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
Your Message
Remember New World Order? The theory sounds good for the morally lacking, however it is the genocide involved that is necessary for progress. It is happening today, Darfur, stir any emotions? Probably not, spell checker doesn’t recognize it. how does this relate to outsourcing and exploitation. When will your country be reassigned to a “3rd world” status and subject to population restructuring? People hollow themselves by saying they are helping outsourced persons when they are in fact driving down wages worldwide.
Hi Yaro!
Excellent analysis of a tricky situation, as well as solid solutions. I really admire the way you do business. What a blessing of inspiration you are!
Your Message
Thank you Yaro for advancing this issue. I used to live in a West African country where it was essential to have people working in the household. I remember getting flack from other expatriates because we paid the people who worked in our home more than others in the neighborhood. In addition, we treated people as valued employees rather than servants. The next level of that is what you are talking about–investing back into their countries, communities.
I am currently not yet where I need to be with my online business and can afford to hire someone from else where. I have hired an intern for $12 an hour but can’t afford to have her do much for me. If I outsource, I can build my online business and help myself get into a better position to help others. Thanks for “connecting the dots” between outsourcing and giving back—for stating what will now be “the obvious” for me.
Edree
I’ve pondered upon this exact topic. I personally would rather hire someone within my country (USA) and more importantly within my state (Michigan). But, and I mean a big but, the ones doing the outsourcing here in the USA expect to be paid a lot more than what someone overseas expects. What we are accustomed to is what drives our expectations – in both payment and job performance.
A few years ago I signed up with one of the big online outsourcing banks in the hopes of performing simple virtual assistant duties for a reasonable pay. I set what I thought was a fair price for my work based on my past employment experiences. I was amazed at how many people “kicked my tires” but then told me they weren’t willing to pay me what I had proposed. To be honest, I was shocked that so many people wanted so much for so little.
We here in the USA are not accustomed to receiving $300 – $400 a month to work full time. People in other countries are more than willing to receive that much a month. I personally would not hire someone from Asia or Europe simply because I would prefer to pay a local outsourcer. But I would not begrudge anyone from doing it – it is their smart business decision.
Don’t kid yourselves, you’re not helping anyone. Not the designer who does a GREAT job for 200 bucks, not even your client you lie and charge 10 times more. If your client KNEW exactly that you invoice him this much and somebody does all the job, I assume that client won’t be too pleased.
Yes, I have worked as “source of cheap labour” when starting freelancing. Theoretically it’s OK: I get constant work from an agency and I eat pretty well. Yes, life in my country should be cheaper (in some areas), gas / food / clothing / electrical stuff are still 2 times more expensive than in the US for instance.
Still, once my portfolio gets to a reasonable size and I am not desperate to find ANY work, I can become more picky with my clients. Which has already happened. I made it a rule to NOT work with agencies anymore. I work with direct clients, those you people charge 3000 for a site and I can do it for a fraction of the cost. For the price you would pay me and then have them pay way more, just to “support the local businesses”.
I can understand the frustration of many people in the US for instance over the fact many “3 world country designers” charge way less for a GREAT job (I don’t believe in the “small price means bad work”, since I have done enough work for agencies that would just supra-charge and not change 1 single CSS line I created) and you’re losing market. This is why many clients are still willing to pay “top dollar” so that they can support you. It’s super OK with me, it’s solidarity in the end. We do play “low” because we can afford to get paid less.
Still, when you charge 3000 USD for a site for instance and get it done by someone for 300 and then just get the money without breathing a word to your client who’s “supporting” you, then it’s not OK with me anymore. I can understand a PROFIT, you’re not in the business to lose money or become a charity, but still, it’s unethical in the end to charge this much and do nothing but intermediate the discussion.
From what you can see, I kinda handle my English, so I assume my client won’t have issues with understanding my ideas. I have a paypal account, talent and time. I have successfully worked with clients from all over the world, clients who still refer my work and have been very pleased with it. Yes, they didn’t pay thousands of dollars. And more and more clients come to realize you can have a good site for less money.
In the end I think we’re all wining from this. Some freelancers are OK with working for agencies to get steady work. Some agencies still make a lot of money from other people’s work and (some) by hiding this issue to their clients, who still pay a lot to ‘support’ the local web design shops. Others have started working with direct clients and still earn a decent buck, thus directly competing with the local “shops”.
I’m curious to see how this will evolve in the following years, that’s for sure
Hi Yaro from a fellow Aussie (in Perth). Very good timing this article, because I have just hired my first outsourcer from the Philipines today.
The ONLY reason I have hired someone offshore is the cost factor. I work full time, pay all the usual bills one would expect, and cannot afford to pay an Australian full time employee $30-40K/yr to fulfil the job I have. My outsourcer, by virtue of living in a country that has a weaker economy than Australia, will cost me less than $400/month for now. That I can afford.
Now, here’s the thing. My current employer pays me between $50-100k/yr to perform my job. I’m damn good at what I do, and it will ultimately bring in $500K – $1M/yr in revenues directly attributable to my efforts. I don’t know what my company CEO makes, but I’m guessing it’s a HELL of a lot more than I make. 10 times more wouldn’t surprise me in fact.
If, through the efforts of my outsourcer, my business is making 10 times what I pay him, does that mean I’m exploiting him any more than my employer is exploiting me? In AU, people see my situation as fairly normal. Yes, they all wish they could earn that kind of money for doing the job they currently do, but that’s just wishful thinking.
You do the work, you get paid what is a “reasonable” amount for your time & effort. I chose my job, knowing the pay rate & the work required, so it’s totally my choice. I think most outsourcers are in a similar position – it’s just that our economies are vastly different.
