[yawboakye]

fellow african here, with a few questions.

could the average income in kenya be around $1.25 because companies decide to pay abysmally? or the people don't merit any higher? would openai be offending the kenyans if they paid them, say, $5/hour? i think this is the question you should grapple with. openai will be selling this tech around the world, and i wonder if these $2/hr workers can afford it at all. would they, or their loved ones, be able to enjoy produce of their labor?

[dylan604]

I've heard arguments in the past of paying "acceptable" US wages to people in other countries would destabilize the other country more than it would help. I'm not an economist, so I don't know how valid those arguments are. I have always thought they were more scare tactics used in favor of being able to pay those low wages for as long as they could get away with it. I could see though how paying a small-ish number of people wages that dwarfs the larger number of people could cause a bit of turmoil.

to me, it goes back to the argument about remote workers should be paid less than the in office worker. or workers living in cheaper areas should be paid less than those living in expensive areas. to me, the salary should be paying for the work being done and that's it. if the same level of work is being done by both employees, it shouldn't matter if one is in Kenya and the other is in the US. the value of the work is what should be getting compensated. again though, i'm no economist.

[NickC25]

>I've heard arguments in the past of paying "acceptable" US wages to people in other countries would destabilize the other country more than it would help.

Which honestly is a bullshit argument. The only destabilizing thing here is it would make the person in the higher-paying profession more valuable to society and more able to make economic impact where it might not normally. In this case, a rising tide does lift all boats...because you're giving more economic purchasing power to more people. Will this kill some businesses or disrupt the status quo? Yeah. Will it help more people than it hurts? Maybe, probably, who knows? But I personally see no problem with paying people relative to their output, no matter where in the world they are.

Having been to Kenya myself and worked with Kenyan developers for several years, most of whom were quite talented, I see absolutely no problem with paying them their value relative to the work being done. I have no problem with high skilled Kenyans making much more than the local average because they have a skill that is in demand all around the world.

>the salary should be paying for the work being done and that's it

100% agree. If a business derives $X profit from a laborer and agrees to pay a given % of $X to the laborer as compensation, it should not matter if the laborer is in a high cost or low cost of living area - the business still makes the same amount in profit, and shouldn't get to say "hey yeah we made $10mm off your application, but we're going to only pay you 5% of our profits as compensation because you live in Bangladesh and the cost of living is lower, so be happy with what we're giving you" when if you did the exact same labor and lived in, say, LA or NYC, they'd give you 10%. Just bullshit IMO.

[autodev1]

BS? Based on what experience of yours?

I spoke with a US Civil Engineer who worked in Honduras in the 1980's, clearing paths in forests for electrical transmission lines.

He initially paid workers significantly higher than local wages-- US-level wages.

The result:

--> He was threatened with harm by bosses of local companies.

Why? He took all their workers.

The local companies couldn't compete-- they lost all their labor to his company which paid relatively (relative to Honduras) exorbitant wages.

His US company literally destabilized the local labor economy.

So, I wouldn't be so quick to jump to "that is BS", as in my opinion it exemplifies naivete & ignorance.

[henryfjordan]

Who got hurt by "destabilizing the labor economy"? The bosses who were perfectly fine resorting to threats and extortion? It certainly wasn't the workers.

It is fine to recognize that people who wield economic power might be upset when a new economic power arrives in town, but to describe the new guy who is trying to do the right thing as somehow immoral is classist nonsense.

[colechristensen]

The entire rest of the local economy. If you eat up a significant portion of the local labor poor with very high wages, who is left to do all of the normal local jobs? Working in retail, food production, sanitation, construction, education, etc.

What happens to prices when a significant portion of the workforce suddenly has tons more money? What happens to the people not lucky enough to have the new high paying job? What happens to the local economy when you leave?

When you pay locally crazy high wages you seriously distort the economy for everyone, it doesn’t just magically snap to a new normal where everyone is happy and free, you can very easily create huge wealth disparities that make situations for many people way worse off, and the people who “win” that you don’t employ were generally already winning.

Just pouring money into a highly impoverished place can be very harmful. “Above average” is good, “ridiculously above average” and you have to start considering your effects across the economy.

