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Wednesday, 20 August 2008

What they pay Zambian security workers...

Average Monthly Wages paid to Zambian security workers by Foreign Institutions:
The World Bank is joined by other institutions in paying poor wages to their Zambian security workers. The wages are clearly below the monthly Basic Needs Basket for a typical family in Zambia. Perhaps they are only employing single people! You can read more here.

11 comments:

  1. As a leading international development institution, the World Bank has an obligation to promote sustainable development and eliminating poverty. A first step should be ensuring that its workers earn living wages.

    ^^^^Horrible thinking.
    They do more to promote sustainable devellopment and eliminating poverty by doing research and helping design policy etc..etc..

    Second, comparing it to the embassies is just as weird. Why not compare it to the private average wages for security jobs ? Or even better, by comparing it to wages in security forces ?

    I bet they're higher. And it's actually a problem.
    There's a lot of reasearch that argues that the aid industry crowds out real productive sector with their above the market wages. When you have farmers or teachers switching to driving a car for some Danish NGO, you know you have a problem.


    Unions are weird sometimes.

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  2. I think their correct actually.

    As an institution, the World Bank can do more than policy research and design...they can also lead by example...that is just as powerful as any policy tool....its called signalling...besides institutions rely on credibility to effect change....under paying your workers is not the best way to do that...

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  3. "There's a lot of reasearch that argues that the aid industry crowds out real productive sector with their above the market wages."

    I think that sounds like someone simply trying to put a paper out...

    lol!

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  4. As an institution, the World Bank can do more than policy research and design...they can also lead by example...that is just as powerful as any policy tool....its called signalling...besides institutions rely on credibility to effect change....under paying your workers is not the best way to do that...

    What would they be signalling to the government ?
    That paying people above market-rates is a solution ? So that we can go back to the 70's when the government crowded out plenty of sectors by simply offering high wages and outbidding any productive activity ?

    "There's a lot of reasearch that argues that the aid industry crowds out real productive sector with their above the market wages."

I think that sounds like someone simply trying to put a paper out...

lol!

    Why ?

    You believe the government can crowd out the fertilizer market but not in the labour market ?

    I mean think about it. An NGO shows up in a village in rural Liberia. It opens positions, with wages and benefits way above anybody's situation in the area. The local teacher or a succesful farmer apply and get the job, because they're the best people the NGO could hire.

    So all of a sudden, you have two productive people driving cars for an NGO while the local economy lost the productive work of a good farmer and a teacher.

    And governments do the same.

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  5. "What would they be signalling to the government ? That paying people above market-rates is a solution ? So that we can go back to the 70's when the government crowded out plenty of sectors by simply offering high wages and outbidding any productive activity?"

    I don't see anything usual about the World Bank signalling that the current minimum wage (K270,000 or thereabout)is insufficient.

    This really is an issue whether government raising the floor would generate the kind of issues you suggest. I doubt it. I mean minimum wages can even raise employment, against a monopsony buyer of labour.

    "You believe the government can crowd out the fertilizer market but not in the labour market ?"

    Scale, my brother scale. The problem with most papers in development economics is that they make accurate but trivial points. Yes it is true that NGOs can crowd out local markets, but how many NGOs are there? Could they really do it in Lusaka? May be a very small region down the other end. Also NGOs are there for a long time. They tend to have limited operation.

    We need to put the results in perspective.

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  6. I don't see anything usual about the World Bank signalling that the current minimum wage (K270,000 or thereabout)is insufficient.

    You're an economist. I don't have any business telling you about the fact that most Zambians have incomes bellow the minimum wage and nominally raising the minimum wage won't change much for them and could worsen things (by reducing formal employment opportunities).

    Especially if it's on one side.

    This really is an issue whether government raising the floor would generate the kind of issues you suggest. I doubt it. I mean minimum wages can even raise employment, against a monopsony buyer of labour.

    Raising the minimum wage can raise employment in a monopsony market assuming that the wages are bellow what should be the market rate.

    The idea that Zambia is a monopsony market or that the wages are bellow what the marginal productivity would demand is far from proven. Actually Zambia is NOT a monopsony labour market.