In the Philipines, the cost of living is a lot lower than here in Australia. By luck, we have a resource-rich nation which we exploit for all sorts of purposes, which explains why our economy is very strong compared to most. However, we could fall into recession or depression as well, & crash and fall, so it’s not guaranteed we’ll always be doing well.
Having said all that, I have NO desire to exploit my new employee (and if this goes well, I will definitely be hiring more people). I am paying him what HE requested for the job (l didn’t specify a pay rate with the job – I asked them to tell me what they thought was fair) and I am more than happy to pay him bonuses for quality work as time goes by, and raise his pay if he performs well.
I LIKE the fact that I can make a financial difference to his & his family’s life. If he didn’t have a job, they would struggle, just like I did last year when I was out of work for 3 months due to illness. No income sucks, I can tell you!
For those who are getting too moralistic about this, I say: if you own any products (clothes, electronics, utensils/tools, etc.) made in 3rd world countries, drive a car made in a cheap labour economy, travel to & enjoy the pleasures of that sort of country, you are a hypocrite! I doubt there would be more than 1 in 10,000 people who did none of these things.
Get off your twisted moralistic high horse and start hiring these people who DO want jobs, pay them FAIRLY and treat them well, even if it’s not the same wage as someone in your home country might earn, and get on with building a successful business.
Once you’re doing well enough, go to that country, set up a charity and make sure it is well managed by a paid employee in that country who will do a good job at seeing your generosity actually benefits those who need it most.
Every country in the world has a different economy, and wages are all relative. If $400/m is a reasonable wage for the work your outsourcer does, then there’s no need to feel you are exploiting them. Pay them bonuses if it concerns you. Of course, if you genuinely are exploiting them that’s a different story all together!
Anyway, thanks for bringing up the subject Yaro. I enjoyed the post & reading the comments.
Eran
A lot of people are repeating the same happy talking points, yet the icky nagging feeling remains for me.
The problem is not outsourcing. On the individual level, in most cases, both parties benefit.
The problem is the institutionalized inequality from which outsourcing derives those benefits.
As the economist pointed out, for labor to remain cheap, there must be a large supply of workers who need jobs. What’s the best way to guarantee a large supply of cheap workers? Value some people (royalty, ceo’s, developed nations), while devaluing the rest (serfs, slaves, third world countries).
Call it slavery, feudalism, indentured servitude, sharecropping, or outsourcing. They’re all different forms of the same institutionalized systems of inequality which generate huge profits for some, while leaving many to struggle to eat.
Just imagine you are a farmer or merchant in the colonial US. The wealthiest men in town have slaves. New slaves are shipped in and sold everyday in the market square. Your friend says his slaves are happy–”like members of the family.” Your pastor says they were naked in Africa and now they are clothed; they were godless in Africa and now they know Jesus. You are doing them a favor…
Besides, it’s not like you’re going to stop this slavery business if you buy one or two to take care of your family. It’s bigger than you, and you’re not responsible for what other people started. Plus, you are a good person and will treat your slaves well, so if they have to be here anyway, they’ll be best off with you.
Happy talk doesn’t make it any better.
Somebody mentioned choices. Yes, we all have choices. As citizens in the so-called “free world,” we can choose to lend our weight to institutions that depend upon and perpetuate mass inequality. Or we can choose to find other ways to support ourselves, share the wealth, and have a good life.
P.S. Are wages up in India because so many people were outsourcing there, or because of changes in government and education? I suspect the latter.
hey Yaro,
It was great to read this post.
Well, I am an Indian and I used to work with Oracle till very recently (Oracle, India).
Truth is we were definitely not paid as well as those in the developed countries. And please note that we were never less qualified for the job. All of us who were recruited went through 5 rounds of interview before getting the job! ( though i think the gruelling rounds were uncalled for 
)
I was an analyst and we worked in a global team. So, there were europeans, aussies, and americans in our team
But, did I think that this was exploitation? Actually, NO!
The reason is that the company paid us what the average Indian market would provide. We were able to afford a very good lifestyle. So, it did not affect me that my fellow co-American was being paid $60 dollar an hour whereas I was given a fraction of it..As long as both of us can manage the same lifestyle in our respective countries, does it really matter?
Moreover, fact is outsourcing is here to stay..The people in developed countries need to be more competitive to get employment and people in developing countries need to get even better to stay put with the competition.. As Thomas.L.Friedman says “The world is flat”
P.S: You write really well.. love your blog!!!
If I were to find a 2.00 per hour person to do the tasks I needed them to do,
once they ended up doing a great job, resulting into an increase in revenue,
I would pay them much closer to what I feel that person should be paid.
I as the employer would not be greedy, as I believe in several universal laws.
It is however of my opinion that if a person chooses to “accept” working for 2.00 per hour for the work that they do, and an employer does not increase the 2.00 per hour to a higher rate for the employee, and the employee chooses to remain working for this employee,
I believe then that this employee should be considered to be making the same choices
similar to a person let’s say in North America, Australia, Europe, who “accepts” a minimum wage job.
Both persons individually have opportunities in time to ask for a raise,
and or increase their knowledge, education and experience,
and use that leverage to turn all of this into a gradual increase in revenue for them.
I could of course also feel sorry for a person here in North America who works for minimum wage. But I myself started out as such, and used my own drive and motivation
and determination to work my way up.
Over the years I was still not happy, as I needed more free time and more revenue etc,
so I started my own business and now work from home full time.
That in itself was “up to me” and the choices I decided to make,
based on whether I was happy with my income, free time etc..
Therefore, here is where I feel it’s also up to these 2.00 per hour individuals,
to better themselves and find ways to move up in income eventually.
