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…
- Outsourcing overseas means you are not hiring locally, which results in fewer jobs, or even lost jobs in your country.
- Outsourcing results in a flow of cash out of your country into another, potentially having a detrimental impact on your economy, causing local businesses, who employ locally, to lose business to cheaper overseas groups, and possibly even close up shop completely.
- Paying $2 an hour (or similar) is slave labor, even if workers are happy with their pay. People should be paid a fair wage based on the benefit you gain from them, not what the fair wage is based on the standards in their economy.
- If people work for you at pennies on the dollar, and you reap massive profits because of that – in other words, they do the work and you keep the money – it’s simply not fair. Why should one group do most of the work for enough money to survive, while another group becomes stinking rich?
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
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
Lol, nicely put Jenny… I think
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
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!
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.