Global Outsourcing: Is It Wrong to Pay Someone Less Based on Location?

As a person who’s on the other side (freelancers from the third world end), sometimes it’s hard for us to work with clients, specially those who feel like they expect you to work dirt cheap since it’s called outsourcing and I live in a 3rd world country. I’ve seen people want to have a $5 logo, with 2 iterations, done in 3d. I’ve also received requests for a 200 page magazine for layout and offered $75. I declined. THat would be suicide.

Yes outsourcing can be cheap, but the client also has to be reasonable.

I hired someone from over seas to write content once, and it worked out great. In my opinion it is perfectly fine. I paid the guy double what the average monthly income in his country was for 3 weeks of work. He was trilled and so was I.

Win Win.

I pay roughly 1/3 the cost to rent a townhouse on the West coast that it takes to live for the same quality on the East coast in the states… before you get all upset about paying people less consider cost-of-living and wage go hand-in-hand.

I’ve used a gentlemen in Pakistan on several projects for coding and he is easy to understand and communicate with and works for way less than someone here would – which means I can charge less for the overall project as my own costs are lower. My subcontractor make money and so do I.

I got a full-time salaried job because a friend from college begged her bosses to stop outsourcing development, and bring in someone local who knew what they were doing. I lost my job with them 7 months later, and they started to outsource again. My friend spends at least a full day cleaning up the code they get back from India.

But somehow, it’s still cheaper to send it out, and have someone in-house clean it up, than it is to have a dedicated developer.

I think the problem is not where that person is, if the work is good, you should pay for good work. I dont care if its USA, India, Europe or the North Pole.

And i mean paying 1st world salaries.

I dont like the “if he is happy and im too its ok”, no, its not. Thats thinking short term and shelfisly, but if you thought about long term is an stupid decision, you are only making the rest of freelancers (and not freelancers) salaries go down. And probably we are already living that “future” thanks to globalization.

You should pay for quality work, and paying 250/month sucks. Find a way to pay a real 1st world salary first. You are not helping the 3rd world people to make real money but you are helping 1st world people to end up with 200$ salaries. So, with that kind of decissions you are only helping yourself in the short term and keeping the poor poor and making the “rich” poor too.

We are now seeing a lot of clients like pipao says, the kind of “make me the new facebook for 300$ or 1000$”. what? Thousands or hundreds of hours for pocket money? Nope thanks.

And what are the people in the called first world going to do? get paid 200/month and pay our 300.000$ houses and 40.000$ cars? Thats how it looks, so the future doesnt look too bright for US and Europe… And what are going to do countries like china is we stop buying their cheap stuff? mmm… There is a lot to think about.

So what im trying to say is that quality work should be paid WELL globally, not well locally. For a bussines decission its ok, save money. For an intelligent decission, well we all should expend more money in better products. Keeping it really fair.

If the best are going to get the work, at least they should also get the money.

@Anna: It sounds like the Penny Wise and Pound Foolish Company is destined for great success. [sarcasm off]

My take…people are just plain lazy. If you live in the US, there are plenty of people willing to work for a decent wage. Any small business or freelancer can afford that extra, help provided they actually charge for their services properly and do the legwork to find these individuals. It’s just too easy now for someone to hop on an outsourcing website to find the work.

This is precisely what irks me when it comes clients overseas. Some of them – companies and freelancers alike – feel that they know better how much to pay us, citing the reason that the cost of living here is cheaper. Geography should not be a factor at all, in my opinion, except for taking note of the time zone differences. As a freelancer who lives in the Philippines, I am as capable and as competent as those who live on the other side of the world, and I charge that way.

