Decentralized Economies & Remote Working

In my article on India (Post:India doesn't just show you life, it forces you to feel it) I talked about how technology has enabled western entities of all sizes to source labor from emerging countries at lower cost, while maintaining the same value. In fact one can argue by smart-sourcing (what I call outsourcing), you have a significant competitive advantage operationally if you’re clever about the way you structure a team.

I also explained how the remote working economy in India, is growing immensely and allowing domestic residents to feed off payment in hard currency, shielding themselves from domestic economic instability.

A remote (Up)working world

On October 3rd, 2018, Upwork’s management team rang the bell at the New York Stock Exchange, marking the debut of their remote working platform. Still burning through capital at the time (wasn’t everybody), Upwork was driven by a bold mission: to unify a global workforce, help businesses operate more efficiently by sourcing top talent worldwide, and usher in a new era of solopreneurship.

In 2019, CEO Stephane Kasriel candidly stated in an interview, “The American Dream is broken, and I think we have a shot at fixing it,” underscoring the company’s ambition to redefine opportunities for workers everywhere. (read more).

In a statement by current President & CEO Hayden Brown in 2023, she highlights the ever shifting dynamics with remote working, highlighting Upwork’s incredible milestone of $20 billion in freelancer earnings since inception (read more). Today, Upwork’s TTM (trailing-twelve-month) revenue sits at $761 million. Close competitor Fiverr, which carries a reputation as a less bougie, lower-cost equivalent, also boasts $379 million in revenue for the same time period. Combined, both platforms exceed $1.14 billion in revenue per year.

The greater question is: are these entities making it easy for freelancers in developing countries to access foreign buyers, and at what scale? Looking into the data, both Upwork and Fiverr are still heavily dominated (number of sellers) by the U.S., accounting for 60% of the freelance market. However, India sits at 7–9% on both platforms, with other emerging countries in the Far East (Pakistan, Indonesia, Philippines) accounting for roughly another 15–20%, and European countries soaking up the remainder. Upwork’s largest cohort of freelancers falls into the Web Services, IT, and Software Development sector at 34%.

Upwork’s revenue has been growing roughly 10–20% year over year, and the growing distribution of freelancers has opened up a new freelance economy. At $1.14 billion in annual revenue from Upwork and Fiverr alone, let’s estimate 20% is attributed to emerging economies. That’s $228 million per year flushed into households across these nations on an annual basis, projected to increase year over year. That doesn’t account for freelancers that discover opportunities on Upwork but transition in-house or use it purely as an intermediary hiring platform (which if you’ve ever hired from Upwork you’ll know is fairly common practice).

Decentralized economies are looming

Wealth disparity summons the importance of relativity when comparing salaries for freelancers in emerging economies to those in developed nations. For example, if the cost of living in India is approximately 10% of what it is in the U.S., employers can justify scaling compensation accordingly, with platforms like Upwork and Fiverr acting as vehicles for this translation (let’s call this the “relativity gap”). Thought it’s important to remember these softwares are a movement for democratising remote working, meanwhile there’s millions of ICs (independant contractors), employed outside these platforms to entities in developed countries.

Interestingly, compensation in fields like web development, software engineering, e-commerce, and marketing is narrowing faster than the cost-of-living spectrum suggests. For example, a director in India might request 40% less than U.S. market rates, meanwhile, their cost of living is 80% lower. With inflation at around 6%, earning in USD gives these freelancers greater stability and purchasing power locally, while allowing employers to save significantly, creating a win-win scenario for both parties.

As a founder of an agency, I’ve written a few pieces about cost versus value, and all I know is, I’d face a competitive disadvantage hiring operators in the U.S. Doing so would mean paying 40–60% more for the same director position, with fewer working hours and possibly less experience. Adding to this challenge, incoming Trump tariffs (déjà vu) combined with domestic inflation will likely place more pressure on U.S. businesses, driving even greater demand for outsourcing. This ironically defeats the entire objective of the tariffs to increase the pressure to manufacture and operate in the U.S. Consequently, it’s still cheaper and a competitive advantage to pay lower rates in hard currency to a workforce based overseas instead of on home soil.

What do I see happening in the next five to ten years? Emerging economies, increasingly connected to the global employment landscape, will likely focus on building decentralized, lean domestic businesses that depend heavily on contracts from Western entities. Economist Esteban Rossi-Hansberg published a piece called Remote Work and City Structure, which discuses in greater detail how remote work is affecting urban ecosystems, and flushing interest and investment to smaller cities and suburbs. He writes: “A decentralized economy driven by remote work fosters economic diversification, allowing local economies to develop niche specializations.” He believes “remote work has the potential to narrow regional economic disparities by channeling investment and spending into areas previously excluded from major economic hubs.”

However, this effect isn’t limited to emerging cities and economies. Even cities like New York are experiencing a decline in demand for corporate real estate, with remote working now a viable alternative post-pandemic (read more). Meanwhile, residential rental prices continue to rise as the demand for living space within the city outpaces supply. Larger-scale projects, such as modular apartment buildings, are beginning to emerge, repurposing neglected office blocks into dorm-like residences.

So, what if even 1% of a domestic workforce in a country like India began earning in USD? Since GDP (gross domestic product) is calculated in local currency, an influx of hard currency could artificially inflate GDP, or mean household income metrics. Granted, relative to the total GDP, these emerging economies have a long way to go, before an influx foreign currency gets robust enough that it completely devalues the incentive domestic employment.

Although, with monster labor markets in a lot of emerging economies, it’s likely majority of this shift will be in non-labor intensive sectors. If the relativity gap in compensation remains unchanged and technology sectors continue growing at current rates, I wouldn’t be surprised if this was an outcome emerging economies start to address more publicly.