11 ms·

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 mer

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?

charlieyu1 4y ago
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 4y ago
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 4y ago
  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-valley/ https://equitablegrowth.org/aftermath-wage-collusion-silicon...
  - bayesian_horse 4y ago
    That is a particularly niche situation...
    - pretendscholar 4y ago
      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 4y ago
  > 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 4y ago
    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 4y ago
  Without free movement of workers across borders labor is not a free market.
  - bayesian_horse 4y ago
    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.
dylan604 4y ago
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.
- ogeiczvm 4y ago
  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.
- wkat4242 4y ago
  > 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?
- zenith14 4y ago
  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 4y ago
yoavm 4y ago
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).
true_religion 4y ago
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 4y ago
  >* 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 4y ago
    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 4y ago
      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.
serverholic 4y ago
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.
- hbrn 4y ago
  > 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 4y ago
    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 4y ago
      > 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.
- 4y ago
marcosdumay 4y ago
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.)
bayesian_horse 4y ago
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.
ryan93 4y ago
Why does Africa need charity? Many countries didn’t have to beg for a special feel good rate to improve
ertian 4y ago
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.

charlieyu1 4y ago

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 4y ago

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 4y ago
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-valley/ https://equitablegrowth.org/aftermath-wage-collusion-silicon...
- bayesian_horse 4y ago
  That is a particularly niche situation...
  - pretendscholar 4y ago
    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 4y ago
> 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 4y ago
  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 4y ago
Without free movement of workers across borders labor is not a free market.
- bayesian_horse 4y ago
  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.

dylan604 4y ago

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.

ogeiczvm 4y ago
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.
wkat4242 4y ago
> 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?
zenith14 4y ago
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 4y ago

yoavm 4y ago

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).

true_religion 4y ago

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 4y ago
>* 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 4y ago
  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 4y ago
    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.

serverholic 4y ago

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.

hbrn 4y ago
> 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 4y ago
  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 4y ago
    > 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.
4y ago

marcosdumay 4y ago

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.)

bayesian_horse 4y ago

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.

ryan93 4y ago

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

ertian 4y ago

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.