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Summary:

Among business leaders, knocking the competition is an age-old pastime, and when we reported on complaints that online labor marketplaces like oDesk are driving down wages for freelancers, Mike Paolucci, CEO of U.S. focused labor platform Solvate, saw his opening. Meanwhile, oDesk fires back.

online outsourcing is bad for american workers

Among business leaders, knocking the competition is an age-old pastime, and when we reported last week on complaints that online labor marketplaces like oDesk and Elance are driving down wages for freelancers, Michael Paolucci, CEO of U.S. focused labor platform Solvate, saw his opening.

Speaking by phone, he explained how his platform’s vetting process ensures clients get top-notch work. This costs a premium compared to competitor sites but comes at a discount compared to work out of U.S. advertising and professional services firms, which Paolucci believes is comparable to what Solvate talent delivers. The process protects skilled workers from competing with much cheaper competitors overseas who are sometimes less than transparent about their actual abilities.

So far, pretty standard stuff as a CEO attempts to explain what differentiate his product from others in the space. But the conversation got more interesting when it turned more general, as Paolucci isn’t just saying his company fills one, higher end niche and other platforms another. He also argued that his competitors are actually accelerating outsourcing, which he called, “not good for the American worker.”

They’re trying to create a global marketplace and that’s what ends up undermining the American worker, because you’ve got somebody in the Philippines or India saying that they can do the same thing that a U.S. worker can do for $5 or $10 an hour. But the reality is that only applies to certain kinds of I.T. like backend programming. They say they can do everything and there are a few American workers on those platforms, but ultimately the customer on that platform is looking for really low cost, offshore IT work, and there’s no way a U.S-based developer can compete at those prices. Those other marketplaces are absolutely undermining the price for that kind of work. I’m not sure how else you’d find all these people.

From Paolucci’s comments it’s clear he’s not a fan of outsourcing generally, and it’s not just his competitors who he’s willing to debate about whether a globalized market for labor is a positive development. He also hit back at New York Times columnist Thomas Friedman for a recent piece on the challenges and opportunities of the ability to move work anywhere.

“My argument back to Thomas Friedman is that the world is still more round than flat,” says Paolucci. “Certain jobs are going to be outsourced, but the kind of work that we do is never going to be outsourced. Just like I wouldn’t understand how to market a product in India.”

“The American worker needs to focus on the things that can’t be outsourced,” he concludes, implying that speeding up the process of hooking companies up with cheap talent overseas, while workers here are retooling for new realities isn’t doing the American worker any favors.

Of course, Paolucci’s focus on the American side of the equation makes sense given the product he’s selling, but it’s not necessarily the only viewpoint – or even the most moral one. That’s the position of John Horton, a staff economist at oDesk. Commenting on the original complaints that sites like the one he works for drive down prices for American freelancers, Horton write:

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.

Is Paolucci’s complaint that most online labor marketplaces speed a destructive trend and hurt American workers valid? Should we also be considering how much good these platforms do for workers in developing countries?  

Image courtesy of Flickr user Paul Keller.

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  1. Michael Paolucci is right! There is no doubt in my mind that these global labor exchanges exist primarily because of the disparity of wages.

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  2. Err no. The Internet is undermining American workers. Solvate is just desperate for PR so they are doing the ‘picking a fight with a bigger bully’ strategy.

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