Those persons could “choose” to eventually market themselves to marketers
who pay 10, 20, or more per hour, once they gain the confidence to know that they are able to ask for more.
Who knows, maybe they can market themselves for 10, or more per hour “right now”,
instead of accepting 2.00 per hour.
Is it not based on the same resume game that we play in our countries?
Experience + education + skills, = demand more income?
Arnold Stolting – Stolting Media Group
Yaro,
Great article. I’m glad to see that someone successful, as yourself, is willing to look deep inside yourself and see if “greed” is devouring your soul. I commend you. This discussion is needed. You are absolutley correct – how much more money do you need to make once you are living comfortably? I do believe the markets do some correction, but I do not believe that greed does not keep the markets from correcting fairly. I believe in entrepreneurs, as they create jobs. Unfortunately, these past 2 decades have created some entrepreneurs to believe that they MUST make more and more and more money no matter who they hurt or take advantage of. That greed has brought the global economy to near disaster. The results of that greed are still not over.
Your article is a glimmer of hope that we, as humans, have started to come back to reality. I’m from the US. Our western ways of accumulating things has become sick. I am not saying that free enterprise is bad – or all of us would not be in business. I think we have lost our way. Your article gives me hope that we are getting back on the right path.
Yaro, I agree with you that outsourcing does help those in 3rd world countries. It gives them the ability and hope to better themselves and others around them. I do agree with your idea to start giving to others in those countries to help them live a better life. I think assisting with education is the best place to start. You can give once, but if you teach, you keep on giving long after the gift is used.
I realize the US has opportunities. But not everyone is meant to be a business owner. Someone has to do the work. When my business grows to the point that I can afford to hire someone to help, I plan to hire someone in the US. I only sell to the US and Canada, so I feel obligated to give back to my customers. I only sell products that are made in the US or Canada so I am keeping someone employed.
That is my opinion. I wish you well in your endeavors and appreciate your courage to question outsourcing.
Hi, Yaro. I just want to point something out. I don’t know about the Philippines or Thailand, but the average wage in Romania is $500 and that’s not enough to get by even for one person if that person needs to pay rent.
While it’s certainly noble to take this discussion to some humanitarian level of equality, it’s just not what the reality truly is.
And I’m sorry, but in my opinion, it’s like this post was created simply to justify in some way the promotion of Reese’s product.
You never really DID come out and say what your position is – only that it’s some kind of moral dilemma.
For me, it’s simple.
From an outsource worker’s standpoint, if I were working in one of these third world countries doing the same work or better than someone from a nation like Canada or the USA, I would be completely resentful. Why should my geographical location make ANY difference to the value placed on my work?
Now, an outsource worker in the USA wants to put food on the table for HIS starving children. And he has no choice but to charge more for his services. Why is he passed over? In his case, he is forced to lower his prices to compete while people in other countries get to send their kids to college and go on vacations because it’s cheaper to live there.
To me, it’s not a dilemma at all. If and when I outsource, I do so in my own back yard. In doing so, I assist in my local economy. I don’t have issues with time zones or language barriers. I can get high quality work right here, and frankly, people in OUR countries are far more likely to go the extra mile to keep your business.
A few of the commenters here made some excellent points. And Michel Fortin had some great points as well – which was where I saw your link, on his Facebook inside that discussion.
But reality intrudes.
As much as we all wax poetic about some utopian global economy, it isn’t a reality – and likely never will be. There will always be the “haves” and the “have nots”. The thing is, if you need a moral ground on which to base your outsourcing decisions, then take a look at the unemployment and welfare lines in your own city, your own country.
And to those outsource workers actually accepting $2/hr for work, stop undervaluing yourselves! Get a domain and hosting in the USA or Canada and charge what you’re worth. Don’t compromise based on your geography! Who needs to know where you reside?
I’m sure I could go on at great length, but I would imagine that this comment will get lost among so many anyway… but I felt the need to respond.
Warmest regards,
Lisa Preston
Hi Lisa,
If there is a person who has a company with only a few hundred dollars to invest in employing someone because they have just started up and no one in Canada or America or Australia will do the work at that rate because it is too low, yet someone in Thailand considers the money very fair for the work – what should that person do?
Frankly, I think he should put his money back in his wallet.
I don’t think that outsourcing in the initial stages of business development is the wisest use of the tiny amount of capital available. I believe that initially it’s important to shape your business structure and learn as much as possible about all aspects of your new venture. As you learn, you can streamline your processes and develop a system that is profitable on a consistent basis.
Once you’ve spent the time needed to really learn the skills and processes that you plan to outsource, you’ll have a far better grasp of what to expect from outsource workers – and exactly what to ask for, and how long it should take. Now, I’m not talking about becoming a professional in any of these skills; I am talking about learning enough about every aspect of your business so that you understand the value of the work required, the time it takes, and if it’s truly necessary to outsource.
Outsourcing is a great solution to removing rote tasks or time consuming items from your own “to do” list, but it’s not recommended for anyone who doesn’t have a firm grasp on his business – someone who is making a profit, and enough to afford it.
One last thought – if I had a consultation with a new business person who (for instance) wanted to outsource the writing of a new ebook, and he only had $300 in his wallet to get the job done, I would recommend that he consider creating a relationship with a writer (jv perhaps) instead of parting with his cash so early in his new venture.