I’ve encountered a lot of people asking me to do a lot of labor for a measly $200-300 per month cost, but if they were asking a fellow American, they would gladly pay thousands of dollars. That’s discrimination. It also doesn’t help fellow freelancers because people end up competing on who has the lowest bid, and there are some who are crazy enough to work for $1/hour. That’s stupid and morally wrong. But because jobs are scarce there are some who agree to this kind of arrangement, even if they work like dogs. I am frustrated by the designers and writers who accept such offers, but understand where they are coming from – we need the money. However I am much more disgusted by the Americans who allow this to happen and who don’t think twice about what this does to us morally, how it affects our dignity – all they are concerned about is that they get to save a lot of money while exploiting us to work harder. They wouldn’t dare to do that to someone living in their country or area.

So all that crap about “needs training, doesn’t speak good English, etc.” — they’re all flimsy excuses. It’s crap. Sure you’re paying a lot less but you’re still paying WAY LESS than if he/she was living in the same area as you. Someone who is a local yet lacks a few skills will still earn much higher than someone living in India or the Philippines. Yet you need us to work for you. We help you succeed but you still treat us like crap.

Freelance rates have always varied by location. In addition to individual ability, it’s often based upon the cost of living in a particular area as Josh mentioned. Freelance copywriters in New York City command higher rates from those living in, say, Des Moines. And the best writers often earn rates above the norm within their own region.

I can’t comment on coding or other “market neutral” activities. But I believe strongly that, when it comes to marketing communications or web content, outsourcing to other countries doesn’t make any sense at all. This is because most marketing copy and design needs to resonate with audiences and encourage them to take action of some sort. It demands an intimate knowledge not only of English but of distinctly American attitudes, dialects, senses of humor, business philosophy and other factors.

In my opinion, only someone who was born in America, or who has lived here for many years, can identify with national, regional and local sensibilities sufficiently to engage and persuade American audiences.

International outsourcing may work better with more academic-type writing, such as white papers, biographies, etc. But when it comes to marketing, I think it’s best to stick with “native” writers and designers.

Great article! I am a Filipino freelance graphic designer and I have been in the business making graphics and dealing with clients for four years now and I should say my prices are significantly lower than my US,UK based counterparts but that does not mean I deliver subpar results, I actually consider it as an “edge” against the competition.

IMO…I think it is ridiculous to argue that all programmers and designers should be paid the same regardless of their geographical location. That goes against the whole premise of why outsourcing became popular in the U.S. (and other places around the world). If a company from the U.S. felt obligated to pay their outsourced worker from India (or China or wherever) the same as they would a U.S. based worker…why would they not hire the worker who lives in their same country and contributes to the same economy (and is probably more readily available depending on location). The matter comes down to price. If that same U.S. based company can find an outsourced worker for 1/3 of the price of the U.S. based worker…and that outsourced worker does the same quality work as the U.S. based worker…it’s a no brainer.
That outsourced worker is happy to get the work and will probably still be making a decent wage (even @ 1/3 the U.S. wage) for their cost of living. I find it hard to believe that most (not all) outsourced workers are upset that they are not making the equivalent to what a worker in the employers’ county makes.

I do believe that some work (ie. design) does not always span across cultures and so outsourcing is not always the best solution. I also believe that quality work is not always easy to come by and it is not relevant to geographical location.

Repeat after me, kids: there is no people’s court. And nobody’s approval (particularly the bleeding hearts) means jack.

I think the author’s remark in her post sums up my feelings on the matter:

>> For me, the personal decision comes down to what the person I’m working with is actually worth.

Perhaps it seems exploitative to pay the offshore worker less. Which is utterly naive. It’s business, not charity, and the asked rate is much less than local rates due to supply and demand.

If a copywriter in India happens to be so excellent that he justifies a US level rate, my guess is that over time his asked rate will naturally rise to meet US levels.

Just as a US based copy writer will need time to establish his credibility and economic value.

ANYONE stuck at toilet level rates who does not like it has to ask why they are getting so much less, and look for those reasons, and work to address those reasons. This goes for onshore or offshore people.

Yes, there will be a strong bias existing to pay offshore people much less. Aside from that, true talent always pops up like a sore thumb.

