    I guess I am not as smart as these other folks!

    That is my own 2 cent!

  • Outsourcing is a very tough subject when we talk business but I think, as you said it, there needs to be professionalism and humanity involved.

    I know $2 would be a lot to many workers around the world but if you’re making an absolute killing off of their work, I think they should be paid more or at least given a very hefty bonus afterward.

    I think it’s also important to build a relationship where the benefit between the two parties isn’t just monetary gain. Their work should help you out but in return you should also be going above and beyond to make sure they’re in a position to benefit greatly as well.

  • I got in touch with some people at Kiva regarding projects in the Philippines, and they gave me back this link -

    http://www.kiva.org/lend?queryString=philippines&status=fundRaising&gender=All&sectors=All&regions=All&sortBy=Popularity

    If you’re currently outsourcing to this country (and many others), Kiva looks like a brilliant opportunity to give back to your fellow entrepreneurs.

    • @Yaro – nice one! So where does your freelancers fit in this link? :-)

      • Well I haven’t got any yet as we are still looking for talented people. Once we find them and negotiate pay rates and start working on projects, then we figure out the rest.

        This is a process that will take months because you don’t know good workers until you work with them for a while.

  • Thanks for the thought-provoking article -spells out some of my misgivings and discusses them well. I like your current position and am interested to hear how it progresses.
    I agree that Kiva is a great resource – I also like the idea of paying extra to provide training and development for your outsourced employees as you would those at home.
    Thanks for raising the issue.

  • [...] Blogging and internet marketing guru Yaro Starak on whether outsourcing is exploitation [...]

  • I live in a third world country and I freelance on Elance and Rent A Coder. I believe that regardless of where a person lives, there should be a minimum wage that is considered sustainable for a HUMAN BEING.
    Whenever someone offers me a ‘dream’ job that pays $3-5 per hour, I ask them, “Would you work for $3-5 an hour”? If you’re not allowed to pay an American, Australian, Canadian or Englishman $3 per hour, then it should not be acceptable to pay an Indian, Filipino or Chinese citizen that wage. They are human beings too. It has nothing to do with economics, it’s about human decency. If a Filipino or Indian delivers the same QUALITY of work as an AUSTRALIAN, he should be paid the same!

  • [...] Is outsourcing exploitation? I don’t think this article is perfect, but it makes me really happy that someone is at least thinking/talking about it. [...]

  • This is a very interesting topic. Yaro, I think you’ve done a great job of touching upon all of the various sides of the topic, and obviously it has sparked quite a discussion.

    As Yaro mentioned, he did an interview with me where I shared some of my thoughts on the issue. I figured this would be a good opportunity to expand on those thoughts.

    This issue is definitely a concern I had when I first started outsourcing to the Philippines. When I started sending PayPal payments for $200 or $300 a month, something about it just didn’t “feel” right. However, it had dramatically cut costs for my business. So I had to make a decision: either find a way to justify it and feel GOOD about it, or STOP doing it altogether.

    In the end, I asked myself — what would make this a win-win situation for everyone involved? Not only myself, but my entire team, both locally and internationally.

    So I began looking at factors like cost of living abroad and also in the U.S, where much of my local team is based. I looked at what the dollar is actually worth in various parts of the world. This helped me come up with pay rates that I felt good about.

    There’s also the issue of fairness. As a business owner, it’s about weighing everyone’s interests and coming up with someone that best suits the individuals and company as a whole. If you are paying someone in the Philippines $12 per hour and you’re paying someone in the U.S. $12 per hour, and they’re both doing the same job, is that really fair to the person in the U.S.? The dollar is worth many, many times more in the Philippines. So that is something that must be considered.

    In the end of course, I think it really boils down to a gut check. It’s apparent when someone who is working for you is happy, and when they’re not. Several team members in the Philippines have expressed that employment with my company has radically changed their lives. When feedback like that comes in, I take time to consider that outsourcing internationally can be good thing if done with the best intentions.

  • Yaro,

    I agreed with everything you wrote. This is a “gray” area.

    Those that see it as black & white are comparing “apples & oranges” and saying they are the same.

    Until we rid ourselves of countries and are just “Earthlings”, the issue of outsourcing will remain “gray”.

  • I believe this issue was addressed at the recent international outsourcing conference? You’ve got valid points here. I think that we need to step up in outsourcing work and pay fair for quality results. Paying someone’s local rate may not be a problem for some, still, it’s always a moral question. Is it fair to pay $2 per hour when your business makes thousands from these outsourced workers? What people will do for money is beyond me, I recently saw someone working for $0.50 an hour to do excel works. Is it really fair?

  • I think this is a great article as it covers both sides of the argument. While some may consider outsourcing to other countries to be exploitation, I strongly disagree. Using some of the popular freelance sites can prove to be an extremely powerful resource, especially for an internet entrepreneur. I realize many are attracted to outsourcing because of the cost savings, but those who are critical of outsourcing don’t realize that these freelancers set the price. Sure they have to stay competitive to increase their chances of getting the job, but THEY are the ones who ultimately set the price. While these prices are often lower than using someone in the U.S., the dollar goes a lot further in many countries than it does here.

