I'm not an economist, but here's a some possible reasons:
- There is a larger supply of programmers in India than the demand for those programmers. That makes the price of programmers low. But only 10% of what American programmers make? That can't be the only answer.
- The cost of living in India is 1/10th the cost of living in the US. Is that true? If I moved to India, would I have 10 times my current buying power (assuming I was able to continue making my American salary) ?
- Normal economic rules do not apply to India because a) people don't use money there, they are communists; b) programmers do not need money, because non-programmers revere them and supply the programmers with all their wants; c) all programmers in India funnel a tiny fraction of every American banking transaction into their own Indian bank accounts (ala Office Space).
- Indian programmers are super-smart and only need to program 4 hours a week. The rest of the week, they work as back-breaking rice farmers.
My guess is #2 is the main reason why. Any thoughts? Also, how long can #2 last? Eventually, won't the cost of Indian programmers rise to near American proportions? If an Indian wanted to live an American lifestyle (DVD players, big houses, eating out every night, watching movies on the big screen, multiple computers, TV dinners, big automobiles, Starbucks, DSL, etc etc etc), wouldn't she need to make more money than $6,000 ? How long will it take for this inflation to take place? Globalization is a two-way street, right?