out-sourcing/bodyshopping, cross-border bodyshopping, and off-shoring
Domestic (within polity) bodyshopping is bad in itself. Even if you out-source to a firm within the country, it still, in practice, involves cutting total compensation.
In the past you would have invested in new-hire training, and regular retained-employee training. You would have mentored, nurtured and developed various kinds of expertise. When work-load lets up a bit, you'd pack nearly everyone into a training class to get them geared up for the next project, the new tools you're planning to deploy, etc.
With bodyshopping you just dump the employees whenever there's a change (no more unemployment insurance obligations, no more pensions...). When you want a new project to start, you start the new contract term, and demand that everyone "hit the ground running". Meanwhile, the bodyshop managers would be striving to be the low-cost bidder; they'd be dangling very slightly above regular employee pro-rata hourly pay but hiding all that stuff about no pension, no pay for down-times, being dumped after x hours of down-time, possibly even hiding low prospects for a full year's full-time equivalent of work, etc. You'd cajole many of them to share an apartment. As with every software project, you'd use implicit cues to encourage them to work 50 or 60 or 80 hours per week while being paid the equivalent of 35 or 40 hours per week.
Total costs per bodyshopped (including management burden, admin/secretarial support, benefits including stock and insurance and vacation and temporary accommodations and on-the-job transportation and pension...) might be 1.2 times their hourly pay rate, while costs per employee in ye olden days of real jobs were 2 times the annual salary.
Cross-border bodyshopping is worse. As others have mentioned, differential costs of living are leveraged. A few bodyshoppers have been caught telling the government that the bodis being shopped would be working in very low cost-of-living/low pay locations, when in reality they've placed them in the highest cost-of-living/high pay locations. In addition, cross-border bodyshopping is used to facilitate off-shoring. The body shopped is used as an intellectual property conduit (one-way, out of the 1st world and into the 3rd; read Gurcharand Das and he will mention several of the many instances if you have your eyes open) and the body shopped is often a communications facilitator to try to bridge over the problems with language and colloquialisms and locally relevant analogies and metaphors. In some cases, the body shopped may even be involved in setting up the satellite links at each end or at least in testing them.
