Personal Services Outsourcing in India: A Different Kind of Labor Cost Arbitrage

Even though traditional labor cost arbitrage opportunities are decreasing in India for North American companies -- thanks to both a weak dollar and booming wages for university-educated talent -- there's a new type of labor cost arbitrage opportunity for families that want children. That's right -- India is fast becoming a hub of low-cost surrogate pregnancy. A recent AP Wire Story on CNN discusses a pregnancy clinic in Anand, India, where "More than 50 women in this city are now pregnant with the children of couples from the United States, Taiwan, Britain and beyond." How much less expensive is it to have a surrogate mother in India? The story sites the case of one women who "spent $200,000 trying to get pregnant through in-vitro fertilization, and was considering spending another $80,000 to hire a surrogate mother in the United States." In India at the Anand clinic, the same services are $20,000 or less. And the "mothers" earn nearly a quarter of that for their 9 months of labor -- many times more than what they would make as cooks or maids for the same period. So it would appear that everyone benefits from the new type of "labor" cost arbitrage ...

As an aside, perhaps the next wave of services-focused -- both personal services and corporate services -- low cost country sourcing will focus on the individual rather than the corporation. The key, of course, will be finding areas for services where location is irrelevant. Hence while global housecleaning might be out, I could certainly see places like India take a more important role for individuals and families as personal services concierges for such things as online gift buying, scheduling, and even financial management (for those willing to disclose personal financial information to a third party).

- Jason Busch

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