The law of one price does not seem to hold, so Brandon Berg poses a question to me:
I’m curious about the reasons for the wide regional variation in wages for software engineers. Computer software would seem to be the ultimate tradeable good, as it can be sent instantly around the world at zero cost. I’m a computer programmer and have recently been looking into employment opportunities in East Asia, and was surprised to find that typical wages for programmers varied by as much as a factor of 5, with the US and Japan at the upper extreme and mainland China at the lower extreme. Wages in Singapore are less than half of US wages, despite a similar per-capita GDP. Wages in Shenzhen are less than half of what they are in Hong Kong, just an hour’s train ride away.
What’s going on here? Why do firms continue to hire overpriced American and Japanese software engineers when they can get them for half price in Hong Kong, even less in Singapore and Taiwan, and at a 75-80% discount in China? I’ve had some people tell me that American and Japanese programmers are just better, but I’m skeptical of this, especially considering the difficulty level of the interviews I had in Shenzhen and Hong Kong.