This is definitely one of the most thought-provoking posts I’ve read this month. I personally think outsourcing is not exploitation. It is because I tend to focus more on the positive side of outsourcing in that its main goal is to help people and not to take advantage of them
As a jeweIry designer in NYC, I would love to manufacture locally 100% of the time for the sake of quick turnaround time and good quality but consumers are so cheap and so uninformed about labor costs and the price of quality. I feel pressured to go overseas at times against my will because no one will pay for U.S. labor (though they sure want to be paid for their labor). Just today I got some great press but there’s a sort of obnoxious aside about my price: http://www.nytimes.com/2010/05/20/fashion/20scavenger.html
I don’t produce poor quality items in the thousands…I produce high quality one at a time and in these days of Wal-Mart, it takes a special person to appreciate such a product. I wrote about the issue more here: http://wendybrandes.com/blog/2010/01/get-smart-about-manufacturing/
Thanks for this article…hope lots of people read it.
This is such a nice post and a great eye opener. I realized I’ve been working as a slave worker as I’ve been in the outsourcing industry for almost a year now. I am Mon from the Philippines.
Great job! thumbs up!
Hey Yaro and Everyone else, very interesting topic, it took me ages just to be able to scroll down in order to write this. I think the fairest thing to say about the topic is : If a person is willing to work for a set price then allow them to do it. You set out what they are going to be doing for you in certain periods of time, they get the job done, they get paid. Very simple math. The biggest problem I see is when someone does a really good job and they don’t get any bonus’s or pats on the back. If you listened to John Reese he spoke about how he would buy computers and give bonus’s to those that did really good work for him. This knocks down the exploitation. If the people that are doing the work feel as though they are being exploited in the first place, why do they agree to work for the said amount in the first place ??
This debate can continue for days and months but all in all it comes down to the most simplest thing. When you agree to work for a certain amount then that is what you are going to be getting paid. If you want to improve on how much you are being paid then you must negotiate being paid at a higher price. If you are a good worker and you want more money, because you have proved yourself valuable to a company then negotiate to get more money. Isn’t that what so many people in the “western world” do ???
I pretty sure that if you had a good worker that proved themselves to be a benefit to your company, that one day turned around and said “can I have a $100 per month pay rise?” A lot of people in the internet marketing business would without battering an eyelid turn around and say yes. If the person doesn’t prove themselves and asks the same thing then more than likely they will just be replaced. A bit like what happens in any country at any time, the words “If you don’t like it then sod off” comes to mind when I think of that.
So it’s not really a matter of exploitation, it’s more to the point of differences in the cost of living vs expenses vs willingness. If you don’t like what your getting then change it, if you agree to what you are getting than that is what you are going to get. There is also the point of, when you outsource you are taking a risk that you agree to pay someone a certain amount but the work which they supply is not up to speed, and because you have given them a contract you may be going out of pocket in order to discover that true person who is going to give the best to your business, instead of just going I’ll work for said $ then give you dribbles of work.
Exploitation is in essence the decree to one person’s acceptance of what they are worth and the acceptance of another to just pay them what they ask for no matter how good or bad they have worked.
“You get what you give … the more you give the more you’ll get”
Klay
Thanks for your post. I’m an American living in the Philippines and I think this post brings up several points I have wrestled with a bit. First of all it does bother me when I see companies exploiting the resources here – from Call Centers to Korean English school. However, I do appreciate outsourcing companies that offer employment to the massive qualified workforce here because it really does help the people.
As a small entrepreneur who is trying to develop a system of outsourcing that could satisfy both ends, this is the approach I’m trying to take. First, I’m keeping it small. The reason for this is so that I can monitor the workers and give continual training to improve the quality of life of the workers, qualifying them for better positions (and better pay), and providing quality service to the clients.
Next, our rates are not $2/hr rates. Instead, they are rates that are still below what Americans would pay to hire someone but I hope they would still see the value behind what they are paying for. It also allows us to give extra training and make sure that we pay the workers well.
One other thing, is that we want to be fair with our employees giving them the benefits they deserve and fair rates. It bothers me to hear applicants tell me of bad experiences they have had with other employers who have made them work unreasonable hours without paying overtime, etc.
In the end, cost of living in the Philippines is much lower than in the States. If a person is willing to be fair with whoever they are doing business with, and not consistently ask for a cheaper price, it benefits both sides. The person who is outsourcing, makes more money to spend in their economy while the person receiving the work, earns money to spend in their economy. I guess the other option would be hiring in their own country, keeping their profit margins down, which would result in less of their spending . . . this doesn’t necessarily help their home economy either.
If you have enough money to take care of yourself and your family already, then you should pay the worker a standard, fair pay that you would pay any human being.
However, what if you don’t have heaps of money your self, and outsourcing is not fair but is an improvement on the situation of these people. So wouldn’t it be better in this case to outsource, which is doing some good, and is making things improve, better than not outsourcing at all? And as you make more money, you also increase their wage?
Ok. This is my 3rd post and I just can’t stand not commenting based on the most recent comments. And Yaro – since you have access to John Reese, perhaps you could share with him as well that the statistics surveyed/compiled by the Trade Union Congress Philippines on Poverty Line Threshold as of February of last year was P15,490.00 per month converted that would be approximately $362/month. When you say poverty line – your access to the very basic needs, as in basic. No cellphones, no internet connection, no laptops, no telephones.
So suffice it to say, the $300/month is, yes, above the minimum wage but definitely below the poverty line threshold.
That’s interesting MacSwitcher…your comment on the poverty levels.
Have a guess what the Govt in Australia classed as poverty level 8yrs ago?
$1,000 a week !
The majority of hard working family men doing labouring jobs on & around the Gold Coast in Qld were only bringing home $480 a week in 2007-8….
Australia is fast becoming a “rice bowl” economy, where workers compete to be the lowest paid here too! Check out the taxi drivers in Sydney & Melb.
