Adjusting To A Brave New World….

Driven by Fear

The ongoing asylum seeker issue and Ford’s decision to sack 440 workers have been the two major stories in the media last
week. Both matters are highly political – and at their core both are driven by fear.

In the case of the Ford workers it’s a genuine fear of trying to find another job in a slowing economy. My heart goes out to these workers and their families.

In the case of the asylum seekers, well, my expertise is in writing about money and not politics, so I’ll leave the central argument to people who are much louder and much angrier than me.

Yet one of the reasons that ‘boat people’ are such a big political issue in this country – at least partly – is because of a general fear that foreigners will take our jobs and disrupt our way of life (and god knows it needs protecting…did you watch Channel Ten’s The Shire last week?).

Which is why both sides of politics are constantly spruiking their plans to protect and create Aussie jobs. And that’s what leads to knee-jerk, rent-seeking policies that have seen taxpayers shovel $12 billion in tariffs and assistance into the coffers of foreign multinational car companies over the last decade.

Yet in that same ten years, few politicians have wanted to talk about (much less throw any cash) the issue that our local workforce has been ripped open and exposed to cheap foreign labor. And there’s nothing either side of politics can do to stop it.

The Indian Accountant

Kane Munro is a Melbourne based accountant who has been running various offshore accounting teams for large Australian practices for the best part of the last decade – mostly in India.

Kane tells me that his current team is made up of young, degree qualified accountants who get paid around $15,000 a year – which is considered a very good wage.

“They work the same 7.5 hours a day as we do in Australia – but the difference is they actually work a full day – there’s no Facebook, Twitter or even much chitchat – they work really hard”, he says.

None of this is new of course.

Two of our favourite pastimes – shopping and media – are being strangled by low-cost online competitors, who may or may not follow our local rules. But we don’t really care about those industries while we’re getting our goodies cheap (or better yet free).

But now they’re gunning for our jobs.

Ten years ago off-shoring was the domain of big businesses farming off their call centres. Next came local professional firms like accountants, engineers and design firms who began bypassing costly Aussie graduates in favour of getting the grunt work done for a fraction of the price overseas. Today, everyone and anyone can access millions of highly skilled, highly motivated workers for as little as a few bucks an hour.

Matt Barrie, the founder of Freelancer.com, calls it a ‘tectonic shift in the way we work’. Barrie’s site is the eBay of off-shoring, and has 4 million users who have completed 2.3 million projects, including a few of mine.

The American Customer Service Officer

Regular readers know that I have played around with outsourcers for years – and it’s mostly been a hit and miss affair – until I met Melissa, a young mother of three, who lives in the US state of Georgia.

For the past six months Melissa has handled a lot of the customer service queries we get on the Barefoot Investor site. She’s been doing so well that I recently offered to employ her directly, rather than through Freelancer.com, who take a cut.

Melissa: ‘You employ me because I’m cheap, don’t you?’

Barefoot: ‘Well, you’re a fantastic worker, and I think you do a great job…’

Melissa: ‘And I’m cheap.’

Barefoot: ‘That is correct.’

Melissa set her payment on Freelancer.com at $US8 an hour. For the record I offered her a pay rise to deal direct – but I’m not fooling anyone (least of all her) – she’s incredibly cheap. There’s no payroll tax, and no employee entitlements like holiday or sick pay, and unlike some previous staff I’ve had, she only bills me for the hours she actually works.

The Luck of the Irish

The digital economy is also a threat to our Government’s tax structures.

Much has been made about Google paying only $74,176 in Australian taxes last year – despite the fact that the local operation generated over $1 billion in revenue.

While you can work anywhere in the world with an Internet business, increasingly your mailing address will be a country that charges the least amount of corporate tax – like Ireland in Google’s case.

I’ve met a number of entrepreneurs over the past few months that are contemplating setting up their online businesses in Ireland – or at the very least hiring a few computer servers there.

What do we have to fear?

The future is always uncertain. The law of supply and demand for skilled work, coupled with constantly improving technology is going to turn the traditional employment model on it’s head – and probably a lot quicker than most people are ready for.

So you can expect a lot more fear and loathing about jobs going overseas. But really it’s up to you how you choose to view things – it’s either an opportunity or exploitation.

History has shown that the massive leaps in progress and prosperity come when we open ourselves up to competition (no matter how
scary it seems at the time).

And over the next twenty years off-shoring will be the major driver in two billion people moving from poverty to middle-class. And that’s going to have a profound effect on everything – including a single mother of three kids in Atlanta, Georgia.

When I contemplated putting Melissa on full-time I wrestled with the fact that she was getting paid so little. And it really is unfair that she’s not earning as much as the Australian workers she runs rings around. But ultimately we’re living in a globalised world where increasingly the only common currency is individual drive and determination.

Tread Your Own Path!

Scott