Labour arbitrage what does it mean

These trends are now affecting the service sector as well. Labor, often skilled and educated, moves to a nation on a temporary using work visas or on a permanent basis.

Impoverished labor moves towards the capital in prosperous nations. This move tends to increase the supply of labor relative to capital in the prosperous nations and potentially decreases wages, according to the laws of supply and demand of and for labor. For instance, the Outsource to Detroit program encouraged companies to relocate their IT operations to Detroit rather than offshoring them. This type of approach will have a profound impact on procurement, even putting aside the social implications and challenges.

For instance, if we look at U. If we extend our search to Europe and Asia Pacific, we see similar regional differences. As we start to think globally, other factors become valuable as well. For instance, the UK offers a single time zone and relatively short traveling times between regions.

This makes it easier and more cost-effective to bring a distributed team together on a semi-regular basis. In Australia , we mark even bigger differences. How Arbitrage Works. Types of Arbitrage. Pros and Cons of Arbitrage. By Tim Lemke. Tim Lemke has more than 20 years of experience as a writer. He specializes in writing about investing, cryptocurrency, stocks, banking, business, and more.

In , he joined investment management company T. Rowe Price as a senior writer. Learn about our editorial policies. Reviewed by David Kindness. David Kindness is a Certified Public Accountant CPA and an expert in the fields of financial accounting, corporate and individual tax planning and preparation, and investing and retirement planning.

David has helped thousands of clients improve their accounting and financial systems, create budgets, and minimize their taxes. Learn about our Financial Review Board. Pros Risk-free profits No capital investment. Cons Fleeting opportunity Potential price or rate fluctuations. Key Takeaways Arbitrage involves buying and selling two related assets at the same time in different markets to extract risk-free returns from the price differential.

Inefficiencies in the global market give rise to opportunities for arbitrage. That could mean more opportunities to find all types of workers in lower-cost areas than your headquarters, without necessarily affecting quality. Even if your company does not adjust salaries based on cost of living, you could still save money when hiring remote workers, such as if that enables you to limit office space rent.

Opening up your employee search to more areas can also expand your talent pool and help you find more diverse candidates. While the costs of hiring these workers might be the same, diversity can help improve your earnings, as it can boost innovation , enhance brand reputation and more.

Utilizing Contractors: Similar to leveraging remote employees, you can also utilize contractors as a form of labor arbitrage. For example, you might need help in areas such as marketing or web design but not be at the point yet where your capacity requires a full-time employee.

Instead of choosing between paying someone to work a job with tons of downtime or stretching your current employees too thin, consider utilizing contractors on an on-demand basis. You just pay for the specific projects you need help with. Doing so can often save you money while getting the same quality of work that a full-time employee might provide. Working With an Outsourcing Partner: Partnering with an outsourcing provider can also be an effective form of labor arbitrage, provided that you trust their quality.