U.S. IT Jobs Market: Can it Survive Globalization?

Like many other sectors, the U.S. IT jobs market has been threatened by armies of smart, skilled and English-speaking professionals from emerging market countries like India, Pakistan and Russia.

These non-Western professionals may have some language and cultural barriers. However, they hold the huge advantage of lower living costs. That is, they are able to charge a fraction of Western rates and still make a good living.

This gigantic wage discrepancy has more than compensated for the cost of shipping in the manufacturing sector, leading to the exodus of manufacturing jobs from the U.S. to emerging market countries in the last few decades.

In the digital IT world, businesses do not even have to compensate for transportation costs, which magnifies the living cost advantage of emerging market IT workers. Moreover, infrastructure and capital investments for IT operations are relatively low, making it easy to set up shop in non-Western countries.

The U.S., of course, still holds the indisputable advantage in thought-leadership and innovation in the IT world, especially compared to emerging market countries. However, there are only so many of these high-leveled positions available.

The strength of any jobs market depends on the availability of rank and file positions.

The increase of leadership and creative positions in the U.S. manufacturing sector, for example, has not offset the exodus of rank and file factory jobs. The same principle applies the IT world; not every rank and file U.S. programmer who has lost his job to an India programmer can successfully start a business and become the next Bill Gates.

A fitting platform to explore the U.S. IT jobs market in the context of globalization is Freelancer.com.

Freelancer.com allows employers to post projects (including those in the IT field) and freelancers to bid for them. The platform is online and the IT work is performed remotely.

Freelancer.com is almost a perfect free market and geography does not matter that much, if at all. So how do Western freelancers stack up against those from emerging market countries on this platform?

The short answer is not too well.

In the Websites, IT & Software category, three of the top five most highly-rated freelancers* are from India (the other two were from Croatia and Romania).

The top ranked Western freelancer, from the UK, placed 29th.

In more niche categories, however, Western freelancers fared better. In the Mobile Phones & Computing category, for example, the third most highly-rated freelancer is a U.S. user named rickbdotcom.

Rickbdotcom, a Texas-based IT professional named Richard Burgess, is not cheap; his rate shown on his Freelancer.com profile is $75 per hour.

When asked why people were willing to hire him over a cheaper emerging market alternative, Burgess' response was superior communication and customer service skills.

Burgess mostly builds iPhone and iPad apps, which requires frequent communication between the freelancers and the client. It is also customer-service intensive in that the client often needs the freelancer to navigate the arduous process of successfully submitting the app to Apple's iOS app store.

For whatever reasons, many emerging market IT professionals do not meet these needs well; some of them do not even see the project to completion, according to Burgess, and several times he was hired to finish their incomplete jobs and successfully submit the apps to Apple's iOS app store.

One of Burgess' latest clients was David Palmer, who is based out of the UK. When asked why he chose Burgess, Palmer cited the latter's strength in communication skills, even when compared to UK-based Chinese programmers he met in person.

One lesson from Burgess' story is that IT work that requires heavy communication and coordination between the client and freelancer may favor U.S.-based IT workers. Part of it is English proficiency, but customer service is arguably equally important (if not more so) as he has clients from countries like Japan, Hong Kong and Israel.

Another lesson, perhaps, is that U.S.-based IT workers should focus on smaller, newer fields.

IT workers in emerging market countries are master imitators; while some of them do pursue cutting edge IT skills, many do not.

These IT professionals, most of them driven by financial incentives, do not like to take career risks; they prefer to pursue established fields, like PHP and HTML, which are almost guaranteed to be in demand.

Standard projects in these fields on Freelancer.com, predictably, are dominated by workers from countries like India and Pakistan.

While workers from emerging market countries still compete in newer fields like building iPad apps, they are less dominant.

Burgess is currently the top-rated freelancer on Freelancer.com for iPad apps and the fourth highest-rated for iPhone apps.

He freelances on Freelancer.com on a part-time basis, about 20 hours a week, while working about 40 hours a week at his regular game developer job.

Prior to signing up at Freelancer.com, he had concerns about competing with emerging market IT professionals who have the advantage of lower living costs.

However, he currently finds himself with more work than he can handle and has the luxury of picking and choosing what projects he takes on.

When asked if he thinks it is economically feasible for him to become a full-time freelancer on Freelancer.com, Burgess said he probably could make a comfortable living even if he charges a lower rate than he currently does (which would make him even more competitive against emerging market freelancers in his fields).

*Ranking accessed on Feb. 10, 2012