[carom]

It is like when you give away mosquito nets and put all the local makers out of business. It is worse in the long run if you tank the job market then leave.

[henryfjordan]

If you plan to continue to give out mosquito nets for 30 years then it's fine to put the locals out of business, better that they spend their time building a comparative advantage in some other industry.

If you are doing a 1-and-done kind of project, maybe you have a point. You would have to weigh the cost of the disruption of the local industry against the benefit to the workers though. If you pay what would normally be 5 years worth of wages for a year of work, it's fine to set the local industry back 3 years. The workers still come out ahead and can invest their wages into rebuilding industry.

[Aunche]

At least in the case of Honduras, more people clearing paths for transmission lines accelerates the development of infrastructure that the locals can use. On the other hand, OpenAI moderation doesn't do anything for Kenyans. You can see the effect of this is countries that heavily rely on tourism like Thailand and Bali. The smartest and hardest working people end up serving foreigners rather than their domestic population. Places that aren't catered towards tourists are completely neglected.

[autodev1]

"On the other hand, OpenAI moderation doesn't do anything for Kenyans."

Have you worked at OpenAI in Kenya?

Because you're speaking in absolutes-- as though you're an authority on the topic.

Let's use basic logic: Working at a technology company by its nature provides:

- Increased experience with Computers

- Increased experience with Data

- Increased experience with Business Processes

- Increased experience with AI Technology & AI Business

- Increased experience with Potential business ideas for startups due to exposure to the business processes of the company and the potential therein for improvement

- Pay

[betterpayforken]

Have you worked at a technology company in Kenya?

Because you're speaking in absolutes-- as though you're an authority on the topic.

Let's use basic logic

No one in this thread knows a damn thing

[boeingUH60]

The civil engineer’s experience rings true from what I’ve seen, but there’s some exception for developers and people of other high skilled professions because they are few relative to the population…paying local developers the same as foreign won’t destabilize but it may for manual labor almost everyone can do.

[hex4def6]

Sure, but doesn't that mean their absence will have a disproportionate effect on the industries that rely on them? If you're a small 15-person dev company, and now there's a multinational company that's gobbling up developers at 4x the going rate, you're not going to be able to compete.

This is one of those things in which it's better to sudden upsets (even if they're "positive"), might have negative consequences.

If you're paying +25% over the going rate, you're going to attract a range of people. Someone that designs software for reactor controls might not care (or be compensated enough anyway).

However, if you're offering 200% over, you're guaranteed to hoover up the top talent from strategic industries, and that might end up being a net negative in terms of the damage caused.

[btilly]

Your small local company does not own your workers. If the multinational values your workers more than you do, then it is good for everyone except you that they work for the multinational.

But, conversely, the multinational values your workers because it knows how to use them for business opportunities elsewhere to make money. But you're in a position to find many of those same opportunities. Which now means that your local economy is not just getting the profit of having the workers do so well, but of the fact that you're keeping the profit margin that otherwise would have gone to the multi-national!

Free trade on average makes everyone richer. (Observation originally due to Ricardo.) That means that it brings both opportunities and risks. And the opportunities usually exceed the risks.

[ElevenLathe]

Seems pretty clear to me (pretty much an identity) that labor paying more is good for laborers but bad for their employers. Not sure how to argue with that.

[anigbrowl]

BS? Based on what experience of yours?

The GP told you: they've been to Kenya themselves and worked with Kenyan developers for years. Please read the whole comment before you fly off the handle at someone. This is unfortunately increasingly common on HN.

[autodev1]

Have some consistency.

If me questioning someone using the term "BS" = flying off the handle.

Does the original poster using the term "BS" != flying off the handle ...?

[anigbrowl]

I am being consistent. You were demanding information that you had already been given. Try putting yourself in the shoes of the person you replied to.