    I agree that paying lower rates to a qualified professional in a 3rd world country probably doesn’t help the economy as a whole move towards a higher quality of life, but it does better the lives of those looking for freelance work. I guarantee most of the freelancers in 3rd world countries make more doing projects for “low USA prices” than they would working in a local factory or any of the local jobs that are actually available to them. I think it is important to remember that it is not the internet entrepreneur’s responsibility to improve the conditions of a 3rd world country (even though they slowly are). It just seems naive to call outsourcing exploitation if it gives those who are voluntarily “exploited” a chance at a better life given the circumstances they can’t help (like the poor condition of a 3rd world economy and being born in a 3rd world country).

  • Outsourcing is a funny thing.

    I am a serial entrepreneur and the business people that work with hire very talented people, pay them VERY well, and get very rich. Then, after they sell the company, the new management always to save money by outsourcing and drive the whole thing into the ground. Every single time.

    The trend is obvious to me. Find the best people, pay them enough to keep them loyal, and you will be successful. Forget the $2/hour crap. You are missing the point.

  • I’m not an outsourcer myself (although I benefit as a consumer, obviously). I just wanted to add to the pro-outsourcing argument.

    Comparative Advantage plays a role here. If a business can outsource the things it does not do well (maybe programming?), then it can focus on the things is does do well (marketing, distribution etc.). Even though the lion’s share of the benefits go to the outsourcer (in most cases), both still get benefits.

    Nationalism is an issue as well. We should never take for granted what citizenship does for the individual in countries like the US, Canada & Australia. It’d be nice if we could come up with a way to share/extend the benefits of our citizenship to others less fortunate.

  • There are several answers to your concern:

    1) If a Martian entrepeneur would give you the opportunity to double your income while doing the same effort, would you let it depend on your knowledge of the economy and salary standards on Mars?

    2) The CEO of the company I work for makes about 1000 times what I make and we live in the same area. It is not comfortable for me to think too much about that, but to say I am exploited? You do not force your hiree to work, do you?

    3) Our company does outsourcing with India on a big scale. Their price has gone up many times in sucession, since the Indian economy has been booming. We’re moving stuff to Eastern Europe now. The Belgian engineering jobmarket is suffering, because we’re too expensive. The global economy will steadily evolve into one market where the standards for an Indian, Polish or Belgian engineer are about the same. Your move is part of that and it is better for the Filipino than for the Australian, in this case.

    4) Keeping labour local is a bit of a nationalist and not a capitalist argument. It’s a political issue.

    Cheers

    • I used to work for an american company and now I work for a German company.. I live in Romania. Outsourcing is one of the cornerstones of control over my country by western powers. The work that I do would be paid 5 to 10 times as much in Germany. Prices on the other hand in Romania for some goods are as high or even higher as Germany. Gas prices are a lot higher then the U.S for example. The only way you people have the lifestyle you do is because we work for you. My question is where the hell does it stop, where is China going to do it’s outsourcing… Mars maybe… This system will fail because all of us including you actually want the same things… I don’t despise the western countries but this is not sustainable.

      • In order for outsourcing to work, it needs to be a benefit to both sides. In your case, Eduard, it doesn’t seem to be. So my question is why do you bother? Why not find a job in Romania that pays the wages you’re seeking?

        I agree with your point about this not being a sustainable system. But I think in the short term it is part of the solution as it does bring foreign money into the local economy. As local economies grow, the price for outsourcing will move closer to parity, driving the jobs back to local workers. But those who formerly provided outsourcing services will have local businesses to work for.

        It will probably never achieve full parity, but it should equalize somewhat in the future. Some countries will always have an advantage, but the gaps should be smaller and the advantage will shift from time to time as well.

  • According to the Happy Planet Index:

    http://en.wikipedia.org/wiki/Happy_Planet_Index

    People in the Philippines are happier than in either Australia or the United States. Seems like they’re getting more bang for their buck.

    • Or maybe it could be other way around. We in the Philippines could be happier because we don’t have as much money as people in the US or Australia. Just sayin’.

  • I congratulate you for tackling this issue head on. After this, I think everyone would agree that bravery and sincerity to yourself are qualities you’d not compromise. Exploitation is an important, albeit a messy, issue especially nowadays when cyberspace breaks boundaries , patents and property rights. This topic was also one of the controversial subjects tackled during the international writer’s congress last February. Writers had been advocating for a set of standards and labor policies that will protect online writers from exploitation. What was resolved then is quite similar to what Yaro points out—let us not be greedy. There are existing fair trade regulations and this should be applicable too with outsourcing. Additionally, governments, whether in the wealthy countries, or the third world countries, should make laws that will give safety nets and protection to workers in the outsourcing business.

