4 ms·

Is this the same as when companies pay remote workers in poorer countries much less? Or even set up whole factories in poorer countries to save costs, but stil

Is this the same as when companies pay remote workers in poorer countries much less? Or even set up whole factories in poorer countries to save costs, but still charge the same price in the rich 'home' country?

mrtksn 4y ago
It's not. You can't simply employ foreigners, you won't be able to do the administrative work and you can easily get into trouble for employing illegals. So when companies pay remote workers, they often have a representation in that country. This usually means(depending on the country) that the American company that "employs" these remote workers actually pay money to a company in the poor country and that company pays the local taxes and the workers. There are companies specialising in this, so they setup companies in many countries and when you hire a remote worker from legal point of view the worker actually works for this intermediary and pays local taxes. Another popular option is, to setup your own company and do the same thing but skip the middleman. When you setup factories in poor countries, that's considered an investment. Again, you setup a local company that is fully or partly owned by the you(depending on the country, there are restrictions) and that local company pays local taxes and operates in accordance to the local laws. When you bring the produce home to sell at American prices, you import that as if you are importing it from any other foreign company.
- jacknews 4y ago
  Well I agree that tax is an issue, and workers shouldn't just relocate without taking that into account, but your argument seemed mostly concerned that they were "exploiting cost of living arbitrage.". Yet this is exactly what companies do when they employ foreign workers or manufacture in poorer countries and sell those products/services at full price in their home countries.
  - mrtksn 4y ago
    From that perspective, I agree but the dynamics are different. "Rich" people moving into your neighbourhood is very different from rich people setting up a factory in your neighbourhood. Both have positive and negative impacts but for the workers rich people moving into your neighbourhood is almost exclusively negative but if a foreign company sets up business in your neighbourhood its more of a mixed bag. Exploiting the arbitrage is how arbitrage is removed so it is a good thing in principle, notice how the poor countries seize being poor after rich countries invest in them and produce all the stuff for cheap. My problem is with the limits on who exploits that arbitrage. Workers are the most limited bunch with very little prospect to benefit from the arbitrage.
    - jacknews 4y ago
      Rich people coming to your country and bringing money is tourism. It's often a much better deal for the local population than a polluting factory intent on paying the most meager wages possible; often the reason they're even there, after all.
      - mrtksn 4y ago
        Nope, Tourism has some benefits but it destroys local communities. In many places in Europe there are movements against tourism. Google for "Tourists go home" and start digging from there. The gist is, only the business and property owners directly benefit from it and the economy created from it often don't offset the troubles it creates to the locals. Factories are a different situation, they are a necessary evil if we would like not to go back living in the woods. Rich or poor, countries need factories and the pollution they create can and is managed. Not in poor, but in corrupt countries factories can create problems but other than that they are a good thing.
        jacknews 4y ago
        Too much tourism, and the way it's funneled through designated channels, can negatively impact communities, indeed, as everything gets gentrified, and deployed for tourist duty. Too many factories? An absolute blessing, no doubt. lol. Seriously, they completely warp and devastate rural communities, which are left with only old people. You can argue that everyone is getting richer etc, but that's not really true. Land prices increase dramatically as foreign 'investment' comes in, forcing people out of the countryside, and into factories just to afford food, which previously they could grow themselves, share, or just forage. Having a few rich foreign workers around could well be the catalyst for them to realize they're getting screwed and should raise their prices, collectively, and those connections could also be the means to do so. I also think the 'cost of living' is misunderstood. In many poorer countries, the cost of living is much lower, because the standard of living is much lower. To live a western level family existence is often more expensive in poorer countries than in rich countries (probably excl. US), once you factor in security, education, health, imports, etc, etc.