[yawboakye]

i wonder if they would have ever hit saturation here. you can only hire so many people. i would compare it to the discomfort that is felt by private transport operators in the wake of a public transport scheme. when the government of ghana introduced public buses that charged less than half the regular fare, they shook the market. but the public buses could only carry so much--many, due to their circumstances, were served by the private operators. it remains so to this day. in fact, private operators have flourished.

likewise, mining companies launching in ghana have usually paid higher than the incumbent. it could be strategic as it allows them to hire highly skilled workers without the cost of pre-training. here too, a saturation is reached, and things stabilize, with people doing the same job but receiving different compensations. we at devcongress (https://devcongress.org) have worked hard to ensure that local companies pay top-dollar for tech talent. we enforce this through our job boards. still, there are companies out there paying $500/mo and they receive a flood of applicants. but these are my experiences. makes me believe that after the market has been excited, it will definitely dissipate the energy, and return to previous equilibrium (or achieve equilibrium at a higher orbit). i honestly believe that an equilibrium will be reached.

[mensetmanusman]

This. Money distorts markets. Try to distort less unless you know exactly what the consequences will be.

[Dylan16807]

If you have enough job openings to hire everyone, that's going to cause issues even if you just pay a competitive local rate.

[6510]

could create a single pool of workers on a fixed salary and rotate them.

that is, if you are stubborn about paying more

[NickC25]

>BS? Based on what experience of yours?

In addition to having lived (for a short time) in Kenya, worked for a company based out of Nairobi for nearly 5 years, and worked with Kenyans that whole time (in other words, I've seen this stuff firsthand in Kenya, which is the whole point of the article, and my comment)...I have also lived in, worked in, and studied in other developing countries, and seen firsthand what happens when high-paying companies swoop in and change the economic landscape.

You know what actually happens? Positive economic change. Isn't the whole point of HN (and YCombinator) to disrupt the status quo, and promote growth? Destabilizing a corrupted, top heavy, status quo where more people now have a chance to grow in life rather than live in abject poverty is a good thing. Nobody cried for the Taxi companies when Uber & Lyft came along, because they destroyed a parasitic, rent-seeking system (Taxi medallions) and the experience for the end-user (both driver and rider) was significantly improved. Same logic applies here.

>The result:

--> He was threatened with harm by bosses of local companies.

Why? He took all their workers.

Yet there's a flipside here that you're completely missing. Those same workers had a significant improvement in their lives, most likely able to accumulate what for them was generational wealth, or enough to give their kids a shot at a real chance in life. Those people had enough to stimulate their local economy much more than anyone beforehand. THAT is what drives positive change in 3rd world or developing countries. Keeping things the way they are economically with no disruption in the 3rd world keeps people poor and unable to grow which leads to bigger problems down the road. Giving them a real chance in life by paying them more gives them and their families a larger ability to make real change in their countries and communities. That should be celebrated.

Put yourself in the worker's shoes - if someone offered to 10x your wages, what would you do with the extra wealth that you now posses?

Having also lived in that part of the world (Mexico, which isn't the quite same as Honduras but analogous enough) , I understand how things sometimes play out in cases like this. The local bosses in your example were probably doing quite well for themselves and keeping a fat cut of the output of their laborers who were paid pennies, and not happy that their game was now being played by a bigger fish than they could fry. So, they acted like a cartel and tried to threaten the new king in town. Did some of the local companies in your example die? Yeah, probably. But nobody is entitled to stay in business....that's sort of the whole point of globalized capitalism - you compete, and you can win or lose, sometimes through your own fault, or sometimes through no fault of your own. Sometimes someone will steal your lunch, and there's not a damn thing you can do about it. That's the reality of it.

[nostrebored]

Your assumption is so short sighted that it's hard to explain how wrong you are.

Let's not think about the noble but the practical: did the man whose life was threatened continue to stay in the country and pay those workers, or did he leave or drop wages? Did people make decisions about where to work based on the idea of long-term compensation? What amount of people left an otherwise stable job to take this high-paying gig that disappeared? What is the net impact on these people _especially_ if the distortion was prolonged and did put other companies out of business?

This is not a 'compassionate' thing to do, it's short-termism that messes with other people's lives. Moreso depending on the function of how large the distortion was and the relative purchasing power of the job. An example of how this works is AWS jobs in other regions -- they pay significantly higher than base rate in many developing countries, but it is both a pedigree and leaves people in a position to get another white collar job that's fine later on. However, the same is not true for something like a gig-work cleaning agency paying 3 times market rate. I have the feeling based on the source that your experience might be closer to the former, which might leave you with a different take than what's happening here.