Check out the trolley boys in the supermarkets here…haven’t seen a 15 yr old kid doing those jobs for a few years now.
Globalization is here, is changing the way we think, work & where we live.
Money always follows value, always has, always will. The people who do work for your outsourcing dept will grow in skill sets & will become more valuable in time…same as here, only we have the unfortunate problem of unions preventing exceptional workers being paid more in their current job.
My friend’s son worked in a supermarket a long time ago & he used to get an extra $20 note in his weekly pay envelope & would say so to the boss. The boss said…”Take it & be quiet. I can’t officially pay you extra because of the unions, but you are worth every penny & then some, but as you are only 15 yrs old, your wage is $120 a week…you do 3 times as much as the others, you keep that extra cash sonny”
Nothing new under the sun…
Kindest,
Poppie
@Poppie – just an update.
The Poverty Lines for the December Quarter 2009 – The Melbourne Institute of Applied Economic and Social Research has updated the poverty line for Australia to the December quarter 2009 Inclusive of housing costs, the poverty line is $753.49 per week for a family comprising two adults, one of whom is working, and two dependent children. This is a decrease of $4.67 over the poverty line for the previous quarter (September 2009). Source: http://www.melbourneinstitute.com/labour/inequality/poverty/default.html
Simply put, if you would compare it as one is to one, the per week equivalent of the $362USD poverty line threshold for the Philippines, would be $90.50 per week. If you would compute the $2 hourly rate by 40 hours in a week, that would give you $80 per week. That’s still $10.50 below the poverty line threshold.
I agree that the ultimate solution is to not be greedy, but there’s also a win-win opportunity here. There is a small but growing sector of social outsourcing organisations that provide a “fair trade” alternative. The ones I know of are solvepoverty.com and samasource.com.
Hi Yaro,
I come also from low-middle income country. I live in Indonesia. In my country, most blue-collar worker will kill each other to get a job with 500$/month. And none of them will consider it exploitation. Even the white collar worker (who graduated from universities) only get 300$/month in their first job, but of course they get an increase after that. But for real, that amount of money is not enough to live, maybe that’s why my country has a big rate of corruption. And many people search for second job in order to make a better living. You can outsource people from my country if you want to, but those who speak English well is not as much as in the Filipin though.
In saying whether this is exploitation, i think you must ask the person you’re working with. Whether they consider this as exploitation. If they say no, that’s it. It would be better to have some money to earn rather than starving. But of course, if you want to make yourself feel better, to get a peacefull mind, give them a raise every year, or something else you can give them…
Trust me, they will be even more loyal to you. and do the best in everything.
At least that what i’ll do if I were them.
Thanks anyway to make this as a topic
Noveline Sagita
I personally dun see outsourcing to third world countries as a means of exploitation. In fact they are paid more than what they work for. Even if you don’t employ them and they work for someone, their boss is making big bucks and they are paid even lesser than what you can offer.
To me, I think that you are indeed helping to improve their lifestyle.
Bravo, Yaro, on an excellent, thought-provoking article. You’ve raised all the important issues. As you rightly conclude, outsourcing per se is not exploitation. Nor is it a black and white issue. There are many shades of grey.
Most of us don’t know for sure whether $2/hr represents a ‘fair wage’ in the countries concerned. But I think we have more than a sneaking suspicion that it is not, no matter how much we like to rationalise to make ourselves feel better.
We all know that $2/hr in the Phillipines has no relation to the same sum here. Let’s forget the actual numbers. The real question is: does $2/hr in the Phillipines allow an equivalent lifestyle to an ‘average wage’ here (I’m in Australia)? I think not. An average wage in Australia allows a reasonable lifestyle. In the Phillipines, it would seem to provide merely a subsistence level. The ‘average’ lifestyle is poverty.
I’m grateful to Honey for presenting her viewpoint and providing an avenue for outsourcing at a fairer rate. I hope numbers of you avail yourself of the opportunity.
What I don’t like is the attitude that it’s OK for us to aim for making mega-millions in ‘passive income’ while getting essential work of a skillful nature at the lowest possible price (regardless of where it comes from).
There is much one could say, but time does not permit. I’d like, however, to respond to some of the comments:
—-
“I intend to live in those countries I employ from”
Presumably on a wage of $2/hr?
—-
“As long as all concerned agree to the contract, all should be fine.”
If it’s a case of surviving or not, people will agree to anything, no matter how unfair. If you’re used to having nothing, a little is great.
—
“People in countries like the Philippines have a lower average standard of living (in terms of money) ”
Why the qualification? They have a lower than average standard of living period. And by paying them peanuts we are supporting this.
—
“I have a need. Somebody in the Philippines (or elsewhere) is willing to fulfill that need at a set price”
So if some desperate person came to you in your country and offered their services at $2/hr for highly skilled work, you would take it? If you are caught doing that in Australia, you would be prosecuted.
—
“To call paying someone $300USD per month as, say, a graphics designer “exploitation” is ludicrous”
Why so? Is the graphic designer on $300/m equivalently better off than someone who enters data? Apparently not. Graphic design is a highly skilled profession, requiring intelligence, talent and specialised training. Paying them the same as an unskilled worker is what is ludicrous.
—
“But to call paying a fair wage for honest work “exploitation” sounds mainly like the cry of those who never gad to actually work for a living in their lives.”
What a silly totally unsupported statement! The question is “IS it a fair wage for honest work”. Citing other cases of exploitation in our own societies is not a justification for exploitation in another country. After reading Honey Young’s post, I doubt that it is a fair wage for honest work.