        4y ago
- jkaplowitz 4y ago
  > It's not. You can't simply employ foreigners, you won't be able to do the administrative work and you can easily get into trouble for employing illegals. Tangent: Most countries do technically allow foreign companies to directly and legally become employers in their country without having to involve any kind of additional legal employer entity, and in many cases such branches (as they're called) of the foreign entity can do the required formalities to legally employ foreigners. But yeah, there are usually significant compliance and liability/financial downsides to the branch approach. S most multinational companies do tend to prefer one of the two approaches you describe. > So when companies pay remote workers, they often have a representation in that country. This usually means(depending on the country) that the American company that "employs" these remote workers actually pay money to a company in the poor country and that company pays the local taxes and the workers. There are companies specialising in this, so they setup companies in many countries and when you hire a remote worker from legal point of view the worker actually works for this intermediary and pays local taxes. Another popular option is, to setup your own company and do the same thing but skip the middleman. Although you're right about this, the cost to the employer of such an intermediary company is hundreds of USD per intermediated employee per month, nowhere near the typical reduction in compensation for that employee for being in a poor country rather than a rich country. So it isn't the full explanation. My take is it's honestly mostly just companies getting away with what they can get away with, in the usual economics supply-and-demand system. Hiring obstacles haven't yet forced most companies to change their definition of their labor market into "anyone who can somehow legally work for us (whether directly or indirectly) during work hours that overlap sufficiently with our core hours and without causing us to incur unreasonable compliance and/or travel expenses." They still set compensation using a per-location definition of the market based on who can commute to an office that no longer exists in the context of a remote worker. Of course, switching to a truly remote-first labor market definition would probably involve paying lower salaries than the current SF and NYC market norms, at least in the tech industry. This makes correct compensation a complicated question for employers, when they recognize the remote-first labor market reality but also want to hire the top-notch caliber of employee who often chooses to live in such major tech hubs. But equally, such employees increasingly want the higher disposable income after adjusting for cost of living that allows them to take a slightly lower salary in other cities or countries and still come out ahead. So this just means that a transition to a remote-first definition would involve some iterative adjustments on both sides as a new economic equilibrium shakes out. We're probably in the first stages of this now. Last note: It is true that benefits like health insurance and social security contributions will usually continue to vary in nature and magnitude based on local country norms; however, one of the countries where these (especially health insurance) are usually priciest is the USA, which also has the highest salaries, so people who try to use this variation as an excuse for salary differentials are either confused about the data or being disingenuous.
- abigail95 4y ago
  I make money doing exactly that, paying whoever, whatever, wherever. I don't know how it could be simpler. Just as you can buy goods from any country via purchase order and pay via invoice, you can do the same with labor. The only administrative work involved is the rules required of the entity buying the labor. Plus local rules that constrain my personal interactions with the company, if me and the entity aren't in the same jurisdiction. If I'm in the USA, I have to mind the SDN list, if I'm in Singapore I don't.
galangalalgol 4y ago
It seems precisely the same. But now it is a problem, because it benefits the worker instead of the business and country/state.
- rtev 4y ago
  Either way, it seems like both are morally wrong. Each is predatory in a different direction.

