The Indian labor arbitrage opportunity is shrinking fast

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A friend who grew up in Pasadena alerted me to this AP article about a guy who runs a local news Website there. He has apparently decided to outsource reporting to India:

James Macpherson, editor and publisher of the two-year-old Web site, acknowledged it sounds strange to have journalists in India cover news in this wealthy city just outside Los Angeles.

But he said it can be done from afar now that weekly Pasadena City Council meetings can be watched over the Internet. And he said the idea makes business sense because of India’s lower labor costs.

How much lower? Well, the two journalists Macpherson hired after putting up an ad on the Bangalore craigslist will cost him $20,800 a year for the pair. That’s cheaper than entry-level journalists would go for here in the U.S., but not that much cheaper. According to the annual survey of journalism and mass communication graduates by the University of Georgia’s Grady College of Journalism and Mass Communication, entry-level jobs at daily newspapers paid a median salary of $28,000 in 2005; at weekly papers it was $24,980.

When I was last in Bangalore, in 2003, I seem to remember that Indian call-center and IT workers were making about one-tenth what their American peers did. Now, just four years later, in journalism at least, we appear to be up to one-third (one should add a few thousand dollars to those American salaries for health care and Social Security costs).

That’s a pretty dramatic change, and it indicates that the ranks of well-educated, perfect-English-speaking Indians are not limitless. Yes, there are a billion people in India. But the overwhelming majority of them are not prepared to cover Pasadena City Council meetings over the Internet (which is kind of a joke in itself, but that’s another story), and those who can are able to charge ever more for their valuable services. It’s still less than similarly qualified Americans make, and smart Indians willing to work for less will continue to put downward pressure on wages in certain occupations here. But their salaries are no longer on another planet, and that’s a significant development.