[NickC25]

My assumption may or may not be short sighted, but is a reflection of the fact that I've spent a while in developing countries and understand that people want nothing more than to provide for their families - yet their opportunities to do so are significantly limited, more than anyone in the developed world could understand....and there are both internal and external forces in these countries that want nothing more than to preserve the status quo, which is that they get a huge cut and the workers get jack-fucking-shit to the point where $2-3 USD an hour is a massive windfall.

Maybe the guy in the example did leave the country, maybe he didn't. But either way, those workers were given a massive windfall for a short time, and I'm willing to bet that some of those workers took that money, invested in their families to the point where their children were able to get some form of education, and those children didn't have to lead the same impoverished lives their parents did. They were able to use that money as a stimulus for real growth. That counts.

[notahacker]

> Having been to Kenya myself and worked with Kenyan developers for several years, most of whom were quite talented, I see absolutely no problem with paying them their value relative to the work being done. I have no problem with high skilled Kenyans making much more than the local average because they have a skill that is in demand all around the world.

We're not talking about developers though, we're talking about people with good enough English and internet connection to be able to tag or flag strings of text and images. That's not highly skilled work even in a country where native English fluency and internet connections aren't as universal as the US. It's just that the cost of living differences mean that the "get paid just enough to make rent" money that unskilled labour is worth in the US is "more than the local doctors" money in Kenya.

[NickC25]

>That's not highly skilled work even in a country where native English fluency and internet connections aren't as universal as the US

Just as a point to that - English is one of 2 official languages in Kenya, and is the national language of business and education. Practically everyone speaks it well enough to get by.

[aeternum]

It often requires extra overhead to work with someone in Bangladesh. Tax implications, legal complexities, potential communication & timezone challenges.

Also companies often can't tell how much profit they will make and can almost never tell how much profit each employee is contributing towards. IP, machinery, business processes, brand value, all contribute to the company profits. Some companies with very significant profits can even exist with zero employees. This idea that a laborer deserves some percentage of business profits is just fundamentally flawed.

[eddsh1994]

When Mansa Musa toured Africa he built new mosques and paid the local workers in gold. Sounds great - skilled labour should get paid well, and he was paying very well. He ended up destabilizing (some people go as far as saying "wrecking") the Egyptian economy for decades. Basically put 22 tonnes of gold into a gold-based economy and suddenly it was deemed less valuable.

[alpos]

> If a business derives $X profit from a laborer and agrees to pay a given % of $X to the laborer as compensation, it should not matter if the laborer is in a high cost or low cost of living area

That would be true if that were deal the business had with their employees. However, you made up the percentage thing by observation and are working from the assumption that because you can represent a wage as a percentage of a profit margin, that means the business agreed to share a fixed percentage of profit with the employee. This is incorrect reasoning.

Businesses generally don't contract with their employees to share a percentage of revenue or profits, with the narrow exception of commissions for people in sales. With regard to developers and almost all other employees, the contract both parties agreed to is almost always a trade of specific amounts of time for specific amounts of money and possibly some flexible additional benefits. And to the employee's benefit, the amount of pay does not flex based on whether the company is even producing a profit from the sale of the the products of their labor, only how many hours they put in. Caveat all manner of fuckery in labor relations, of course. Which is a giant caveat, I agree in advance.

However the fundamental agreement is still time for money without the employee having to worry whether the products of their labor can be sold for more than their hourly wage, that's the business's problem to deal with. The employee expects their paycheck to show up on time all the time, or the deal is off.

With that sort of agreement, it is absolutely expected and reasonable that the business keeps any profit from selling the product of the labor after the agreed upon fees for said labor have been paid. That was the deal.

---

If you'd like a different deal for most people, as I would love to see more of in the world economic future, then most people need to change over from needing a job to needing some form of income to support their long term future growth as they live currently off of savings.

