This is probably a naive question but would love to hear some HNer insight on this one.

While pondering the prices being charged by many contractors on sites like oDesk and Freelancer and reading many people saying that marketplaces like these are a 'race to the bottom', a thought occurred to me.

If these sites are meant to make the market global (and thus a person in say, India, with an Internet connection and talent should be no different to a person in the US, with an Internet connection and equal talent), why didn't / why don't firms in places like India bring their prices UP to the higher rates generally charged by people living where expenses are higher?

I see the argument that contractors living in countries where the living expenses are low can afford to charge less, but why would they?

I know why they would _now_, because the trap has already been set. But why did it end up like that? Why didn't people see it as an opportunity to ask for more (as in some thought process like: "this site makes me equivalent to a US contractor, so I can now charge as much").

I realise there's probably a lot in this question; I'm NOT singling out any countries in particular certainly and I know there's definitely generalizations here (not all contractors from such places charge low amounts).

It makes me curious what would happen if there was a freelancer site that totally anonymized which countries its' contractors were based in; would this affect prices in the market? (as buyers wouldn't have an expectation of a lower price point depending on where you were, if that is in fact a reason).