Cheap Labor Services

I am working on a project which trades services worldwide. It has been on the back burner for a decade and I am now moving it to the front burner. Trade data in services is notoriously paltry, but one can get some ideas of the players in some industries by googling topics and seeing how many hits there are:

India radiology offshoring 1,690,000 hits

Russia radiology offshoring 589,000

Swiss radiology offshoring 736,000

(Of course I could change the terms and get different responses, but the rates are similar.)

I am noticing a trend that I may have not noticed if I had not been taught way back when that cheap labor is not a factor in int'l trade (in this case, trade in services.)

The places where management of the service is inexpensive becomes the leading source; where the management is relatively inexpensive, workers are in demand and their wages go up. This process keeps going ever narrowing the gap between worker and manager. Everyone benefits, especially the customer. Int'l trade is relatively free market, and so we have this relatively beneficial process. This process I might add, as it plays out in India, is limited to the special economic zones in India, where the government has relatively relaxed rules and regs for biz within the zones (India copied the Chinese success with Special Economic Zones, built on the Hong Kong model.)

As I compare offers for the provision of services, I find that the best offers are coming from places where the prices are nominally lower than USA, for work equal to or superior to what I can get in USA.

Let's take Example A. The management is requiring less for their compensation than management anywhere else, and paying their coders better, than in Example B and Example C. (These are likely to be different countries, but it can explain the differences within one country too.) This is the winning combination.

In example B The management is requiring more for their compensation, and paying their coders less, than in Example A and Example C. This is the most common scenario and these people will not survive. I see explicit examples where the managers are paying low wage for work and charging full rate, for management. The price is the same, but the work is not up to snuff.

In example C The management is requiring more for their compensation, and paying their coders more, than in Example A and Example B. A lot of these costs are fixed overhead simply by virtue of operating in a given country. Such as USA.

In scenario A workers are better compensated and the management requiring less. These workers overseas, say making websites, have a higher standard of living than their competitors in USA that are coding websites. That standard of living just costs less there. Yes, the USA coders are paid nominally higher, but their expenses and taxes are exponentially higher. The USA coders net less, and are able to access less material benefits, than their competitors overseas. It is ironic that coders overseas are delighted with their "low wages" and coders here in USA are resentful of their lack of compensation, even though the numbers on their paychecks are real big.

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