Imagine a scenario where your business could access all the labor it needs—completely free. It’s a hypothetical, of course, but one that sheds light on some core economic principles and real-world practices, particularly when it comes to global labor sourcing.
The gut response might be, “Use as much free labor as you can!” And that instinct isn’t wrong. Labor is typically one of the highest costs of doing business. So, if you could eliminate that cost altogether, your return on investment would skyrocket. Profit margins would swell. Your company would suddenly have cash to spare for product innovation, marketing, or simply passing the savings on to customers. But beyond the theory, this kind of thinking is actually embedded in real global practices—namely offshoring and outsourcing.
The Real-Life Version: Outsourcing and Offshoring
While no labor is truly free, offshoring gets us closer to that concept by tapping into global markets where wages are significantly lower than in the United States. Countries like China, Vietnam, and Bangladesh have become manufacturing hubs not because of better technology or infrastructure, but primarily because of inexpensive labor.
Brands such as Nike, Adidas, Reebok, and New Balance rely on these lower labor costs to keep their prices competitive. If those same shoes were manufactured in the U.S., they would likely cost significantly more. That extra cost would either be absorbed by the company, cutting into profits, or passed on to the consumer—potentially pricing out middle-income buyers.
Instead, offshoring allows companies to maintain healthy margins and offer affordable products. That’s not just good for shareholders—it’s good for consumers, too.
However, it’s worth noting that tariffs can complicate this cost-saving equation. Governments sometimes impose tariffs on imported goods to protect domestic industries. These tariffs function as a tax on offshore production and can erode some of the cost advantages businesses gain from outsourcing. Smart companies must factor in not just wages but also regulatory risk and international trade policies when deciding where to manufacture their products.
When consumers pay less for goods due to lower labor costs overseas, they’re left with more disposable income. They can use that extra money to:
Invest in retirement accounts
Support other sectors of the economy through further spending
Pay off debt more quickly
Save for education or emergencies
This boosts not just individual financial health, but also overall economic activity. It’s a feedback loop: lower prices lead to increased consumer spending, which leads to more business investment, which generates more jobs and innovation. Everyone wins—at least on paper.
Reinvesting Business Gains
Businesses also benefit beyond just immediate profit. Those higher margins from reduced labor costs can be reinvested into:
Research and development
Expansion into new markets
Hiring more specialized (and better-compensated) talent
Improving product quality or customer experience
This reinvestment strengthens the company’s foundation, increases its valuation, and can generate even more shareholder wealth. It’s the flywheel effect in motion.
Increased profitability also attracts more investors and can lead to stock price appreciation, allowing early investors or business owners to realize capital gains.
The Flip Side: Ethical and Strategic Considerations
Of course, this isn’t to say offshoring is without controversy. Critics point to lost domestic jobs, labor exploitation in developing countries, and environmental concerns. These are valid issues. However, from a purely economic standpoint, the use of cheaper labor—whether domestic or international—has undeniably helped consumers and shareholders alike.
The strategic takeaway for business owners isn’t to pursue labor arbitrage at all costs, but rather to continually assess their cost structures. Are there ways to lower costs without lowering value? Are there tasks that could be outsourced or automated? Could a hybrid team (part local, part offshore) help your company grow more sustainably?
For example, if you’re a solopreneur or small business owner, hiring a virtual assistant from the Philippines might free up your time at a fraction of the cost of hiring locally.
In fact, I practice what I preach. I outsource my entire team. My virtual assistant is based in the Philippines, my editor works out of Costa Rica, and my web developer is in Pakistan—just to name a few. This global team allows me to operate efficiently, scale when needed, and focus my energy on high-value activities like strategy and mentoring. By tapping into international talent, I not only keep costs manageable but also gain access to diverse skills and perspectives that enrich my business.
Where Are You Allocating Your Savings?
The crux of this discussion comes down to one final question: what are you doing with the savings you get from lower costs?
Are you using the extra margin or cash flow to invest in your future—through retirement accounts, education, or business expansion? Or are you using it purely for consumption—buying more things, upgrading lifestyle, or chasing short-term comforts?
There’s no universally “right” answer, but how you use savings reflects your broader mindset. A consumption-driven approach provides immediate gratification. An investment-driven approach compounds over time.
As famed investor Warren Buffett once said, “Do not save what is left after spending, but spend what is left after saving.”
What strategic investment—personal or business—could you make today using the savings generated from cost efficiencies like outsourcing?
