[hnzix]

> the fallacy of low rent/cost of living in developing economies

Let's say a knowledge worker in a developing country could survive on $1 USD a day, adjusting food and rent to local cost.

If a local white collar job paid them $5 a day, and a remote "exploiting" job paid them $15 a day, but an American could earn $50 a day for the same task, is this really a moral hazard?

[hawkice]

No, ya see, it's wrong to pay people in poorer countries less because now you're talking to a poor person. If you hire an American, you never even spoke to a poor person, so it isn't your fault.

If that sounds like a fever dream, you aren't alone, but it's my best guess at understanding what's happening. Obviously, my complete lack of employing people in central Africa is why they are all middle class Americans now, so I'm doing my part.

[kokokokoko]

Or, maybe pay people a living wage no matter what country they are from? Doesn't seem that unreasonable.

[PinkMilkshake]

It seems reasonable until you realize you could completely wreck their local economy.

If you start paying people to compile lists for you at a higher rate than they are paid performing important local services, then they will stop performing important local services and start compiling lists for you.

What needs to happen is slower growth.

So foreign businesses outsource to the Philippines, paying them low wages. Then other businesses see this as a good way to save and do the same, and then more businesses and so on. Soon the people in the Philippines have options, and their market starts to become competitive, and they start demanding more pay (which is good). During this whole process they are spending that foreign money into their local economy, allowing it to grow and keep up.

China is a good example.

[nstart]

That last part of "demanding more pay" almost never happens. The reality is, service economies start a race to the bottom by taking advantage of the lower starting cost of living and then the economy doesn't really improve. People just live with lower starting costs of living and lower quality of life in many cases.

Note that I use the term lower starting costs of living. There's a reason a lot of people migrate if they can. It's because these countries (like Sri Lanka which is where I live) have costs that suddenly spike the moment you aspire to a better quality of life and the salaries don't keep up.

But I digress. The evidence of the local economies not necessarily improving is there in many outsourced service economy based countries. India is a prime example. And when outsourced jobs started moving away, there were articles describing India's IT industry as a bloodbath (or something similar).

So no. Paying people better actually improves the economy of the country. Especially if it's non local currency. Most countries benefit from inflows of strong foreign currency. People start having less incentive to leave the country so brain drain is less. People can reach higher quality life goals, so purchasing and usage of local services increase (think food and beverage, local tourism, clothing, and even other simple services like laundry).

The idea that US companies paying higher rates is going to wreck an economy of a lower performing country is very unlikely. The reality is that if it somehow became a norm, (unlikely since if rates are high globally, you'd keep the jobs local as much as possible), people would just form new companies to service that market.

Which is technically what is already happening in countries like India and Sri Lanka.

So no. Please pay people better. It'll most likely help that country's economy.

[scotty79]

As a business, paying more for something that you can have (exactly the same) for less is totally unreasonable.

[vesak]

Well, if a person is producing below a living wage, then it's difficult to pay that person a living wage.

[kokokokoko]

You realize, that the business we are talking about is performing arbitrage on labor. That the very definition of this business is that the workers are receiving less than the full amount of the value they are creating.

Its literally how the business makes money. Paying them less than their output.

This business cannot exist and at the same time not have more money to pay the people doing the work.

[GabrielBen]

> That the very definition of this business is that the workers are receiving less than the full amount of the value they are creating.

Of any businesses, its necessary to also maintain the capital that gives them the productivity to generate all that value. Even under a marxist theory you cant pay someone what they produce exactly, cuz then they wouldnt be your employee.

[zorga]

That is a living wage in their country.

[unclebucknasty]

Yes.

[DATACOMMANDER]

Because he should be employing Americans, or because he should be paying the developing-country worker $50/day? If the latter, how do you think that workers in developing countries are going to go from making $5/day to $50/day if they never make anything in between? Surely a 200% pay increase given immediately is better than a 900% pay increase that’s purely hypothetical?

[kokokokoko]

Because he should be paying human beings a living wage no matter where they are. Pretending that living costs in a developing nation is somehow magically non existent is immoral.

Pay people a reasonable wage to live their lives and provide for their families. Just because someone lives in another country does not give a person the moral authority to pay them an amount that does not allow them to properly feed and care for themselves and their family.

[strken]

This point of view compares a marginal improvement with a massive improvement and concludes that bringing about a marginal improvement when you could cause a massive improvement is wrong.

This is a false comparison because there's a third option, which is doing nothing. Doing nothing is worse than causing any size of improvement, and almost all of us are doing nothing. If we are to accept that paying Filipino workers slightly more than the local economy is offering is wrong, then we must also accept that not paying them anything is wrong, in which case we should be going after the hordes of people who aren't doing anything instead of the people who are only doing a tiny little bit.

[mbrock]

That’s not the only possible ethical judgment. You’re assuming a kind of utilitarian perspective, but I think most people have at least an implicit virtue ethical perspective, which might come into play when evaluating the morality of a person who lives a life of leisure and freedom funded by maximizing the arbitrage from a third world labor force employed for repetitive and alienated tasks. Especially when the thesis that minimal wages now inexorably increase later seems on the surface like a neoliberal just-so story.

[notahacker]

I think the developing world considers bosses that provide them with comfortable middle class incomes by local standards doing work which is far more attractive than alternative employment opportunities to be a tad more virtuous than the equally wealthy Westerners clamouring for the elimination of their jobs though...

Nothing could really be more damaging to the development of poorer countries than condemning them to subsistence incomes because we've decided it's only ethical for businesses to employ their workers if they're productive enough after all other hurdles are considered to earn Western wages.

[danillonunes]

You can’t put people who are paying nothing in the same table because they aren’t receiving any work in compensation. If they were, that would be slavery and obviously more morally wrong.

[nl]

A "living wage" depends on where you live.

It's pretty common to see articles about people moving from SF to the Mid-West, taking a pay cut but being happy because they improve their standard of living.

We also see articles about people moving from the mid-Est to Thailand, taking a pay cut but being happy because they improve their standard of living.

Going by the BigMac index for example[1], it is perfectly reasonable to think that developers in the Philippines, Vietnam or India would be happy on roughly 50% of a US salary (presumably a non-SF salary too). Obviously this is very much a rough guide, but it's something to start from.

[1] https://www.statista.com/statistics/274326/big-mac-index-glo...

[ubercow13]

Isn't the point of this kind of labour arbitrage that a living wage is still less in some countries? You seem to be conflating two points in this thread - that the should pay a living wage and that they should pay in line with the value they generate. The whole point of labour arbitrage is that there is a large(r) gap between those amounts no?