  • Yaro Starak’s thougts are that of a real concerned human being.These type of thinking and analysis is what takes the human race forward. I do not have any answers to the outsourcing phenomenon. But one thing that I noticed needs to be told here. The money making attitude of the IT firms that do the outsourced work of USA etc, has moved up a notch, by forcing its staff to work 12 hours to 16 hours everyday while they are paid the standard eight hour job salary. Thus the persons working in Indian IT firms have become some kind of a robot. As you all know, India does not have a working government and labor laws are never enforced. So the greed of Indian companies have made INDIAN IT FIRMS IN TO MASSIVE SWEATSHOPS

  • Dear Yaro,

    this World we are living in is, aside from all the glitter on the surface, a brutal, instinct driven, exploiting and perverted world off our old brain parts, commanding every step we do.
    There is no altruism, no equality, and even though words like that and ‘fairness’ exist – in the end they are just justifications in retrospect.

    First of all I can state that I agree with EVERY single sentence you wrote and every conclusion you made. From the perspective of a moral, intelligent and humble person that cares for the people around him you formulated naturally upcoming thoughts about this topic – Thoughts everyone will have who thinks about this topic a little bit deeper than: “I like money. I want to grow my business *robotrobot*”

    BUT – I would go further than this and I might sound harsh in the following or offend people but: **** you. :)

    I am more radical: You conclude that this is, finally, after a good amount of consideration: a grey area. But in fact – thinking about the underlying principles have even made you donate something of your profits that come from outsourcing, back to the countries you’ve outsourced to.

    I say: Your conscious, HUMAN, loving and thinking brain parts have discovered the inhuman, suppressing and exploiting matrix that lies behind the process of outsourcing to grow/help a business. This produces a conflict that troubles your unconsiousness which in return puts effort in to place to reduce the influence of this conflict troubling you.
    What then became a grey area due to contemplating different arguments (more so: fake arguments) ACTUALLY is the same substantial and core problem: simply hidden behind some finely tuned mind-made thought-architecture that puts a bandage over the openly bleeding wound and makes it easier to justify the behaviour and look at it.

    Looking at the so described “slow process” of “making countries equal” due to outsourcing is just not looked far enough ahead and the proliferal vision isnt turned on yet. Again: a self defense mechanism OR one just doesn’t know it better.

    You CAN NOT create VALUE in terms of ‘more money for everyone’ EVER!

    ALL YOU EVER DO ist just DIGGING HOLES.

    And that comes down to the physician law of energy: energy can not be lost, nore can it be created. Energy is there and from the beginning of time it is simply going from one form into another.

    Which brings me to some points you stated which ultimately led to the “grey area” definition:
    “Not being happier, when you have more than your neighbour”
    FALSE – our brain does reward us instantly with dopamine! – it is very hard work I guess to control yourself to the point of being completely free of any of our inprogrammed greed-programs.

    Also interesting: your argument, that:
    “what fulltimes outsourcers get in some countries is more than the average wage there”
    …and that is used to justify outsourcing as “good” because you are supporting someone in a poor country to get rhicher.

    Well guess what you are in consequence merely doing: You are making them rhicher than their neighbours – and now before I roll out that thought lets go back a bit.
    Let’s think of the first reason which people are on your blog, or really any other internet-money-something-blog or REALLY any other money-something-something:
    Because they are greedy and JEALOUS of their ‘neighbours’ who posess more and better. Which motivates and drives them to enforce powers to overtake them. In our small example they now start a business and grow it by outsourcing, overtake their neighbours and now are happier.

    Back to the phillipino who gets payed more than what the average wage is in his country now: He gets rhicher than his neighbours and thus more jealousness and greed is created.
    And finally though: You have digged a hole somewhere else!

    On that note: It is funny how on the one side we say things like “money wont ultimately make us happy, giving is the real rewarding experience” and on the other hand we can use an argument just as “outsourcing is making poorer countries rhicher” (and thus, concluding: “happier” (?)) for the “PRO” side of this discussion, isnt it?…
    Which is again proof for our brain just making things easier for, well, you (I dont outsource other than buying Nike products ;) )

    Which somehow leads me to a final conclusion:
    Everything in this world is natural – even we humans, thats why we call our surroundings ‘nature’.
    Jealousness, greed, exploitation and inequality are natural and have indeed brought our human race to where it is right now – with all the ‘good’ and ‘bad’ equally.
    At the end it is just about being smarter and or stronger than others. And everything is about SEDUCTION… not much room for humanity.

    Marketing and business is nothing more than seduction: I mean, look around you. EVERYTHING is seduction. Your blog seduces strangers to “opt in”, so you can build “a list” right? Cause that is good marketing. Youre showing off how it is “easy” to make your first 1000$ online, everyone wants to have it: its attractive and so: you seduce someone for YOUR PERSONAL EGOISTICAL AND SELFISH needs. And ‘profit’ of course.

    To be honest: I could plain out just puke when I see websites like “Niche Profit Classroom” where someone is selling a method how to create stuff that youre not interested in, do that very often, than use “sneaky little mind tricks” behind your PC screen in the hopes of that there are enough dumber, uneducated and more confused human beings than you are (thus: weaker individuals, which you, as the stronger/smarter human being, can exploit), are buying them with the hope and deep need for a better life so you can “MAKE UP TO 90,000$” *ding ding ding*
    I mean,… come on..
    If it were working so well (still) than why were you selling it? I mean – seriously…

    Bu at the end: you know what? I dont care!

