A couple of thoughts:

* Like any competitive market, the forces of supply and demand are going to determine prices in these online markets. With the opening up of new countries that have large, reasonably well-educated, internet savvy populations, supply increases which will tend to drive down wages. On the other hand, these markets (and the ability to break work up into small, outsourceable bits) also make it possible to outsource more work, increasing demand, and hence prices.

* At least within oDesk, we haven’t seen strong trends in wages, though presumably this article is talking about freelancers in general and we obviously don’t have visibility on their wages.

* As a practical matter, I don’t think workers in developed countries like the US can’t compete in these markets—they actually have a lot of advantages: perfect english, same time-zone, familiarity with US business culture/expectations etc. Further, price matters, but it’s not the only thing. For what it’s worth, I work with many oDesk contractors and the break-down is 1 x US, 1 x Italy, 1 x Russia, 1 x Pakistan and 2 x Philippines.

* The efficiency and distributional effects of information and communications technology are complex and the evidence is ambiguous, so I’d be skeptical of anyone offering a definite answer to these kinds of questions. There was an interesting Quora thread on this topic: http://www.quora.com/Will-oDesk-and-mfg-com-be-the-demise-of-the-American-middle-class

* I think focusing on what these markets do for relatively well-paid workers in developed countries misses one of the most important moral facts about these markets, which is that they generate new, relatively well-paid, meaningful work opportunities for people in developing countries. It’s obviously not a random sample of our workers, but If you spend a few minutes on oDesk’s Facebook fanpage and look at the comments and stories, it’s clear that online work is improving lives in a pretty dramatic way.

In many ways, I think that the sites you mention are a symptom as well as a cause. I have also seen very low prices posted for jobs on non-bidding sites and have even had to deal with the expectation of low prices when dealing directly with a client.

I believe that the problem of low freelancing rates is complex. There are many factors that feed into including: the economy and the resulting influx of new freelancers, the globalization of the marketplace, and even client expectations and misinformation.

Thanks for highlighting the problem in your post.