—
“when you want a gallon of milk or a package of cheap underwear, I can pretty much figure you’re heading for Wal*Mart … I know I do. (every few years when I’m in the US, that is).
“What intelligent and right-thinking person wouldn’t?”
Getting things at the cheapest possible price is not necessarily intelligent, though it’s certainly self-serving in the short term. I make merely an average wage in Australia (partially because my work has been undermined by outsourcing
. I wish I could say I always live up to my principles, but I’m as self-serving as the next person. Nevertheless, I often ‘suffer’ by paying more than I have to to avoid places like WalMart. Yes, I buy Chinese goods, if there’s no option … and often there isn’t. The sad thing is that companies that prefer to employ Australian labour can’t compete.
—
I wonder what our ‘entrepreneurs’ will do when there is no longer cheap overseas labour to contract … possibly draw on the increasing number of desperate people right here at home who no longer have work because of outsourcing. Oh but that won’t work, will it, because our unemployed get more from social security for doing nothing than you are prepared to pay for skilled work.
From my own experience I learned that a $2-per-hour makes a catchy headline but it’s unrealistic if you look for quality. Together with my business partner I started outsourcing just to learn that we had to put so much time in recruiting that in the meantime we could have done the job ourselves. That was the point where we stopped the whole project.
From the beginning we decided to pay a higher wage once the product sells well. In fact the question is this ‘How to outsource without feeling bad about it?’ because the main reason for all the concerns is that you are looking for arguments that make you feel better.
By the way I’m pretty sure if you really find a Filipino who is doing the job as good as you need it to be done and you pay for example $6-per-hour (what still is a low wage), this same Filipino will outsource his work to another Filipino for $2. In this case 2 Filipino’s will win, you win and most important you will feel better.
@Carmel – you hit it right on target Carmel. I agree with you 100%. Online freelancers like us should be treated with some respect as human beings and not some pets.
Because of the disparity in US-Peso exchange with US dollars having a higher rate, many Filipino freelancers will bite that opportunity for $2/hr. But if the ratio of the US-peso exchange is 1:1, that’s a different story and there would be an outcry among the Filipino freelancers since the average rate per labor hour in the Philippines is almost Php 40. Dollar earners in the Philippines is now concerned of the peso evaluation as this trend is continuing. And not just perhaps, but it is a reality that $2/hr seems minute because freelancers are mostly college-educated and have the tendency to seek for a white-collar job much higher than $2/hr in the Philippines.
My point here is that outsourcing can be bad or good and there will be exploitation if you fail to account the situation of those you accept to outsource certain jobs for you.
There is nothing wrong with outsourcing when you know who you are dealing with and that you also provide benefits to your subcontractors. But sometimes many Filipinos sometimes take the chance of the meager pay out of desperation or perhaps they want to be competitive. There are many reasons. It is not about poverty( although that is also a factor). It is about motivation or the lack thereof.
Many freelancers are professionals here. They seek freelancing to augment their income because the standard of living here in the Philippines is increasing and they want other jobs that don’t require intensive manual labor but techie/talent/ skill-based. Knowledge economy, although I don’t have exact figures, has begun to rise in the Philippines with IT and outsourcing among the major industries where many Filipino professionals are now part of.
And many of these professionals are also into Internet Marketing but they seek freelancing to supplement their income. But then, it would be better to provide the freelancers the proper rate that corresponds to their skills and experiences as well as performance. Actually, there is a problem with outsourcing here in the Philippines because of the high turnover rate.
Why I know this is because I am a Filipino freelancer too. I want a better life and better opportunities for my country. The Philippines has a lot of potentials and many people here don’t see the gold that are just sitting right on their backyard. The sad truth here is that many who find it have to undergo exploitation.
Just a thought — doing the right thing never needs to be justified.
I can’t remember where I heard that, but I believe it is true. If you need to justify doing something then perhaps your conscience is trying to tell you something.
Noice!
There are definite benefits to outsourcing – inexpensive labour being just one of the many… however (and this can be a HUGE however), be aware that there are certain rights that you can fore go with using international outsourced labour. IP rights are a growing industry and there can be major hiccups dealing with this issue if you are outsourcing to an international company or individual. You must keep local laws and rights uppermost at all times when looking for a contractor. Time frames are also an issue you cant exactly knock on the suppliers door if delivery is not made on a finished project. I don’t feel it necessary to outline every failure point in international outsourcing here but the biggest is trust. You are entrusting YOUR BUSINESS to someone that you may have no reasonable way to pursue if there are issues that may cost you the business you outsourced in the first place. I will however mention an analogy that comes to mind when thinking of outsourcing – you can buy 40 fry pans at $10 a fry pan and get the same life time use as one that cost you $100 in the first place and came with a 20 year warranty. Sometimes in the long run it is better to pay the extra price for the quality goods with the warranty and the local service centre!
Your Message
Yes, buyer beware. I purchased a website in February from Blogging to the Bank, a UK based service, and it has never worked. Despite many emails to the designer no attempt has been made to fix the problem. Having been told to be patient as they are very busy I’m now handing it over to a more local service.
wow..so many comments..agree with the topic though..some nice comments from the readers
There are two reasons for outsourcing , first people don’t have knowledge about thing which they outsourcing second they want to earn more by saving their time. Normally outsourcing trend is to outsource to those how want to have work at low cost they don’t care about quality and most of time harm the whole project.
Just a follow-up…
We sometimes fail to recognize the differences between outsourcing and off-shoring, as well as outsourcing and employment. That is what I have observed so I have a made a blog post on it.