    Cause: It is just how it is.

    Dont hate the player, hate the game. And the game in this instance is called life, will for survival, evolution and surviving of the fittest.

    I think to conclude everything: Play the game hard cause you can only play it once,… but dont lie to yourself: Exploitation, manipulation and seduction of “weaker” beings than you (everyone) right now are is part of it.
    And the only thing you make better by “donating to a charity, helping the country you’ve outsourced to” is yourself.

    And that is no different to: buying yourself out of it. But you know what: even that isn’t really an atack because again: I dont care because it is human – and I do the same.

    :)

    PS:
    I’m 22 years old, from germany (sorry for typos, bad language etc.) and the only thing in this entire “thing” I’ve lately stumpled upon that was good enough to seduce me to put money into it has been “The 4 hour work week” which has in consequence and because of endless internet research also brought me to this blog for example.
    I whis everyone the best of luck to become a happy person.
    Kind regards

  • Dear Yaro,

    Your blog entry was quite lengthy. Whew.

    But IMHO, outsourcing to another country, as long as you follow the laws in that country (especially meeting the minimum wages. etc) is not bad at all. You are giving jobs to the people there. You are not putting a gun to their heads to work for you. Its a contract that both parties enter into, FREELY.

    Besides, standard of living is cheaper here in RP than in Australia.

    So go ahead, outsource. Hopefully in the Philippines. We’ll love you for it.

    While you’re at it, visit the country some time. Great beaches around these here parts. :-)

  • He explained his argument, which I came to see as a reasonable point of view, because it is based on helping people in other countries, not taking advantage of them….

  • If someone who lives in Australia and earns $4,000 per month, outsources work to someone in India and pays them $400 per month… Due to different costs of living, is it possible the person in India can afford a lifestyle beyond that of the Australian who pays them?

    If you are outsourcing to someone who is working for themselves and can bid and negotiate their own contracts then it is hard to imagine how it can be a bad proposition for them and their community.

    Rather than outsource work overseas, should we just donate money to them and create unskilled welfare states?

  • Yaro this is an amazing post. Really great to hear your feelings and thoughts on this particular subject. I have to wonder if a post like this is worth more to you and your business than actually pitching John’s program as an affiliate. I guess with out one you wouldn’t have the other though, I am curious to see which one truly pays off for you in the long run.

  • Yaro, I absolutely loved reading this post. Few people in this industry are willing to discuss the moral implications of outsourcing, and especially at such a personal level.

    For those who read Honey’s comment earlier, which was fantastic, I’m one of her employers at the job hiring site easyoutsource.com (I’m in Chicago). I agree with her that you need to pay your employees a fair rate. A person working for you oversees has the same basic motives as a person working for you in the United States. An employee may put on a happy face because he wants to keep his job, but he definitely does not want to be working 15 hour days at $2/hr just to support his family. If you treat people with respect and pay them what you know they are really worth you will get happier, more enthusiastic employees and you can go to sleep at night knowing you’re doing the right thing.

    On the topic of money, I couldn’t agree more with you that chasing money just for money’s sake will take you nowhere. It’s such a hollow motive. The purpose of earning money should be first and foremost to let you comfortably live and enjoy your life (and possibly support a family), and once you’ve made enough to reach that goal, the best thing you can do with your time is to give back to the world. Trying to earn enough to start a successful charity seems like a far more powerful motive than trying to earn enough to buy a fancy car. Look at Bill Gates and Warren Buffet. I have no doubt that they are happier now, focusing on distributing their billions around the world, than they were when they were singly focused on accumulating more wealth for little added value to their lives.

  • Hi Yaro,

    Alexis your french buddy from Paris told me about your blog, I read your blog profits blueprint ebook yesterday it was a very helpful reading and I am really pleased to find out today that you are concerned with the well-being of outsourced workers. There is more in life than just making money (and don’t get me wrong, I wanna make money, but not only ;) ) Cheers

  • As entreprenuers we can create more value by employing more people who are happy to be employed.

    Think about where many of our clothes, TV’s and other goods come from. They don’t pay western labor rates in China.

    Abide by laws and be kind to fellow humans and accept that some things are not able to be defined into one answer.

  • [...] is Yaro Starak’s Entrepreneurs Journey.  What caught my attention was his post about outsourcing and exploitation.  His approach to the topic is very fair and he didn’t take sides at all.  What impressed [...]

  • Jon

    Outsourcing exploitation? While I agree with some of the points mentioned by Yaro, on the other hand I believe outsourcing is a way to create indeed value (as some commenters said) and it is difficult to judge from our point of view… for people in poorer countries the money they get is really going to make THE difference…

  • Allow me give you a slight perspective from one who has lived in the so-called Third World. I was without a job for many years. Didn’t know where the next meal was going to come from and even went for days without a decent meal. Most jobs you will get in some countries are legal slave camps. You only get paid enough to be able to come back the next day and put in long hours of hard mostly manual work. Yet you cannot complain lest you lose that job and your family starves – at least it does put not so good food in their mouths.

