[AnthonyMouse]

Companies can have internal intermediaries.

Suppose you go to a country and talk to a charlatan who tells you that they have many qualified people and they'll work for 30% of what you're paying in the US. You hire them and tell them to hire more staff there.

Then it turns out there are many qualified people in that country, but they don't work for 30% of what you're paying in the US, because it's a global market and actually they can command the same wages as their skills imply anywhere else. But there are plenty of unqualified people who will sign on for lower wages, and you've been promised workers for lower wages, so that's what you get.

[coredog64]

The good news: Each employee only asks for 30% of what your onshore resources want. The bad news: You need four of them.

[schnitzelstoat]

You kind of can though. In Europe even 30% of a US FAANG wage would be an incredible wage here. 50% certainly would be.

There are other problems like timezones etc. and maybe payroll taxes are higher here too but I think the possibility for labour arbitrage is definitely real.

[everforward]

In my dealings with companies that had European offices, European workers had far higher non-salary costs that brought the total compensation numbers closer together.

Eg Europeans usually had much more time off. The costs of that time off scale with salary.

I do think labor arbitrage could work, I just don't think it would be in Europe. I suspect the total employee cost in Europe approaches that of the US, the money just goes to non-salary places (taxes, time off, labor protection, etc).

[AnthonyMouse]

The thing about arbitrage is that it generally implies you know something nobody else knows or are otherwise in a different situation than they are. Otherwise everybody would do it, bid up the price, and there would be no more arbitrage opportunity.

Which is basically what happened. When the earliest companies figured out that you could do a lot of computer things remotely, they would hire some quality staff in e.g. India, pay them a little more than they'd usually get in India but a lot less than they would in the US, and that was great. Then everybody wanted to do that... but there isn't an unlimited supply of qualified staff.

So the competent staff started demanding more money, because they could, until they got paid enough that the savings was only just offsetting the inconvenience of different timezones and laws etc. But the current CEO still remembers that case study they read in business school from 1985 about how great outsourcing is at saving money, from before the arbitrage opportunity was eliminated by everybody trying to do it.