This might help and I hope it’s okay to have a link here:
http://www.bjornbern.com/2010/05/contrasting-outsourcing-employment-and-how-to-exploit-in-outsourcing/
I just want to say that by the end of the day, there’s just one main thing that’s important – everyone needs to be happy. If the business manager is happy, if the outside project manager is happy, if the company or person overseas, from whom the project manager orders the service is happy, then where’s the problem?
And you don’t even need to think or talk about outsourcing to Philippines. Not necessary. Independent of the country you are talking about, there are people and businesses, doing exactly the same thing, but one is earning 10 or 100 times more. Even though we might not consider this is unfair, it often comes from the facts that 1) Some people and businesses do something different than other 2) some people and businesses need to make more even just to survive. Even in small countries, the average income levels in different towns may differ 2x simply because of the costs involved in living in that particular town.
I agree, $2 an hour is not much. But you do need to think of the bigger picture. I might get a cheap beer in a bar for $2, someone from France might have to pay $6 to get the same beer, and someone from Philippines might get 4 beers for $2.
What I want to say – obviously, if I do the same work as you do, we’d all want to be paid the same amount. But at the same time, it would be good to think about the background system. And what I mentioned before, as long as everyone involved are satisfied with the number you’re getting, where’s the problem? Even within our own small communities we often choose the one supplier with good quality and best prices.
The topic is complicated, agreed 100%, but I think the happy-factor is the most important here. I might feel being exploited because I don’t make as much as Donald Trump or even you, Yaro, but that’s just life.
Hi Yaro,
First off, I’d just like to say thank you thank you thank you for this blog. I came across it a week or so ago and can’t seem to find enough time (minus the 2 jobs I have) to devour the content.
That said, I don’t think of outsourcing as exploitation. My stance is if you’re on a limited budget (like me), can’t do all the work in your business yourself (like me for lack of time), willing to work with your team (assuming you’re hiring more than one persons), willing to give bonuses and incentives for loyalty and service, etc then I don’t see it as exploitation.
One last thank you Yaro. I’d like to say a special thank you for Membership Mastermind and Become A Blogger Premium. As soon as I can afford them I plan to make them a part of my online repertoire.
God bless..
Lady J
I was glad to see you tackle this Yaro. In a country where people are obsessed with “cheap” clothing, fast food, and other such goods–few think of what it means on the other end.
If you support those types of commerce, the chances are you are support slave labor and the substandard environments those products are produced in.
As a professional writer, when I first heard of people selling articles for $2-$5 it made me ill since it has taken a lot of work away from people who produce good, original content.
However, as someone who has been limited by budget–outsourcing sometimes fits well but the one I use gets paid a fair wage–which is about a third to half of what I could hire in my area.
You see I looked first.
Then when I hired someone through an online service, they were protected and so was I. But, I was looking for a fit, someone with a skill set AND that I could afford.
In the future, I’d love to see how others not only provide regular work but also reward those workers.
Outsourcing is not something new, people have always hired other labor and skill sets at lower wages to get a job done. What is different is the online movement toward it brings the awareness of it to a different group of people–and we should take notice.
Most people fail to understand the cultural and wage differences that exist and so pondering such things is worthwhile–and implementing a fair and conscious choice is a good answer for me.
Yaro,
I enjoyed the post but allow me to play Devils advocate here. Reese did mention hiring $2 an hour labor from overseas but he also stresses to treat your staff fairly with bonuses, incentives and so on.
On another issue, when it comes down to it, one thing I didn’t see in your post was the great value that those in countries with deflated currency benefit from the exchange of a stronger dollar earned. For example, i’ve know someone earn as little as $20,000 USD and build a house in their own country.
Of course, there are those that exploit people regardless of location, ethnicity or any other factors. These people in my opinion need help. My take on outsourcing is that’s its great to build your business and you should support local talent as you can afford it as well.
If you can’t afford to pay your outsourced workers bonuses or incentives. A ‘thanks for your help’ or ‘I appreciate your help’ can go a long way until you can.
Dwight Anthony
Financially Elite Blog
http://financiallyeliteblog.com
Well in my experience its hard to choose a good team thats capable of working on your project. Even with good reviews on the net most of the time its just a waste of money, few exceptions here and there.
Gideon Shalwick recently hired a full time Filipino at around $400 US a month?
In Indonesia, You can hire full time Indonesian for $80 US a month.Seriously.
$400 US a month in Indonesia is umm..maybe it’s a little too high.
Is Outsourcing Exploitation?
Here is my 1 million-dollar question for Yaro or anyone who can help shed light on this ??
Jay Abraham talk about paying based on performance. I bet a lot of US based marketers will NEVER propose that to the Philiipinos; and we say we are really helping them to grow their economy?
We know damn well that our business models will make thousands for us. and these “poor folks” are the ones who do the dirty work so to speak.
So how do we define exploitation in this context?
What is help, what does it mean?
We make a profit of 100,000 dollars on a project and give the poor phillipino worker 500 dollars bonus and that means what?
I guess I am not as smart as these other folks!
That is my own 2 cent!
Outsourcing is a very tough subject when we talk business but I think, as you said it, there needs to be professionalism and humanity involved.
I know $2 would be a lot to many workers around the world but if you’re making an absolute killing off of their work, I think they should be paid more or at least given a very hefty bonus afterward.
I think it’s also important to build a relationship where the benefit between the two parties isn’t just monetary gain. Their work should help you out but in return you should also be going above and beyond to make sure they’re in a position to benefit greatly as well.
I got in touch with some people at Kiva regarding projects in the Philippines, and they gave me back this link -
http://www.kiva.org/lend?queryString=philippines&status=fundRaising&gender=All§ors=All®ions=All&sortBy=Popularity
If you’re currently outsourcing to this country (and many others), Kiva looks like a brilliant opportunity to give back to your fellow entrepreneurs.