    At night you are too exhausted to even make love to your spouse, in a one-room shack that is living room, kitchen and bedroom, all in one. Yet, the business owner for whom you work lives in a mansion somewhere in an exclusive neighborhood. While your body aches from hard work he is merrily playing golf at some fancy resort while you are slaving away to make him richer. At night he (sorry ladies, but it is usually a he) is out whore-mongering though he is “happily” married. He has a couch in his office and can take a nap whenever he is too “tired” from all his hard work. He gets business through bribing government officials and in some cases decision-makers in the private sector with whom he plays golf.

    No, not all Third World employers are like that. Some of them are real entrepreneurs who got rich through the right channels and some do treat their employees fairly, even very well. And, ironically, it is not foreign entrepreneurs that are bad, it is usually the opposite. In fact, many people are happy to work for foreign investors as they usually pay better and are more humane.

    I was able to get myself out of the legal slavery by use of a gold mine that I had been sitting on all along – the ability to use paint and a brush. I would sell my paintings to the same foreigners for what I now know to be pea nuts since I live in America. But those pea nuts gave me and my family a decent livelihood: a decent house, food, clothing, school fees and uniforms, and even some nice savings. I was better than most and equally happier.

    Now, decide for yourself whether I was “exploited”.

    Sincerely,

    David

  • Sam

    Paying $2/hour is slave labor? Have you ever been to and LIVED in a country like Philippines or India? Just because it is so in the developed countries doesn’t make it so in the developing world.

    I’m an Indian, and believe me $2 per hour is actually a LOT of money for people here.

    Plus the amount of money to live comfortably is a lot lower in PH & India than in the US, Aus, or Canada. I know for a fact that you can live like a king in India with only $2,000/month. Heck if you live in India, you can hire full-time domestic help for only $200/person.

    By outsourcing, these people are getting more than they would have from local businesses. My friend in India has a PhD in law (a more specific category under law of course), you know how much he gets paid by his employer? $1,500 full time! Imagine that, $1,500/month for a frickin’ PhD!

    Hey, if you have a problem with the idea behind outsourcing and want to support local businesses, well be my guest. One less competitor for me to worry about…

  • Internet marketers have a wonderful opportunity: they can either learn to use outsourcing to the benefit of their business AND their Virtual Assistants, or choose to forever rely on solely their own efforts and their own time.

    Which will YOU choose?

  • Tim

    Whew! That was lengthy!

    I’m a Filipino and I don’t really mind being outsourced to as long as the other end makes me feel “equally treated”.

    I’ve written an article or two about this matter, I can’t really blame first world countries for seeing our situation as an opportunity. If I were in the same position, I’d do the same.

    However, having worked on different outsourcing companies, there are the good and the bad. Some companies would insist on making us feel “virtually part of the team”. That means that if there’s a programmer here and there’s a programmer there, even if the programmer on the outsourcing country gets a higher pay, we should be treated equally, our opinions should also be weighed on equally. There is no power over one another because we are “the same”, although like Sponge Bob, the only difference is… I’m cheap.

    Now I don’t mean to do any sort of advertisements, but if you have time please read an article I wrote about a month ago entitled “5 Common IT Outsourcing Mistakes Companies Make” by Lamia. I’m confident that it will be number one in google so I don’t have to post a link. :)

  • ALL business is exploitation of a large base of people at the bottom to make the small group at the top rich. Period.

    • Tim

      @TruthIsQuick

      If we continue to think like that then that would keep us from getting successful in life. Yes, there is some truth to what you are saying but there is also some truth to what Yaro says that he is trying to help. These helped people should then learn from example and not just work for someone for the rest of their lives.

      I’ve written an article in the past called “becoming rich by eliminating guilt” which you can google and I hope you find useful.

  • [...] buddy sent me an email about an interesting discussion on outsourcing. It asked the question “Is outsourcing exploitation?”. It is not the first time to hear the question. I raised that question too as a young freelancer. [...]

  • Finally someone with the guts to say that the primary purpose of outsourcing to cheaper labour countries is greed – bottom line and boosting profits. It’s got nothing to do with philanthropy.

    As a virtual assistant here in Australia for over 10 years, I’ve watched the increase in off-shore contractors. I’ve written a number of articles asking people to simply be careful – and to know WHY they’re outsourcing to cheaper countries in the first place. Outsourcing off-shore can have great benefits – particularly if you’re looking at overseas expansion and having someone with local knowledge of business practices, laws etc is a great benefit. But also be careful because how do you know the person you are paying $2/hour to is actually doing the work – and not giving it to a team of people working in extremely poor conditions for 2c/hour.

    Morals and etiquette are also very different country by country and it’s important you understand that you may be putting your intellectual property at risk. Issues of confidentiality are critical and overseas contractors know it’s very difficult to follow up legally if they do something wrong. It’s happened to me.

    I’ve never felt personally threatened (in a business sense) by off-shore providers. They service an end of the market that put simply I don’t want nor do I need. My clients appreciate the service I provide and are prepared to pay for it because they see me as a partner in their business – not a cheap means to boost their bottom line.

    Great article. And I applaud your desire to put some of the profits you make off the back of these cheaper labour country operators back into their country.

