When an economist models a regional real estate market, she or he will use regional wages as one of the variables. What households make will put a cap on what each can spend on shelter. What if, like in Vancouver, British Columbia, money earned elsewhere continues to grab a growing share of property purchases? Just within the United States, the same job earns you vastly different incomes depending on the metro area. Cost of living variance doesn't explain all the disparity. Sometimes, the higher cost of living doesn't justify a higher wage. A neat trick would be to take the highest returns for your talent and migrate that income to one of the cheaper locales. That San Francisco wage sure looks a lot more impressive, housing-wise, in Portland, Oregon. Too bad for the people stuck working for regional pay.
In places with astoundingly high housing costs (choose your own reason why), the problem works the other way. Businesses struggle to pay workers enough to allow the labor in demand to live there. A neat trick would be to take the lowest return for talent and migrate that income to one of the more expensive locales. That Bangalore wage sure looks a lot more palatable, margin-wise, in San Francisco:
Electronics for Imaging paid several employees from India as little as $1.21 an hour to help install computer systems at the company's Fremont headquarters, federal labor officials said Wednesday. ...
... The incident is a reminder that even amid a labor market that has boomed in recent years in Silicon Valley and other parts of the Bay Area, income inequality and payments of relatively low wages can still be a problem for workers in the region. The workers were paid in Indian rupees. ...
... Investigators from the division's San Jose office learned that the technicians were flown in from the employer's office in Bangalore, India. ...
... Electronics for Imaging said it brought some IT employees from India temporarily to help its local IT team with the relocation.
"During this assignment, they continued to be paid their regular pay in India, as well as a special bonus for their efforts on this project," said Beverly Rubin, vice president of HR Shared Services with Electronics for Imaging. "During this process we unintentionally overlooked laws that require even foreign employees to be paid based on local U.S. standards."
The problem isn't that the workers got paid $1.21 an hour for the job. If the company's version of events are accurate, the wage accrued in the United States was a bonus on top of the wage earned as an employee in India. If the workers aren't paid anything for the States-side gig, did a labor law violation still occur? I'm not sure.
Let's open up this scenario to the freelance economy. Hypothetically, of course, workers in Bangalore who have the necessary skills are self-employed. A San Francisco technology firm needs a highly skilled job done, offering airfare and minimum wage to the Bangalore-residing freelancer. That U.S. minimum wage looks pretty good in cheaper Bangalore. A deal is struck. Services rendered. Bill paid in full. Everyone is happy.
Not everyone is happy. A freelancer living in the Bay Area could have done the work. But she can't undercut (or match) minimum wage plus airfare and still afford rent. The freelancer is gentrified out of her home because the wages are too damn low in Bangalore.