Stop Paying The Poor So Much

Recently I was asked to serve on a panel after a screening of the documentary Poverty Inc. In the course of the discussion I brought on the story about the Haitian woman who was employed by a nonprofit run by Americans and was able to save $2,000 over the course of 6 months to buy a house. It’s a great story.

Being able to earn (let alone save) $2,000 in half a year is a very good income in Haiti. GDP per capita, price adjusted) in Haiti was $1,760 in 2015 when the scene was filmed. The woman was able save in 6 months more than the average yearly income of Haitians. That is like being able to save $45,000 in 6 months in the US. Something that is far out of reach for most.

Woman who was profiled in the documentary, Poverty Inc

Like most people employed by nonprofits in the developing world, they are not hired for specific skills that they possess but because they are poor.So not only is this Haitian nonprofit paying workers extremely generous wages but they are specifically hiring workers who would otherwise earn very little in the marketplace. How is this not charity? Would a Haitian owner pay the workers what these Americans are? Let that marinate…

The obvious question that was posed by the audience in response was “then what should we pay the workers?” That’s an honest question and an important one. I, like you, want the workers to be paid as much as possible but not in a vacuum. When we pay far above what the work is worth then we cause all the same problems that other forms of charity create.

In the United States an employer will pay you what the work is worth but if you suggest that employer in Haiti should pay workers what the work is worth, people freak out. And by people I mean Americans thousands of miles away freak out, not Haitians. It’s an honest reaction and one that is largely fair. They react because they care. But do you see how dangerous it is when we act differently towards those in poverty than we would for those like us?

Would you like it if people treated you differently out of pity and guilt? That sounds terrible because your self worth is undermined. That is far worse than being in poverty.

So what should we pay the workers? For starters, treat them like people with dignity and expectation. Pay them what the work is worth but let’s expand on this.

Why do Apple and Google pay so well? They need skilled workers who are the best at what they do and the products they create and help build are very valuable and warrant higher wages.

The nonprofit in Haiti is selling products to the US which means that they need a standard of quality that is high. They need good workers but also the products being sold in the US sell for much higher prices than if they sold domestically and therefore there is enough margin for the business to pay more in wages. They should pay more than the market wage but they shouldn’t pay excessively more than the market wage because that is charity. When it crosses the line into charity is subjective and depends on the specific case but paying workers what the work is worth allows employers to pay workers more. Just within a framework.

I work in Kenya with a leather goods manufacturer (See our YouTube Page). I care about the workers and want them to be able to provide for their families to the fullest extent. Leather itself is a valuable material and the quality needed to sell in the US market is very high. I need the best workers I can find and the products we make have a great margin so I have room to pay workers well. That is part of the reason why I pursued leather because I can do right by the workers.

Working in the factory in Mombasa, Kenya

When this business takes off I want the workers to benefit like I do but one thing I cannot do is compromise the business by incorporating charity. I would much rather create a profit sharing scheme down the road and let them benefit enormously than pay excessive wages now and put the whole operation in jeopardy. Not because the business can or can’t sustain it but because the workers are not stupid. They know charity when they see it and they will act accordingly.

Ask people who have worked abroad and employed locals. One thing that is very common is the lack of gratitude by local employees and the dumbfounded attitude founders have towards them. Just because someone is doing work doesn’t mean you are avoiding the pitfalls of handouts.One organization in Uganda had to call in local police to quell a riot, tear gas and all, because their workers were revolting. This organization was paying very well on top of many other benefits they were giving workers but the workers wanted more. Why? Americans are rich and they are poor. They knew they were receiving charity so why not try to receive more?

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