    Cheers
    Lyn Prowse-Bishop

  • I am wondering whether this debate has lost its focus? Surely outsourcing even to Australians at a higher rate should not be confused with employing a person at that rate. Using a VA for example only costs the purchaser the time of that person completing that job with no added costs like holiday pay. I hope this debate has not been lost in the cross fire that is all….

    Michele

  • [...] my business as well.   I started looking for articles about outsourcing, and I found one on the Entrepreneur’s Journey, by Yaro that I thought was interesting.  The author debates whether outsourcing to third world [...]

  • Somewhere in the comments on this page someone mentioned how outsourcing has created a new source of work, allowing many in places such as the Philippines to stay home with their family. This being a huge improvement over having to leave their family in search of work in other parts of the world.

    Well the other day I received this submission/story to my site. It is an inspirational yet sad story about an absentee father, who had to leave his family to find work. It is told from his young daughters perspective:

    http://www.familyhistoryproducts.com/dads-propellers.html

    Many of my site’s readers have really enjoyed this story. I’m sure you will too!

    Michael

  • Growing to love this site Yaro – thanks! Yeah in the past we seemed to have nothing but bad luck with outsourcing, but I’ll keep your article (and links) bookmarked when we reopen those doors. Re: the exploitation issue, yeah I agree with many of the responders in this post – ultimately it comes down to ‘is everyone happy’ in the end. And besides, work well done usually means repeat business, right?

  • Yaro, yes I must agree with TruthisQuick about how he said that all successful businesses generally are, are the large base of small people at the bottom to make the small base of people on the top rich ;) Sad… but this is how society works. Let’s be happy for the internet so that we don’t have to put up with that!

  • “An employee may put on a happy face because he wants to keep his job, but he definitely does not want to be working 15 hour days at $2/hr just to support his family.”

    Absolutely. Yes, people who are desperate will agree to work for less than what they should be getting but then they have to work overtime more and more just to make ends meet.

    • Hi Meily,
      I don’t think anyone expects an outsourcer to work 15 hour days.
      They are human too and often become good friends.
      $2 an hour is a low figure I think. I have paid up to $8 an hour to some people and they are over the moon about it.
      If the employer does exploit these wonderful people (outsourcers) then shame on them and all I can say is Karma is a wonderful thing and always comes back to bite you on the rear.

      Also, I think this is just a small part of a much bigger issue.
      As yaro stated it is not about the outsourcing offshore, it is about peoples moral code.
      Look at Rupert Murdoch or other very rich people. They incorerate in offshore tax havens because they don’t want to pay tax in thier own countries which in turn could go to good use IE: homeless people, disabled services etc..

      In the end, if I had a choice of 1. closing my business down because I could not afford the labour in my own country ( which does no one any good ) or outsourcing.. then I need to take the second option. At least I am making a difference in someone elses life as well as improving my own.

  • [...] companies are taking advantage of people who are less fortunate to make a profit.  I found a great debate started by a small business entrepreneur if you want to learn more about this [...]

  • would you work for 2 dollars an hour? precisely

    • If I lived in a 3rd world country and $100 a week meant that my family could eat.. then yes I would. Keep in mind that the avg monthly wage in 3rd worls countries is $500 or so a mth.

  • [...] Back in May this year, my friend Yaro Starak of Entreprenuers-Journey.com put out and explosive article questioning “Is Outsourcing Exploitation“ [...]

  • What a facinating and thought provoking article. As a business that delivers an outsourcing service in the UK, for UK rates, we are constantly up against competition from overseas. However, the clients that work with us chose a professional virtual assistant service such as ours, as they value the partnership we form with them. This professional, proactive relationship offers far more than the simple outsourcing of a project or series of tasks.

  • So the question is, did you outsource THIS article?

    The myth of six-figure membership sites and profit-building blogs was interesting 5-6 years ago, but as more and more people try to build these “niche” sites, it becomes clear that most of the content on the web is junk. People don’t even write their own stuff. Comments are left by other niche marketers just trying to get their link out there. Thanks to all the ebook marketers and so-called SEO bloggers, the internet lacks quality and authenticity. It’s all a pile of BS.

    Hey this is just what I was looking for! Great article Yaro! I can has my URL posted now?

    • Nope, I never outsource my own articles on this blog because I enjoy writing, that is why I started blogging in the first place.

  • Jez

    Yaro, this may be silly, but I’m in bit of a rush. If you don’t mind me asking what Business are you apart of? And is it Australian? Just trying to compile some research about business ethics for an assignment and I would like to use your opinions as a specific example. Regards.

    • I run my own business Jez, it’s called the Blog Mastermind Partnership in terms of a trading name if that helps. And yes it is Australian.

  • Schurke

    Dear Yaro,

    The question “Why is my time worth $500 for 30 minutes and someone in the Philippines worth $300 a MONTH?” is a fallacy, a “complex question”, naive and rhetorical. It is a question of an economy that is merely more than a myth enforced by plenty abstract power of policies, PR and advertisement, and less abstract power of police and military force behind it.

    Regarding your topic: outsourcing is not an exploitation on any level only and only if you always vote for and support strong pro-immigration politics!

