NCPA - National Center for Policy Analysis

Online Labor

October 25, 2001

The Internet has significantly changed the way labor markets work. In the United States, roughly 29 million jobs are posted on some 3,000 online job boards.

This has made job searches more efficient, say experts:

  • Jobs posted online are more readily accessible, more up to date, cheaper, and have searching functions.
  • Labor markets are becoming less regional, creating national and international labor markets that encourage specialization.

The Internet and other technologies are allowing businesses to utilize workers with the needed skills wherever they are located.

  • The advent of digital imaging and the Internet has allowed banks to process checks out of state where labor is cheaper and still obey the 48 hour turnaround rule.
  • Several U.S. technology companies outsource services to countries such as India, where labor is cheaper and there are a greater number of technology graduates.
  • Of the Fortune 500 companies, 40 percent currently outsource some of their software development to India.

Of course, the Internet has limits -- softer attributes like motivation, organizational fit and general attitude will not be discernible from data communicated electronically. However, technology is improving -- audio and video streaming, for instance, allows face-to-face interviews over the Internet.

Source: "," Economic Intuition, Spring 2001; based on Inigo Amoribieta, Kaushik Bhaumik, Hishore Kanakamedala and Ajay D. Parkhe, "Programmers abroad: A primer on offshore software development," McKinsey Quarterly, Number 2, 2001, and David H. Autor, "Wiring the Labor Market," Journal of Economic Perspectives, Winter 2001.


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