Instead of expecting someone else to ensure there is a buffer of money to pay you so you can pay your expenses, you will have to keep that buffer yourself and be okay with the fact that sometimes you will get paid a lot and sometimes not so much, but you will then be getting that percentage of the profit you wanted and it will be totally reasonable to expect the same percentage regardless of what the cost of living is.

You also won't have to worry about layoffs as much because the company's costs now also scale directly with it's profits, so there is no need to cut head count when things get really bad and the company's buffers run low.

But again, that also means you will be responsible for keeping a big enough buffer yourself to deal with the fact that your income fluctuates with both short an long term market swings. Otherwise all you have done is trade the annoyance at seeing the company profit massively from your fix-time-cost labor for the annoyance of being broke even though you have a job whenever the market takes a shit.

Most people still don't want to deal with that, even in super wealthy countries like the US. In fact most people in wealthy countries actually scale their own living expenses in step with any increases in their income such that they can be living paycheck-to-paycheck even at $200k+/yr.

So the balance of things present day is that most people take full-time or even part-time contracts as employees and hope they don't get fired at the wrong time in life.

This is possible to change though, for yourself and for others if you like. So if you think your current deal is bullshit, feel free to change the deal.

[blagie]

The basic argument is a little bit different. There is a huge population in Kenya living, or in some places, failing to live for under $2/day. Most of these people are independent -- for example, street-side sellers in an urban slum, or living in a village far from Nairobi.

The key question is how we improve lives of these people.

It is difficult for me to overstate the impact a 5-fold improvement in income has on people's lives. I've seen initiatives which train people to do tasks like basic data entry, bricklaying, or otherwise, taking $2/day workers to be $10/day workers. Programs like these are typically a few months long. They don't train people to have the equivalent of even a middle school diploma, and they won't be competitive with even the least educated Western workers.

Still, breaking generational poverty is a long process, and that basic increased stability is a first step.

If we shut off employment paths following those programs by giving bad PR to anyone who employs people for $2/hour, we've doomed a key pathway for hundreds of millions of people to escape abject poverty.

Gapminder shows four income levels:

https://www.gapminder.org/fw/income-levels/

Westerners tend to group levels 1-3 together. However, the gap in quality-of-life from level 1 to level 2 is much greater than the rest of the stack. Level 1, life basically sucks. Hunger, lack of basic life-saving medicine, and early death.

Levels 2-4, I've lived at (for at least a few months), and it's okay once you get used to it.

It takes surprisingly little to bring people from 1 to 2, and these sorts of jobs are one way to do that.

As a footnote: People often confuse financial stress with simply being poor, since in the US, those correlate almost completely. Financial stress sucks. Most people worldwide living at levels 2-3 don't have high levels of financial stress. A much more typical situation is a village, where no one has a lot of stuff, but people own the land and their homes. Financial stress sucks. I'd rather own a home at Level 3, with savings, a stable family, income, etc. than live paycheck-to-paycheck at Level 4.

[nerdathlete]

Thanks for sharing, the Gapminder level stratification (and Dollar Street photos) was very eye-opening and a humbling reminder of how privileged I am as a software engineer.

[blagie]

A few years back, Bill Gates bought every university graduate who wanted one a digital copy of the book Factfulness. It's like the insight from that stratification, over and over, in book-length format. It's really quite excellent.

One of the interesting trends you'll see is we've gone from /the vast majority/ of the world at Level 1 really not all that long ago to around a billion people today (probably less when as I write this).

The world is getting a lot better very quickly for a lot of people. At the same time, solving the problem is no longer intractable.

I will also mention: "Privilege" is complex, and life isn't all about money. Starting around level 2 or 3, "stuff" usually isn't the biggest problem in life. You get used to the inconvenience of needing to boil running water or having to ride a bike instead of a car pretty quickly. You don't experience it as inconvenience at all if you've never had it (as most of humanity hasn't for most of time).

On the other hand, humans are social creatures. Many places where people live at level 2 or 3 have communities and families of a type you've never experienced if you grew up in the US. The US is a very lonely place, and there's a mental health crisis in the US that would be completely foreign in many places at level 2 or 3.

The US also experiences much greater financial stress. If you're in a poor village, but you grow your food and own your home, you stress out a lot less about money than if you're making a 6-figure income, but worried about college debt and making your mortgage if you have a short-term job loss, divorce, or medical crisis, as is common in the US.