    Best regards

    S

    • 99percent

      Shame on you, families are starving because of outsourcing.
      They live in their cars if they are lucky enough to have one.
      Wages are not keeping up with inflation, families have to choose to eat or stay warm. In Canada the number of jobs outsourced has caused suicides, and mental illness to grow. Sure Canada has health care but no one can afford the meds, so what is the point. So next time you play golf or sleep in your warm bed think of all the peoples futures you have ruined and will ruin, by your greed….
      Remember Scourge….

      • The next time you outsource sleep warm in your bed thinking of all the lives you are helping in the country you outsource too.

  • Ruth

    I think one issue for outsourced workers in the Philippines is if you want to earn our loyalty, treat us as you would employees. We won’t mind earning less than our contemporaries in your country – so as long as the salaries you give are competitive to ours. Take time to find out what is competitive $2 an hour will only be similar to what the office guy is earning. We don’t have health insurance, vacation time, and in the Philippines, we are paid overtime and night differential. We pay for our own electricity and DSL, while you save on your overhead. I think it’s only fair for us to be compensated at $8 or more because you people keep us up at godforsaken hours by getting us to stick to your timezones. The upside to freelancing is we can easily leave you once a better opportunity comes along — think about it! So pay us well and you will win our loyalty and our full service and your money’s worth.

  • matthew

    i think outsourcing has it good and bad points, the first point is that if you pay a Brit at lets say £2000 a month but can pay a Indian at £500 a month then for £2000 you could have a indian at 4 months work were for the same cost you can only have 1 brit, a bad point is lets say for example you a supermarket chain and you outsource you IT Support department lets say 100 people, when them 100 people lose there jobs from outsourcing to India, they have no money to shop in your supermarket so you are losing a 100 customers.

  • Don Petroff

    Hey people need to get off their cotton ball coat tails and look at it for what it is. Its all relative .. An oil sheik arrives in Sydney and pays people $10 more than the hourly rate and yet jokes …this guys cheap .. is that exploitation? .. no .. the guy in Sydney is still living according to the going rate and the Oil sheik has the money to live according to his standards. Perhaps a bad analogy but its all relative. I moved to the Philippines, Ive lived here 4 years. A coke is 12c, cigarettes a carton are $4, beers are 50c and a 750ml bottle of booze is $1.10.. got the drift when rent is only $110 a month etc Most prices are 1/10th the cost of Australia. A US trained periodontis locally charged me less than $10 for a 1 hour exam..
    We all dont want to be driving new holdens and mercs (these people that are projecting life in the second world is misery are only just projecting their own worlds on everyone else what life should be like or have probably never travelled to India or Philippiens or Bangladesh)…. you can fly to Manila for prices from a few dollars with specials with carry on luggage and i happily catch the transport at 12c a time etc. Even a smart phone is free on a low low plan that youd never get in Australia with SMS costing next to nothing… the living cost is substantially better and the rate is sufficient to run a family. Front page news is the transport prices wanting to be dropped 1c. Ive been outsourcing for several years and had my fair share of ripoffs … but theres no need to feel sorry that your ripping anyone off .. theyre doing very nicely thankyou.

    • Troy

      Your right Don.
      It is all relative.
      I will just refer everyone to my post at the beginning of this article. POST 16 and POST 33.
      If a business can only survive at the start by outsourcing then go for it. Otherwise there is no business and no person to provide a job to, then it’s a lose, lose for both parties.
      I understand what Nicole is saying below.. but what you have to remember is there are people in this world who will happily make 50k and pay you $400..to me that is just greed..but DO NOT blame the system of outsourcing, it is our morals that are at question here and I for one would happily pay my outsourcer $2000 a month if I were making $20,000 a month.

  • Guest

    Wow, this was a very comprehensive and insightful article on a still hot topic of debate. I can see that Yaro doesn’t want to outsource his writing because he loves it and is good at it — clearly, he does what he loves and loves what he does.

    I wonder, though, if there is a solution to the labor crisis in the developed world that has been brought about, or believed to be brought about, in part by outsourcing. Yes, we all should care about the conditions in third-world countries that we as more advanced Westerners and members of industrialized Australasian countries can improve globally. This is undoubtedly a chronic human concern that is perhaps as old as humanity itself.

    But what can be done, or what can people do, about what’s happening to people in the U.S., Canada, and most of Europe? It’s highly unlikely that the student loans bubble is going to just fizzle out, and not everyone is cut out for, or wants to go the I-blogged-my-way-into-a-career route. Not everyone can be an entrepreneur, and not everyone should be.

    The housing market is a mess; the U.S. is still in an unwinnable and arguably inhumane war being fought in Afghanistan, with countless lives having been lost and continuing to be lost each day. Veterans are returning home minus limbs, suffering from health problems, and permanently afflicted by the psychological effects of war. Then they fail to be re-integrated into the workforce and subsist on meager disability wages, while their wives/spouses, many of whom have never worked outside the home and possibly have young children, are forced to try and obtain technical skills or college degrees ASAP or else face the prospect of being hustled into the streets or into low-income, wretched VA housing that’s more comparable to a crack house or a shack in Soviet Russia than what our bravest men and women truly deserve after sacrificing so much for not one, but two, simultaneous cruel and unjust wars.

