Normalising Wages

John Robb writes about the normalisation of salaries that is driven by the use of the Internet and global corporations [1]. He cites an example of IBM forcing many of it’s employees to work in developing countries for lower wages.

It seems to me that IBM is leading the field in this regard and many other companies will do the same. The computer industry which has been very well paid for the last 20 years seems likely to have some significant reductions in wages. Some computer jobs can’t be immediately outsourced to other companies such as network cabling, hardware repair, and training. But they will experience a pay reduction due to competition from software engineers and other people who’s primary work is easily outsourced.

For a job hunter it seems that the best thing to do is to look for work that requires site visits and customer contact. One of my long-term clients has a large business in installing wireless devices. For a long time they have had an open offer for me to climb up towers and install wireless devices. If the rates for system administration and software engineering in Australia (and the outsourced work from the US that I sometimes do) drops to Indian pay standards then I might do some of that wireless work.

When recommending that my clients hire people to do software engineering or programming work I am considering seeking out people in low-wages countries that I know through the free software community. I believe that through an organisation like Debian I can find people who are as good as the people I have been finding through my local LUG but who can feel happy earning a much lower rate. My clients seem to periodically need PHP work, so if you live in a low wages country, have good PHP skills, and are well known in the free software community to a degree that I can feel happy in skipping personal meetings then you can email me your CV.

Don Marti has written about the Linux vs Windows situation on Netbooks [2]. He suggests that neither Intel nor Microsoft is set up for a Netbook world. If both Intel and Microsoft were to pay the majority of their employees rates that are only slightly greater than typical wages in India then things might look a little better for them.

During the dot-com boom I was working in Europe (firstly in London and then later in Amsterdam). It was a lot of fun in many ways with large amounts of money, easy work, and parties. The down-side was that I had to work with druggies and other people who were not suitable employees as the companies I worked for felt that they had no choice. Since the dot-com crash the quality of the people I have worked with has increased significantly which was a good compensation for the lower pay. Also I believe that the lack of silly money was one factor that helped Linux and other free software increase market share after the crash. I expect that the economic depression that we are now entering will have a similar effect. I will earn less money, have fewer parties, and work harder. But generally the quality of the staff in the IT industry will improve and the usage of free software will increase.

As an aside, Don suggests that people who create web sites etc will want more expensive machines. I regularly use my EeePC for running servers in several data centers, I do all types of system administration and system programming on it. The screen resolution is not that great, but it shouldn’t be difficult to design a Netbook that can drive a 1920*1200 external display (as is being commonly deployed in new hotel rooms – it seems that all new large-screen TVs have VGA and DVI input). A netbook which can drive a 1920*1200 display and a full-size USB keyboard could allow me to do some very effective work in a hotel room while also allowing me to work when traveling in public transport. Now all I need is for the hotel booking sites such as to allow me to search for rooms that have such a display. A business hotel could even provide a USB keyboard in the room to allow guests to travel light. Of course it would be possible to design a slightly larger laptop at a Netbook price point, the extra plastic and metal needed to make a larger frame and keyboard costs almost nothing and given the low prices of large desktop TFT displays I find it difficult to believe that the factor of two difference in price between the cheaper and more expensive Netbooks is due to the display.

My main machine is a Thinkpad T41p, I really don’t need a high-end machine on my desktop. I am considering the practice of avoiding purchasing expensive machines as a matter of principle. Maybe if we try and avoid buying expensive machines we can help drive the market towards Netbooks where Linux has an advantage.

3 comments to Normalising Wages

  • Tim

    FYI, John Robb has no idea about comparative advantage and makes a completely fallacious statement that more trade destroys comparative advantage. The theory of comparative advantage requires trade to work, and the more trade, the more the effects/benefits* of comparative advantage. Like flexibility of labor markets, this is fundamental economics and to dispute it is like a biologist opposing natural selection.

    *”effects or benefits” is a choice you can make politically.

  • I don’t know…I think we’re going to have two PC markets: minimum-price netbooks/transaction desktops, and faster, more profitable machines for people who either (1) want to invest their leisure dollars in the best possible game experience or (2) cost enough to employ that it’s good business to speed them up a couple percent with a faster computer.

  • etbe

    Tim, comparative advantage seems to only occur when you can’t move all the work around. If the work is entirely portable then the absolute advantage is what is most relevant – which is when outsourcing to “developing countries” makes sense.

    Don: Early game machines had very limited IO (no storage or network access) and displays of fairly low quality (nothing like VGA). This gave significant benefits for PC gaming where games could be saved, played across networks, and displayed in high resolution.

    Now HDTV provides good resolution and with a DVI (or better) interface to a TFT TV can give very good quality. Modern game consoles have net access and can store data to flash, an internal hard disk, or the net.

    I believe that PCs will never match the CPU power of game consoles. PCs are tied to a single execution unit with a possibility of a loosely coupled GPU that can do more powerful things – it doesn’t compare to Cell or similar architectures.

    My EeePC 701 is faster at loading OpenOffice than many desktop machines…