Who's more privileged?

[fragmede]

OpenAI is operating rationally as a corporation, and choosing labor, legally, in a cheaper country - if they were to pay US wages, why not hire American workers? The entire point is because it's cheaper. There's a different world where OpenAI chose to hire Americans for this job, but it's simply cheaper for them not to. The loss of American jobs is a whole other discussion, but it's the very economics of the situation that drove them to do that in the first place.

[bmitc]

That’s a very narrow minded view of economics though. Minimizing costs and wages is not the only optimization that matters.

[mensetmanusman]

true, But it generally has helped raise billions out of poverty.

[ninjagoo]

that were first thrust into poverty to start with by a different system of exploitation.

I have to admire the beauty of this argument as it has occurred over time - let's exploit them using force and make them poor (enriching ourselves), then use the poverty to justify paying them less (enriching ourselves), using the argument that we are slowly lifting these billions out of poverty (enriching our souls).

[mensetmanusman]

That initial system of exploitation is what the US fought against in a revolution. Everyone was exploited at some time in history.

[ambicapter]

Would you have a problem if a bunch of billionaires moved into your neighborhood? What do you think would happen to the prices around you? Why do you think people in, say, Lisbon, are so dismayed at the amount of "digital nomads" moving into their cities at the same time as their housing prices rise wayyy above their average wage?

> to me, it goes back to the argument about remote workers should be paid less than the in office worker.

Can you make a stronger link here? Because I'm not seeing the connection other than wages are involved.

[zenith14]

I don't know about "destabilizing" per se, but whenever people try to set prices significantly above or below market, there tend to be consequences. If OpenAI paid $5/hr when people are more than willing to accept $1.5/hr, demand for those jobs would far outstrip supply, leading to intense competition for those positions. Situations like this often lead to corrupt practices where the bureaucrats/middlemen who find themselves in a position to determine who get these jobs end up capturing a significant portion of the profits, either directly or indirectly.

[practice9]

> the salary should be paying for the work being done and that's it.

I agree with you. The issue is quantifying the essential cost of work. As companies sometimes have no idea how & where they lose or earn money, they tend to rely on external factors to select a "justified" level of wages: average industry wages, location, local laws, whether you need to commute etc.

[wkat4242]

> I could see though how paying a small-ish number of people wages that dwarfs the larger number of people could cause a bit of turmoil.

The same way that a CEO in our world is getting paid 100 times as much as a janitor?

[ogeiczvm]

Phil Knight mentioned this in Shoe Dog. I don't remember the details but he was paid a visit by some officials and they told him he cannot pay factory workers more than they can pay their doctors.

[pas]

central banks' main task is to keep economies from im- or exploding. if there's suddenly a big influx of money they have to raise interest rates to balance that out.

development economics is not about the wages, it's more about market access. the problem is that many developed economies (looking at you USA) have protectionist tariffs which make it hard for developing ones to gain market share.

[spamizbad]

> I've heard arguments in the past of paying "acceptable" US wages to people in other countries would destabilize the other country more than it would help.

Interesting. If true, that sounds like a good argument for capping salaries. Would the US be a little less chaotic if we set a maximum wage?

[dylan604]

Boy, that's a brave thing to suggest on a forum of people with aspirations of getting cushy jobs at FAANGs to get those uncapped wages. It appears it's going over as well as a lead balloon too.

[ninjagoo]

An astute observation. I had a good chuckle. Thank you!

[6510]

cap income at say 300 m annually then gradually lower it. Get all those mentally ill people out of decision making. Make exceptions for truly mad skills.

Around 50 m have some construction where further work is paid with a salary for life or until the company goes bankrupt.

[ninjagoo]

Lovely! Have an upvote, such as it is!! It is rare to see such a complete demolition of an argument or the real-time validation of that demolition through the rules-for-thee-but-not-for-me reaction to it!!!

[astrange]

That's why income taxes are progressive.

