Online Outsourcing

Prospects for Increasing Youth Employment and Reducing Poverty in Indonesia

by Peter Glick, Louay Constant, Ifeanyi Edochie, Shanthi Nataraj

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Rapid advances in computing and information technology are having profound effects on how economic activity is organized globally. For many production activities, widespread use of the internet means it is now possible for employers, workers, and customers or clients to be located almost anywhere in the world. In recent years, online outsourcing—whereby certain digital tasks or assignments are carried out for firms by individuals across the globe who are operating basically as independent contractors—has risen rapidly, with the only job requirements being access to a computer and a good internet connection, as well as the requisite skills. Online outsourcing encompasses both virtual freelancing, which consists of skilled tasks, and microwork, which consists of less-skilled, repetitive tasks that can be accomplished online. In this Perspective, the authors review the potential benefits and drawbacks of online outsourcing, with special reference to its potential for youth employment and poverty reduction in Indonesia. They find that although there are several significant constraints on the growth of online outsourcing as well as concerns about the extent it benefits workers, Indonesia's large size and relatively high levels of education and internet connectivity make it fertile ground for a significant expansion of online outsourcing. The right policies will be needed to facilitate this expansion while directing a good share of the benefits to lower-income workers.

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Funding for this study was provided by the generous contributions of the RAND Center for Asia Pacific Policy (CAPP) Advisory Board. The work was conducted within the RAND Center for Asia Pacific Policy, which is part of International Programs at the RAND Corporation.

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