    But there are no jobs to be had besides, say, burger joints or retail, and technical careers like hairdresser, secretary, etc., pay abysmal salaries. Jobs for BA+ candidates are scarce, even though the general consensus is if you aren’t trained as a skilled worker, you need at least a Bachelor’s to even be considered for employment. Otherwise, if you’ve got high school or less, you might as well don a fry hat and serve up whatever pink slime ol’ Ronny Mac has queued up in his clown suit.

    These people need jobs. People whose spouses were laid off due to outsourcing and now face the prospects of car payments, college for their children, healthcare, you name it, these people need jobs too. It is highly impractical for people to tell their children that they better get situated to life as a lowly housekeeper or data entry clerk because college is “a waste of time,” and a comfortable life is no longer to be had. Unless you “start your own business,” which is again, a nice idea but a pipe dream for the poorest of Americans whose idea of entrepreneurship usually involves buying the world some coke and then breaking rocks at Alcatraz.

    (OK, Alcatraz is closed, but you get the idea.)

    Whether or not it is basically a multi-level contracting racket (as I believe), college is so deeply embedded as a rite of passage in our culture that it is considered a badge of honor to the graduate and to prospective employers, who now will probably unload the jobs they would have paid Bachelor’s recipients or grad students for onto cheap labor in developing countries. Yet if an applicant arrives for an interview with zero college experience on his resume, he is promptly ushered to the door and encouraged to seek “more qualified” employment.

    Where?

    Yup, you guessed it, pass ‘em all spatulas, and send in the clowns. Either that or they can leave the McCircus and go work for the King.

    Not the Blog King (no offense), and certainly not Elvis, though his own pelvis and the organs beneath certainly suffered from the effects of such culinary weapons of “mass” destruction. I mean the royal monarch of Whopper Castle.

    The U.S. financial system is not going to forgive these student loans anytime soon, if not ever, and the greedy loan sharks and everyone who has grossly overinflated the cost vs. worth of a university education are the ones largely to blame, along with our government who keeps giving these crooks sanctions to run what really amounts to a nationwide Ponzi scheme that has put the entire economy in jeopardy.

    What I ask is what can these people, the out-of-work grads, the dissatisfied menial laborers on the border of mental breakdowns, the fragmented veterans and their families, their children, future generations — what can they do to improve their labor situation, since neither loan forgiveness, economic upturn, improved job prospects, nor a curb on outsourcing, will be a reality of the near future if at all?

  • Hello,

    I hope it’s not yet too late to comment. I’m a copywriter from the Philippines and I wanted to share with you my experience.

    I used to be fine working with $400 a month. That’s around the average amount a college fresh graduate would usually earn if I had chosen to work for the companies here. My employer and I had an efficient working relationship. He sent me the assignments at the end of his day and I sent him the completed articles at the end of my day. No questions so I’m assuming he was satisfied with my work. I got paid regularly on the 15th and 30th, no fail.

    I was pretty happy until I found out how much my employer was earning from his websites, which he had pretty much on auto-pilot since he had me and other people doing much of the work for him. To tell you the truth, I did feel a bit exploited. How could he and other people from the first world who had businesses just like his enjoy so much when I had done the work on the content of his website, which I knew by then was a very, very important part of any online business?

    Looking at it now, just from writing this comment, it’s not just greed on the part of the outsourcers that is the problem. We, the people who are being outsourced to, are also greedy. But then again, don’t I deserve more than the $400 I get every month? I helped you earn $50,000 or so every month by taking care of one of the most substantial parts of your website. I do think that the value of my work was more than 0.8% of the profits I had helped generate.

    But to this day, it’s still difficult for me to take a definite stand. I doubled my rate to $800 a month and I’m lucky that I found an employer who is willing to pay me that amount and help me improve what I do. I won’t deny that my salary is way, way beyond what any 25-year-old living in a provincial area in the Philippines earns and that I’m happy that my family always has food on the table, but there is still this nagging feeling that my contribution (to your business, to the world) is undervalued.

    It might be the Generation Y syndrome or plain and simple greed, I don’t know, but I’m guessing I won’t stay long anywhere I don’t receive what other people honestly believe is due to me.

    Thanks for taking the time for reading my comment. This is just my opinion, though, and I’m not speaking for the rest of my fellow Filipinos and other people from other third world countries who do the same thing that I do.

    • Nicole, you raise some very good questions and I don’t think that there are any easy answers.

      To some extent, the same phenomenon can exist when outsourcing within your borders. Some contractors have a smaller operating cost and/or are willing to take a smaller profit to be competitive. But countries such as the Philippines or India have a lower cost of living relative to countries like US, Canada, Australia, etc.

      I think that it is important that the contractor feel that they are getting a fair wage for what they are producing. If you are comfortable with it, then it really doesn’t matter how much the client makes from it.

      Remember that while they don’t seem to be doing much work, there is a lot going on behind the scenes that has got them to where they are.

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