[ertian]

If they were going to pay $5/hour, why wouldn't they do the same work in India, Vietnam, or some other country with wages in that neighborhood, but with a more stable political environment, better infrastructure, and more experienced and educated workforce? Choosing Kenya at that price point would essentially be charity, and might end up being costly charity (because of the extra costs associated with doing business in Kenya vs more established markets).

And then Kenya doesn't gain the benefit of the $2/hr wages (which, as mentioned, is already above average), plus the benefits in knowledge & experience, improved infrastructure, and secondary jobs, as well as the possibility of similar jobs in the future.

China started out competing almost exclusively on wages (like Japan, Korea, and Taiwan before them), and now the US and EU worry about Chinese advanced industries (eg. semiconductors) surpassing their own, the same way Taiwan did with chips and Japan did with cars.

Competing via low wages is, unfortunately, a necessary first step to growing an economy.

[true_religion]

I can't about Kenya, but this wage translates to around $240 per month (1.5 per hour, 40 hours a week, 4 weeks a month).

This is the average rate the government pays secondary school teachers in Ghana, after 2-3 years of experience. It's almost 2x the rate that private schools pay teachers.

With this wage, no allowances, a single person can live independently in an apartment, and eat out every single night of the week if they choose. It's a fine and decent wage for what amounts to work only requiring a good pair of eyes and basic literacy.

[NickC25]

>* a single person can live independently in an apartment, and eat out every single night of the week if they choose.*

And that's a good thing, because you're increasing the spending power someone who will keep the money velocity high has, which by definition helps the local economy. They are spending that money, which will move about and cause growth.

[int_19h]

Spending all that money also increases demand on goods, raising prices for everybody else eventually. The people who serve the direct needs of those who get the first dibs on the money are likely still better off, but the further away in that chain, the less favorable the balance. At some point, it may well become negative. So I don't think there's a universal answer here that applies to all such situations in general - one has to crunch the numbers to make any meaningful conclusions on the overall economic effect.

[true_religion]

There is some inelasticity to some classes of goods, so you don’t immediately have to worry about upturning an entire nations company because a foreign company decided to pay middle class wages to a few dozen people.

Now for instance, the class of goods we were talking about is restaurant food. This may be a pure substitute for home cooked food, leading to no increase in food demand and money simply being spread to the service workers. Or it could be that they eat different food (e.g chicken imports rather than local fish), which also wouldn’t affect the balance of demand/supply for the poorest and neediest.

[int_19h]

I would be more concerned about housing.

[bayesian_horse]

Look for "Nash equilibrium". Game theory makes it really hard for all companies in a free market to conspire to keep wages down. Can they conspire to a small degree? Certainly, probably disguised as a cultural or traditional bias.

Employers don't pay $5 per hour because they wouldn't make a profit either.

[pretendscholar]

That's a theory that only models certain market conditions. In practice there is an information asymmetry (contrary to the presuppositions of the Nash Equilibrium) and often the employer side has a small number of companies so coordination is easier. Check out this settlement from the 2000s in Silicon Valley[1]. This involves highly desired, well educated employees so imagine how it is in other fields.

In my own experience I've had several prospective employers at conferences say that they were interested in poaching me but mentioned that they were wary to start a poaching war. They knew the CEO of my company and were conscious of the fact that he would likely make an effort to respond in kind. The Nash Equilibrium is an interesting concept but reality is complex and messy.

[1] https://equitablegrowth.org/aftermath-wage-collusion-silicon...

[bayesian_horse]

That is a particularly niche situation...

[pretendscholar]

Take your pick. Even just in the tech sector in silicon valley there are many examples of collusion. Mind you this involves some of the most desirable employees on the planet.

But back to the central point the basic nash equilibrium is in the spherical cow realm of models as they relate to actual reality. There are some interesting additions to it involving time series and asymmetrical information to try and model real economic data.

[psyfi]

> Employers don't pay $5 per hour because they wouldn't make a profit either.

Nope, they might be able to make profit at $5 or $10/hr, but there it doesn't make sense to pay more than you have to, that's why Chinese devices are significantly cheaper than their western counterparts, they can still compete if they raise the prices but they can allocate cheap labor in china that allows them to become a strong competitor

[bayesian_horse]

We're talking about African economies. Those businesses don't have margins that would allow a five times higher wage while still making profits.