@Yaro – nice one! So where does your freelancers fit in this link?
Well I haven’t got any yet as we are still looking for talented people. Once we find them and negotiate pay rates and start working on projects, then we figure out the rest.
This is a process that will take months because you don’t know good workers until you work with them for a while.
Thanks for the thought-provoking article -spells out some of my misgivings and discusses them well. I like your current position and am interested to hear how it progresses.
I agree that Kiva is a great resource – I also like the idea of paying extra to provide training and development for your outsourced employees as you would those at home.
Thanks for raising the issue.
I live in a third world country and I freelance on Elance and Rent A Coder. I believe that regardless of where a person lives, there should be a minimum wage that is considered sustainable for a HUMAN BEING.
Whenever someone offers me a ‘dream’ job that pays $3-5 per hour, I ask them, “Would you work for $3-5 an hour”? If you’re not allowed to pay an American, Australian, Canadian or Englishman $3 per hour, then it should not be acceptable to pay an Indian, Filipino or Chinese citizen that wage. They are human beings too. It has nothing to do with economics, it’s about human decency. If a Filipino or Indian delivers the same QUALITY of work as an AUSTRALIAN, he should be paid the same!
This is a very interesting topic. Yaro, I think you’ve done a great job of touching upon all of the various sides of the topic, and obviously it has sparked quite a discussion.
As Yaro mentioned, he did an interview with me where I shared some of my thoughts on the issue. I figured this would be a good opportunity to expand on those thoughts.
This issue is definitely a concern I had when I first started outsourcing to the Philippines. When I started sending PayPal payments for $200 or $300 a month, something about it just didn’t “feel” right. However, it had dramatically cut costs for my business. So I had to make a decision: either find a way to justify it and feel GOOD about it, or STOP doing it altogether.
In the end, I asked myself — what would make this a win-win situation for everyone involved? Not only myself, but my entire team, both locally and internationally.
So I began looking at factors like cost of living abroad and also in the U.S, where much of my local team is based. I looked at what the dollar is actually worth in various parts of the world. This helped me come up with pay rates that I felt good about.
There’s also the issue of fairness. As a business owner, it’s about weighing everyone’s interests and coming up with someone that best suits the individuals and company as a whole. If you are paying someone in the Philippines $12 per hour and you’re paying someone in the U.S. $12 per hour, and they’re both doing the same job, is that really fair to the person in the U.S.? The dollar is worth many, many times more in the Philippines. So that is something that must be considered.
In the end of course, I think it really boils down to a gut check. It’s apparent when someone who is working for you is happy, and when they’re not. Several team members in the Philippines have expressed that employment with my company has radically changed their lives. When feedback like that comes in, I take time to consider that outsourcing internationally can be good thing if done with the best intentions.
Yaro,
I agreed with everything you wrote. This is a “gray” area.
Those that see it as black & white are comparing “apples & oranges” and saying they are the same.
Until we rid ourselves of countries and are just “Earthlings”, the issue of outsourcing will remain “gray”.
I believe this issue was addressed at the recent international outsourcing conference? You’ve got valid points here. I think that we need to step up in outsourcing work and pay fair for quality results. Paying someone’s local rate may not be a problem for some, still, it’s always a moral question. Is it fair to pay $2 per hour when your business makes thousands from these outsourced workers? What people will do for money is beyond me, I recently saw someone working for $0.50 an hour to do excel works. Is it really fair?
I think this is a great article as it covers both sides of the argument. While some may consider outsourcing to other countries to be exploitation, I strongly disagree. Using some of the popular freelance sites can prove to be an extremely powerful resource, especially for an internet entrepreneur. I realize many are attracted to outsourcing because of the cost savings, but those who are critical of outsourcing don’t realize that these freelancers set the price. Sure they have to stay competitive to increase their chances of getting the job, but THEY are the ones who ultimately set the price. While these prices are often lower than using someone in the U.S., the dollar goes a lot further in many countries than it does here.
I agree that paying lower rates to a qualified professional in a 3rd world country probably doesn’t help the economy as a whole move towards a higher quality of life, but it does better the lives of those looking for freelance work. I guarantee most of the freelancers in 3rd world countries make more doing projects for “low USA prices” than they would working in a local factory or any of the local jobs that are actually available to them. I think it is important to remember that it is not the internet entrepreneur’s responsibility to improve the conditions of a 3rd world country (even though they slowly are). It just seems naive to call outsourcing exploitation if it gives those who are voluntarily “exploited” a chance at a better life given the circumstances they can’t help (like the poor condition of a 3rd world economy and being born in a 3rd world country).
Outsourcing is a funny thing.
I am a serial entrepreneur and the business people that work with hire very talented people, pay them VERY well, and get very rich. Then, after they sell the company, the new management always to save money by outsourcing and drive the whole thing into the ground. Every single time.
The trend is obvious to me. Find the best people, pay them enough to keep them loyal, and you will be successful. Forget the $2/hour crap. You are missing the point.
I’m not an outsourcer myself (although I benefit as a consumer, obviously). I just wanted to add to the pro-outsourcing argument.
Comparative Advantage plays a role here. If a business can outsource the things it does not do well (maybe programming?), then it can focus on the things is does do well (marketing, distribution etc.). Even though the lion’s share of the benefits go to the outsourcer (in most cases), both still get benefits.
Nationalism is an issue as well. We should never take for granted what citizenship does for the individual in countries like the US, Canada & Australia. It’d be nice if we could come up with a way to share/extend the benefits of our citizenship to others less fortunate.