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Should expats pay cheap local rates for local labor?

Bali Maid

In yet another topic that is a fascinating issue in some parts of the world, and not an issue at all in others, I thought I’d discuss the situation of hiring locals when living in a place where wages are very low. For example, if you are living in, say, Indonesia or Thailand or Egypt, you can hire a housekeeper to work 3 full days each week for about US$100 per month, give or take a bit.

The first natural response is to celebrate because on even a modest Western salary we can live like a big shot, but of course the next thought is to wonder if we are exploiting someone this way? It’s a complicated issue and the answer might be different in each situation, so I thought I’d discuss some of the main points and see if other people have other insights to add.

Local wages can be shockingly low

At the moment I’m living in Serbia and I have a photo-gathering project I wanted help with for a new website I’m building. I asked a friend here who is the manager of a busy cafe in the heart of the city, hoping he could help me find a young person with a computer and a bit of time on their hands. I meekly offered around US$3 per hour for this project, and was shocked with the cafe manager said he’d do it himself, in addition to the 60 hours or so he works at the cafe each week.

Evidently, US$3 per hour is probably more than he makes at his real job. I probably could have offered half that amount and found someone happy to do it, but it would feel like I’m ripping someone off at that level. Hiring “someone in India” to do it is one thing, but hiring a friend who lives in your same town is another.

Then there are the cases of hiring a live-in maid or a gardener, where you learn that finding someone to do it for US$100 per month is easy. Obviously there are other countries where it’s US$300 per month, but still that’s only US$10 per day and some people feel so guilty that they avoid the situation altogether. Is that a better way of doing it? Probably not.

Hiring locals can help you be accepted more easily

At some point I’ll probably move to Bali for a while, and I’ve read a lot about it and discussed it with friends who live there. The common wisdom is that you should hire a housekeeper even if you don’t really think you’ll need it. Paying a local to do your dishes might seem decadent, but the local community will appreciate you giving a job to a local, and they can get you cheaper and better groceries, among other benefits.

Certainly it depends on exactly where you are and if you can speak the local language fluently or not, but in many cases it seems that if you can hire and trust a local helper for a low wage that you’d be crazy not to do it.

So should we pay the going rate, or more?

So expat friends might tell you that you can hire a housekeeper for US$100 per month, but you feel that $300 seems fair and you can easily afford it. Being generous sounds good, though it can come with unexpected downsides. For one thing, you can throw off the local labor market and make it so people with other talents are fighting to get housekeeping jobs for expats because it pays better.

It can also set expectations high for other expats and create bitterness between the workers who aren’t making as much, even if they’ve been employed longer and might be doing harder work. Then there’s the problem of starting so high that you can’t really reward good work with raises because it becomes serious money at some point.

Worst case: Getting a reputation as a sucker

One of the less obvious problems with offering to pay a local double or triple the normal wage is that in many communities you’ll instantly earn the reputation as a sucker, and you’ll lose respect rather than gaining it. I’ve heard many stories, first when spending a long time in Vietnam, that even foreigners (as well as locals) who pay high prices are thought of as stupid.

In many parts of the world, it turns out, driving a hard bargain is a way to get respect rather than seem like a cheapskate. It’s something to think about wherever you are living and take into consideration. You might feel good in the short run by paying what you think is a more fair wage, but it’s very possible that the locals will get to know you as that “idiot who doesn’t know what things are worth,” and you might get taken advantage of in other ways from then on.

Have you had to deal with what to pay a local in a cheap place?

Obviously each area is different and there isn’t one answer for the question. On the other hand, it can be a complicated situation, where by trying to be nice, we are doing far more harm than good to ourselves or others.

Have you dealt with this dilemma yourself?

Comments

5 thoughts on “Should expats pay cheap local rates for local labor?

  1. I think that paying the local wage is the way to go. We live in China and pay our housekeeper 100RMB (about 15 bucks US) for four hours of cleaning, etc, each week. It didn’t cross my mind to pay her any more than that. The same goes for never tipping here (tipping is a non-issue in China, people will chase you down to give you ten cents change). Why would you do anything other than what the locals would do. We are locals!! We also bargain hard every time we go shopping.

  2. Steve, I agree with you, as I mention in the story, partly because it can actually cause other problems when you overpay someone. But really, US$15 for 4 hours isn’t that out of line. Imagine if the local rate was US$5 for 4 hours of cleaning, as it is (or lower) in many places. You’ve got to admit that it would feel a bit weird, and it would be tempting to pay more, right?

    Regardless, it does seem better to pay around the local rate, for the reasons discussed. Thanks for your comments. -Tom

  3. This is a really good article.

    I have a friend who grew up in the Philippines who told me that $40 USD buys a full time maid for a month. I’ve always thought that, in that situation, i would pay much more, 5-6 times the local salary in order to not seem like “The cheap foreigner”, as well as that whole altruism thing.

    I think i would feel weird not offering at least a little extra, would it be better to offer decent yearly bonus’s instead? And using the example of the Philippines, for a local rate of 40$ per month, what would be an acceptable bonus amount?

  4. Peter, thank you for your kind words. The reason I wrote this was because I felt exactly as you did at first, but then discovered that there are many potential downsides to overpaying just because we can afford to. I think it’s probably best to start someone at or perhaps just over the local rate, even if it’s US$40 per month, and then increase as they go on to reward loyalty or whatever. By then you’d see some potential downsides if there were any. -Tom

  5. Here in Ecuador minimum wage is less than $2.50/hr. which is not enough to live on even though cost of living is cheap. While some expats have taken advantage of that (and even payed as little as $1/hour under the table to a desperate single mother) most of us try to pay a fair wage without upsetting the balance. You are right in that severe overpaying can cause problems, but there is nothing wrong with paying a little extra for hard work.

    ~Wendy http://www.why-ecuador.com.

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