Big tech companies, maybe. But even those.

Once you raise prices the demand shrinks which also leads to smaller profits. There's no free lunch. If employers could make more money by paying higher wages, they generally would.

[benlivengood]

Without free movement of workers across borders labor is not a free market.

[bayesian_horse]

Free enough. Especially in large enough countries the market is free enough. There is no such thing as a completely free market. But in general, and in most places, no, most employers can't conspire to dump wages. Even if it looks like conspiracy, it may be something else, like a bidding war on the supply side.

[serverholic]

We are not payed what we are worth.

We are payed what the company can get away with.

It’s about power, not value. Value is much less of a factor than people like to think.

Same goes for people who are payed a lot (like CEOs). Sure they have impact on the organization, but they also have power.

[leetbulb]

I don't understand this argument. Ask for what you think you are (your time is) worth. If you aren't receiving that, you are (your time is) probably worth less

[serverholic]

Your argument doesn't take into account power dynamics. When negotiating price, each side comes to the table with bargaining power. If bargaining power is sufficiently uneven then you really can't claim they'll come to a fair agreement.

When an amazon warehouse worker has to pee in bottles to meet a quota do you think the worker and amazon came to a fair agreement? Or perhaps amazon had more bargaining power.

[hbrn]

> We are not payed what we are worth. We are payed what the company can get away with.

Is there a big difference between the two in a free market?

How exactly are you measuring what you're worth?

[serverholic]

Worth and value are inherently subjective. Price is an attempt to assign an objective value to something subjective. It kinda/sorta works, but it also kinda doesn't.

Let's imagine there is no minimum wage in America. Now let's say that workers in America demand $10/hour and African workers ask for $2/hour for the exact same job. What's the correct value for that labor? It's a non-sensical question.

You could say it's the minimum value at $2. But then some other worker asks for $1. Did you make a mistake? Was it not actually worth $2 the whole time?

[hbrn]

> Worth and value are inherently subjective

If they are inherently subjective, why are you claiming we're not paid what we're worth? This statement is meaningless, isn't it?

> It kinda/sorta works, but it also kinda doesn't

In what way it doesn't work? Clearly it has more utility than other attempts at measuring value. I can agree it's not perfect (nothing is), but that's very different from not working.

> let's say that workers in America demand $10/hour and African workers ask for $2/hour for the exact same job. What's the correct value for that labor?

The correct value is whatever someone is paying for that labor on a free market.

> You could say it's the minimum value at $2. But then some other worker asks for $1. Did you make a mistake?

The only mistake is treating value as inherent and static.

[yoavm]

why $5 then? seriously asking... it also sounds low. in reality companies pays employees (even an american company with an american employee) the bare minimum they can pay them and still have them do the job. the "could the employee afford it" test is a little strange - an astronaut probably can't buy a spaceship, I can't afford some enterprises software that i wrote myself, etc etc.

i suspect that when we look at what caused a raise in salaries at a certain place it is rarely companies from abroad paying more, but simply the local economy developing, causing people to ask for more (which often meant that international companies stopped hiring there, e.g. china).

[charlieyu1]

Paying too high can often lead to more extortion. There are people who worked as domestic helpers from Philippines or Indonesia at other countries. They are paid about US$500 a month, which is 5-10x of average salary in their home country. The bad news is that you would need take huge loan, with multiple family members as guaranteers, to pay for the “training fees”.

[bayesian_horse]

At a rate of $5 or more they may be competing with higher skilled jobs in that country (I haven't checked, but four times the average wage...). Doctors and teachers would quit their jobs to earn this much.

That is what's happening in Cuba where highly skilled people with good English skills rather work in tourism than as doctors, engineers or teachers. Not a good long-term situation.

[marcosdumay]

As any other place, the salary is low because people don't have money, or high because people have money.

The more people go there looking to hire somebody, the quicker it gets pushed up. But salaries do basically never change suddenly anywhere, because it's the local people that pay most of them.

(And, no, this is not fair. And locals should push for higher pay.)

[ryan93]

Why does Africa need charity? Many countries didn’t have to beg for a special feel good rate to improve