mrtksn 4y ago

It's not. You can't simply employ foreigners, you won't be able to do the administrative work and you can easily get into trouble for employing illegals. So when companies pay remote workers, they often have a representation in that country. This usually means(depending on the country) that the American company that "employs" these remote workers actually pay money to a company in the poor country and that company pays the local taxes and the workers. There are companies specialising in this, so they setup companies in many countries and when you hire a remote worker from legal point of view the worker actually works for this intermediary and pays local taxes. Another popular option is, to setup your own company and do the same thing but skip the middleman. When you setup factories in poor countries, that's considered an investment. Again, you setup a local company that is fully or partly owned by the you(depending on the country, there are restrictions) and that local company pays local taxes and operates in accordance to the local laws. When you bring the produce home to sell at American prices, you import that as if you are importing it from any other foreign company.

jacknews 4y ago
Well I agree that tax is an issue, and workers shouldn't just relocate without taking that into account, but your argument seemed mostly concerned that they were "exploiting cost of living arbitrage.". Yet this is exactly what companies do when they employ foreign workers or manufacture in poorer countries and sell those products/services at full price in their home countries.
- mrtksn 4y ago
  From that perspective, I agree but the dynamics are different. "Rich" people moving into your neighbourhood is very different from rich people setting up a factory in your neighbourhood. Both have positive and negative impacts but for the workers rich people moving into your neighbourhood is almost exclusively negative but if a foreign company sets up business in your neighbourhood its more of a mixed bag. Exploiting the arbitrage is how arbitrage is removed so it is a good thing in principle, notice how the poor countries seize being poor after rich countries invest in them and produce all the stuff for cheap. My problem is with the limits on who exploits that arbitrage. Workers are the most limited bunch with very little prospect to benefit from the arbitrage.
  - jacknews 4y ago
    Rich people coming to your country and bringing money is tourism. It's often a much better deal for the local population than a polluting factory intent on paying the most meager wages possible; often the reason they're even there, after all.
    - mrtksn 4y ago
      Nope, Tourism has some benefits but it destroys local communities. In many places in Europe there are movements against tourism. Google for "Tourists go home" and start digging from there. The gist is, only the business and property owners directly benefit from it and the economy created from it often don't offset the troubles it creates to the locals. Factories are a different situation, they are a necessary evil if we would like not to go back living in the woods. Rich or poor, countries need factories and the pollution they create can and is managed. Not in poor, but in corrupt countries factories can create problems but other than that they are a good thing.
      - jacknews 4y ago
        Too much tourism, and the way it's funneled through designated channels, can negatively impact communities, indeed, as everything gets gentrified, and deployed for tourist duty. Too many factories? An absolute blessing, no doubt. lol. Seriously, they completely warp and devastate rural communities, which are left with only old people. You can argue that everyone is getting richer etc, but that's not really true. Land prices increase dramatically as foreign 'investment' comes in, forcing people out of the countryside, and into factories just to afford food, which previously they could grow themselves, share, or just forage. Having a few rich foreign workers around could well be the catalyst for them to realize they're getting screwed and should raise their prices, collectively, and those connections could also be the means to do so. I also think the 'cost of living' is misunderstood. In many poorer countries, the cost of living is much lower, because the standard of living is much lower. To live a western level family existence is often more expensive in poorer countries than in rich countries (probably excl. US), once you factor in security, education, health, imports, etc, etc.
      - 4y ago
jkaplowitz 4y ago
> It's not. You can't simply employ foreigners, you won't be able to do the administrative work and you can easily get into trouble for employing illegals. Tangent: Most countries do technically allow foreign companies to directly and legally become employers in their country without having to involve any kind of additional legal employer entity, and in many cases such branches (as they're called) of the foreign entity can do the required formalities to legally employ foreigners. But yeah, there are usually significant compliance and liability/financial downsides to the branch approach. S most multinational companies do tend to prefer one of the two approaches you describe. > So when companies pay remote workers, they often have a representation in that country. This usually means(depending on the country) that the American company that "employs" these remote workers actually pay money to a company in the poor country and that company pays the local taxes and the workers. There are companies specialising in this, so they setup companies in many countries and when you hire a remote worker from legal point of view the worker actually works for this intermediary and pays local taxes. Another popular option is, to setup your own company and do the same thing but skip the middleman. Although you're right about this, the cost to the employer of such an intermediary company is hundreds of USD per intermediated employee per month, nowhere near the typical reduction in compensation for that employee for being in a poor country rather than a rich country. So it isn't the full explanation. My take is it's honestly mostly just companies getting away with what they can get away with, in the usual economics supply-and-demand system. Hiring obstacles haven't yet forced most companies to change their definition of their labor market into "anyone who can somehow legally work for us (whether directly or indirectly) during work hours that overlap sufficiently with our core hours and without causing us to incur unreasonable compliance and/or travel expenses." They still set compensation using a per-location definition of the market based on who can commute to an office that no longer exists in the context of a remote worker. Of course, switching to a truly remote-first labor market definition would probably involve paying lower salaries than the current SF and NYC market norms, at least in the tech industry. This makes correct compensation a complicated question for employers, when they recognize the remote-first labor market reality but also want to hire the top-notch caliber of employee who often chooses to live in such major tech hubs. But equally, such employees increasingly want the higher disposable income after adjusting for cost of living that allows them to take a slightly lower salary in other cities or countries and still come out ahead. So this just means that a transition to a remote-first definition would involve some iterative adjustments on both sides as a new economic equilibrium shakes out. We're probably in the first stages of this now. Last note: It is true that benefits like health insurance and social security contributions will usually continue to vary in nature and magnitude based on local country norms; however, one of the countries where these (especially health insurance) are usually priciest is the USA, which also has the highest salaries, so people who try to use this variation as an excuse for salary differentials are either confused about the data or being disingenuous.
abigail95 4y ago
I make money doing exactly that, paying whoever, whatever, wherever. I don't know how it could be simpler. Just as you can buy goods from any country via purchase order and pay via invoice, you can do the same with labor. The only administrative work involved is the rules required of the entity buying the labor. Plus local rules that constrain my personal interactions with the company, if me and the entity aren't in the same jurisdiction. If I'm in the USA, I have to mind the SDN list, if I'm in Singapore I don't.

galangalalgol 4y ago

It seems precisely the same. But now it is a problem, because it benefits the worker instead of the business and country/state.

rtev 4y ago
Either way, it seems like both are morally wrong. Each is predatory in a different direction.