Over at WordPressPhilippines, Ia writes:

The New York Times reports that “In Web World of 24/7 Stress, Writers Blog Till They Drop“. Drop dead, that is. They consider professional blogging a “digital-era sweatshop”, referring to a factory where its workers are sorely underpaid and unprotected.

It’s an interesting analysis of how Filipino bloggers, unlike their American counterparts, are not getting proper benefits or even proper compensation. I like how this article tries to make a point to a very specific outsourcing niche, but I do think that it’s pretty much just describing the nature of outsourcing in any industry.

Let’s not forget that the Internet is a free market just like most other offline industries, and that the main reason why Filipinos are getting paid peanuts to blog professionally is because they accept peanuts. Let’s disassemble that notion briefly.

If Filipino bloggers are not getting paid enough, what will happen to the local professional blogging industry? The answer is really simple: either 1) blogging as a profession will cease to exist locally or 2) the market will readjust its prices to support a smaller number of higher-quality bloggers, essentially locking out the lower-end suppliers. Now because I don’t think people will ever stop trying to make bucks from blogging, let’s talk about option number 2.

Notice that I said the market will "readjust its prices," and not "the market will increase its prices." To illustrate, here’s a really simple economic thought experiment:

Sam in the US is paid $100 per post. Pedro in the Philippines is paid $20 per post. Using these numbers we can make the erroneous, simplistic comparison that Sam is 5 times more valued than Pedro, which is the mistake that most people make when they talk about outsourcing. We can, however, say that for every 1 Sam, a company hiring professional bloggers could alternatively look for 5 Pedros instead.

Now let’s say Pedro decides that he’s not getting paid enough, and starts charging $50 per post (a huge, earth-shaking increase in any industry). Now the company looks at the numbers and thinks, "Hmm, so we can either hire 1 Sam, or 2 Pedros. Which option should we go with?"

The answer will almost always be "Sam," and the reason for that is that there are issues intrinsic in outsourcing that make having two Pedros less appealing than just having one Sam. As a US company, outsourcing your writing to the Philippines carries with it many pitfalls: cultural differences are the biggest one, but you must also contend with incompatible work ethics, timezone differences, geographical costs, etc. The only way you can justifiably accept all of these problems is if you can get 5 Pedros for the price of your 1 Sam. At 2 Pedros for 1 Sam, however, that arrangement ceases to become cost-effective, and the correct thing to do is to either go back to Sam, or wait for China to start blogging in English and outsource your requirements there.

Now, this thought experiment kind of sounds like I’m saying that Pedro is forever stuck at $20/post, but that’s not necessarily true in practical terms. If Pedro’s overall quality and work ethic improved, you might only need 4 Pedros to accomplish the work of 5, meaning they can now all get $25 per post, a 25% increase. (What happens to the 5th Pedro however? Well, he loses his job most likely. Creative Destruction is a powerful force indeed.)

The lesson here is that you should never, ever forget that outsourcing is forever a price war, and will never be anything other than a price war. The reason why Filipino bloggers don’t have health benefits is because the added cost of health benefits will result in some Filipino bloggers losing their jobs, and at the moment, the market requires a certain number of available bloggers to fulfill the requirements of various businesses.

The other thing to consider here is that as we become more progressively globalized, the costs of maintaining Sams and Pedros will become more and more similar (so it is totally possible — although I personally think it’s unlikely — to have Pedro earning a very similar amount of cash as Sam). However, remember that the available funds have not changed in this scenario. If 1 Pedro is making $80-100 per post, that means that 4 other Pedros will no longer be able to find work, and will either switch industries, or try to undercut that 1 brilliant Pedro. The former action just shifts the burden to somebody else, and the latter restarts the whole price-war process.