Why Distance Learning is Big Business:

Economics Dictates Cash Flow.

Anyone who is into personal finance has heard of 529 plans by now as a great means for funding your child’s dream of going to college, without forcing you into a second mortgage.

But what if they never get there? Is there a way, that parents can leverage their financial situation now to help their children do better in school?

The article below explains how one california mother does it, and why this might be the newest example of more traditional outsourcing woes for the US Economy that many in the tech sector have already experienced as a result of the outsourcing.

Source: http://news.yahoo.com/s/nm/20060928/tc_nm/life_education_india_dc

How the United States is Service-Based

The United States is becoming more and more of a service-based economy for services like dry cleaning, restaurants, and personal tutoring. However, people in the U.S. often enjoy saying that we are not concerned about service-type jobs being outsourced because many arrogantly believe that those in the United States are skilled workers and therefore cannot be replaced by those in Asia. However, this article linked above shows that this statement is in fact false.

Indians working for this company that provides a service are clearly skilled workers. Having achieved Master’s Degrees and having similar certifications is not an easy task. Indeed, many in the United States don’t even have a college degree at all. And since it is clear that there are those in India who are as skilled as those in the United States when it comes to businesses that deal in services, it becomes quite clear:

• The main ingredient in a services business is labor
• Labor costs are driven primarily by costs of living where the labor force is working
• If work can be done remotely, then in a free-market situation, the businesses where work can be done remotely, the work will shift to where labor, and therefore the operational cost of the business, is cheapest

The Impact may be Forthcoming
This could clearly have an impact on all of those professionals out there who make a living by being full-time or part time tutors in the US, although I doubt that this industry will ever be completely replaced. There may be an upside for United States children, however, if all of this turns out to be true. Cheap tutoring may help improve our children’s chances as the next wave of the economy crashes to shore. Cheaper tutoring might make giving your children an edge affordable, especially in subjects where they are really struggling.

Its Just Numbers
In this case, at the 2.50/hr that this is costing their family, it seems like quite a bargain. In fact, this cost is only 6.25% of the hourly cost of 40 dollars per hour for a local english or math tutor that this mother describes. Therefore, there is big money in this business for this indian company and it will not likely go away any time soon provided that their business model is good and it makes sense.

On some level it might be a sad social commentary. But, even working a very low paying wage job, you could likely afford to work, make money, get taxed, and get your kid an hour of tutoring and still come out ahead. And the quality of the tutoring (after an adjustment period) may be as good or better than what you would get elsewhere. And although the science may be dismal, money follows economics. And in the simple example above, this family is making out like bandits compared to their neighbors. They are getting more goods for the resources invested and the quality is superior. Its hard to beat. Really. Now if I could just do that with my 401k…