In a past life as a contract software developer, the terms and rates of contracts I have been offered at times were somewhere between insulting and actually legally damaging. Most of the time the very worst rates and terms have been offered with a completely straight face. And there was nobody available to judge the vermin who insulted me with ridiculous rates or contracts designed to tie me up with legal problems.

Usually, with few exceptions, I have turned down the really insulting deals, the “you HAVE to take our work because we know you aren’t very good” deals.

There’s no people’s court protecting me. In fact, most peers laugh at these deals, like I am to blame for attracting the lowlifes.

So I feel absolutely no compulsion to “protect” anyone else, foreign or local. If some guy in Pakistan wants to develop C++ for a month for $200, that’s his business.

And here’s one last aspect of supply and demand that fits: how well the provider’s overall production meshes with actual money outlay. I have actually hired an offshore coder. The guy was OK on very regimented tasks, but then started to get sloppy and appeared to misinterpret my specific requests. I finally stopped using him (even at $18/hr) because communication was quite painful and I was asking him to redo every thing I asked him to do. It was more economical just to do it myself.

So, this stuff really does have a way of correcting itself, particularly because the Internet gives us all an equal chance. Believe it or not, bleeding heart or not.

It’s not morally wrong to pay outsourced workers less than US wages, that is the purpose. When you start to pushing the limits of how low you can pay them that is another story.

There are not many places where $200 is a “very respectable income” for a computer savvy person with solid internet access.

Most freelancers seem to be going to the Philippines these days, which has an average income of $217* which makes $200 for someone with even a minimal skill set questionable.

Morally I don’t have any problem with people outsourcing to much cheaper countries, but there is serious benefit to keeping your freelance dollars local – whatever local means to you. In my case, keeping my dollars in the US is worth a premium as much as feasible.

*http://www.worldsalaries.org/total-personal-income.shtml

What we’re talking about here is not a relatively new phenomenon. Companies consistently seek larger profits by reducing the bottom line. No surprises there- that’s been the business model since Henry Ford started.

Outsourcing has been taking place for years– so long, that it’s become almost assumed that the larger the company is, the more likely they are to outsource the work needed. Think: Apple, Nike, just about any child’s toy or electronic device is NOT physically produced or manufactured in the USA.

This is why it made sense for Americans to go to college, because it was believed that intellectual work couldn’t be outsourced. Thanks to the internet and developing technology, now even that has changed.

None of this should come as a surprise: companies are only trying to do with intellectual labor what they’ve done with manual labor for years. The US government has allowed outsourcing to continue, unchecked, for far too long. Being that we live in a commerce-eat-commerce world that worships the mighty dollar (or yen, as it might be) over all else, what did you expect would happen?

To my compatriots overseas: trust me, it isn’t any better here in the US. Jobs are few and far between. Companies underpay their employees. In-house designers have to sign “contracts” where their full-time job is gone after six months or a year. Other businesses think freelancers means “free”. (“Gasp! I have to PAY you every time I ask you to do something? That’s UNHEARD OF!”) Think about it… every time a company gets an overseas employee for $1, someone in the US just lost their job. Companies very rarely, if ever, just consider turning over thousands of dollars for a job. Well-paid workers are the exception, not the rule.

We can preach the values of great design, but until our society no longer worships the mighty dollar (and all the commodities that several dollars might buy) we won’t see any change in the appalling behavior by companies who are making, and want to retain, record-high profits.

Nothing wrong with it. In all sorts of industry professionals get paid less living in certain areas as opposed to others. Being a journalist in Nebraska nets less than NYC. Doctors make less in Iowa than they would in Miami. I’m not sure why this is considered a moral issue, unless people are on their high horse about it.

Someone from New Delhi, India keeps sending me emails about outsourcing my web content to their company, but I’m not ready to outsource. Even if I did outsource, I’d utilize the wealth of resources available in the U.S. then look for opportunities outside the U.S. in order to spread the ‘wealth’ around.

