Wages and cheap labor

2007-Aug-18

A few years ago I had a long running contract as a programmer at a large company. If you are a contractor two rates are important, the “bill rate” that the corporation pays your contract agency and the “contract rate” that the agency pays you. Contract agencies hate to tell you the “bill rate” because then you know how big a cut they are taking and how little you are getting.

But sometimes you can find out. And I found out that the corporation had a standard bill rate of $68 an hour that they paid to the contract agencies for most of the programmers they got.

Until they started hiring guestworkers in a big way. Most large companies and contract agencies know how to game the system so they can pay guestworkers much less (about 30% less) than they would pay an American. So they get as many as they can. But once they do, then all contractor rates go down. And sure enough, when the company started hiring guestworkers, it lowered if bill rate for all contractors from $68 an hour to $65 and hour, and then lowered it to $50 an hour.

Well, some of us got a wage cut of 100% when they replaced just about all American contractors with guestworkers. And when we tried to get another contract, all the agencies started offering us 50% less than we hade been working for (because they found that they could send the work offshore where the workers were paid only one tenth as much as here).

Cheap labor doesn’t just hit the individual who loses their own job. It hits everyone from that moment onward as the wages for all jobs go down to match what the companies can get away with paying anywhere in the world.

Your job’s next.