I don’t think there’s anything wrong with outsourcing as long as people (no matter where they live) get paid what their worth. I believe in QUALITY over quantity. I want and will pay for quality work. I also want to work with people who understand how to build business relationships. If you know how to do this, I don’t care where you’re located.

It’s just a matter of economy.

I’m a designer from Argentina. People outside my country, knows that 1 dolar = 4 argentine pesos, then, they think “Oh, making a website in Argentina, will be cost much less than in U.S.”. But they’re almost wrong.
Why?
Because here, ther’re so much inflation, and the price of the things ups every day!
I hate that economy, always looking outside and making comparisions with other country’s currencies.

The reality is, a good designer in Argentina, charges a little less, but making a websiesite for, let’s say US$ 500, is ridicoulous!

Most small business work in a community.
I do get irritated when I hear someone talking about how they outsource everything so cheaply etc etc & then in the same sentence have their hands out for you to do business with them, its so sleazy.

My thoughts are you can tell your story walking pal, I prefer doing business with people that do business with me or the community I live in.

If everyone outsources their services overseas then it ends up being a race to the bottom.

I think it’s simply the problem of having too many choices, thanks to the Internet. Not really a problem, come to think of it, but more like the paradox of choice.

The internet has truly transformed this world into a global village.

An employer can now have a choice of hiring locally or overseas; for cheaper but much less quality; or more expensive but more quality, or cheaper and better quality, even!

Likewise, as a freelancer I may work for cheap for any employer, or choose who to work with by charging what an US or UK freelancer is charging.

I choose the latter.

You may base your choice on business reasons or personal reasons, even!

The global economy as it is set up is going to lead populations and countries to extreme poverty. If that’s what you want to do to other human beings then you should definitely take advantage of all the wage differences across the globe. At the same time you can congratulate yourself for taking part in the rebirth of slavery.

So let’s create a central bank, and one currency, so the dollar/whatever is worth the same over a whole bunch of countries – if not the whole world! – and then the cost of work will be quoted on even terms everywhere and people won’t be able to take advantage of the differences in the cost of education and living, because there won’t be one.

But wait, we’re doing that somewhere up in the Northern Hemisphere. And the Euro is failing.

GFC v2.0, anyone? (That’s assuming Greece – or even the US – doesn’t default on their government debts…)

I’m more than happy to pay at geography-based rates. And even happier to chip in a bonus (above and beyond quoted prices) if I feel a particularly good job has been done. If I can pay someone a rate that they’re happy with, and I’m happy with, I don’t see the problem.

I do not think it’s wrong for pay someone based on location/geography. Most western countries outsource to other countries, like philippines,india etc to save on their expenses.

Freelancers across the globe grab any chance they can get , to take jobs from us/uk because the pay is really good, compared to the wage they get on their own country. What I don’t like is when people offer jobs, that are so low, ex: logo for 25 usd or unlimited revisions, any noob freelancers across the globe fight over these jobs. These also has a direct effect on the freelancers in the uk or us too. We freelancers should be responsible too, any not stoop down to such a low level.

It’s actually basic business principal of comparative advantage. I just spoke to few people in Philippines under Expedia.com and it’s “outsourcing at its best” at work with its labor cost advantages.

Here’s the thing…
It is absolutely the WRONG, WORST time for outsourcing as obviously our country is struggling with high unemployment and those jobs could be handled by we Americans. But from a CEO’s perspective, you could see why a decision to save all costs would have them choose an outside CSR vendor. But again, absolutely the worst timing for Any Outsourcing right now.

If you have to ask the people from a lower income country like India and the Philippines, outsourcing is one of the best thing that ever happened to them. It is good for both the employer and the employee.
Good for the employer because they’re saving money but still having a team of skilled people. Good for the employee because they’re working from the comforts of their home with flexible work hours, and they’re pretty much happy with the basic pay of $3 an hour.
But there are also disadvantages of offshore outsourcing. Communication is one example of those disadvantages. You just gotta create a virtual workspace for you to be able to monitor their productivity.