    Surely, if the raise is not dramatic, the effect wo'nt probably be dramatic, but our countries have dual-labour market issues, with the majority of the population struggling in the informal sector and formal sectors seeing their productivity shrink because their margin are reduced by such moves.

    Having more of that is the solution ?

    And yes it actually happened before.

    Scale, my brother scale. The problem with most papers in development economics is that they make accurate but trivial points. Yes it is true that NGOs can crowd out local markets, but how many NGOs are there? Could they really do it in Lusaka? May be a very small region down the other end. Also NGOs are there for a long time. They tend to have limited operation.

We need to put the results in perspective.

    2 things:

    - If the bad effects are irrelevant because of scale, so are the good effects.
    - for things like brain drain we're not concerned about the scale. And it's the same principle. Now it's an empirical point that has to be proved but it's not clear that the aid industry is necessarily the smallest here.

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  7. ”You're an economist. I don't have any business telling you about the fact that most Zambians have incomes bellow the minimum wage and nominally raising the minimum wage won't change much for them and could worsen things (by reducing formal employment opportunities).”

    Wait! I happen to actually think that your impact depends on the share of the public sector, and I was talking about signaling government not asking government to implement the wage minimum for everyone. Like foreign institutions, government is also a low wage payer for its security staff and so forth. That subtle distinction is important. The only concern is whether raising the wages government pay would crowd out private sector productivity (your earlier point, in the context of NGOs!)

    ”Raising the minimum wage can raise employment in a monopsony market assuming that the wages are bellow what should be the market rate. The idea that Zambia is a monopsony market or that the wages are bellow what the marginal productivity would demand is far from proven. Actually Zambia is NOT a monopsony labour market.”

    Well that’s an empirical question…the sources of monopsony power are either sectoral or geographical. In Zambia the public sector retains significant monopsony power in many rural areas.
    In mining urban areas, mining largely dominates. There again pointing to significant monopsony power.

    ”Surely, if the raise is not dramatic, the effect wo'nt probably be dramatic, but our countries have dual-labour market issues, with the majority of the population struggling in the informal sector and formal sectors seeing their productivity shrink because their margin are reduced by such moves.”

    The level is obviously critical. In a standard monopsony setting, existing wages have to be below market clearing prices for a minimum wage to raise those wages and employment.

    ”If the bad effects are irrelevant because of scale, so are the good effects.”

    Can’t argue with that..lol!

    ”For things like brain drain we're not concerned about the scale. And it's the same principle.”

    We are not? How so?

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  8. Wait! I happen to actually think that your impact depends on the share of the public sector, and I was talking about signaling government not asking government to implement the wage minimum for everyone. Like foreign institutions, government is also a low wage payer for its security staff and so forth. That subtle distinction is important. The only concern is whether raising the wages government pay would crowd out private sector productivity (your earlier point, in the context of NGOs!)

    Signalling, asking, same difference.

    The problem is that in both cases, some institutions, which also happen to not be companies that produce things or services, would pay wages that are above market rates.

    You know there is already significant pressure on government to do just that and a set of incentives that would motivate them to do that. Why do you want such signal to be sent ?

    And the public sector is a considerable share of formal employment. They're competting for the same pool of workers as every body else and contrary to everybody else, pay for it with other people's money (taxes, aid, whatever). It's just too easy.

    Well that’s an empirical question…the sources of monopsony power are either sectoral or geographical. In Zambia the public sector retains significant monopsony power in many rural areas. 
In mining urban areas, mining largely dominates. There again pointing to significant monopsony power.

    I'm not buying it. Really not.
    If in urban mining areas, there was any type of monopsony power (and a lack of competition between mines), mining wages wouldn't be higher than non-mining wages and there would have never been any kind of migratory movement towards those regions. Obviously those didn't happen. (And in nationalized mining times, the mining wages were far above the market rates, once again, pointing out that government has every incentives to do that).
    In rural areas too, I bet the public sector pays more than the local market rates. There's no monopsony induced deflation.

    The level is obviously critical. In a standard monopsony setting, existing wages have to be below market clearing prices for a minimum wage to raise those wages and employment.

    Yes. Which is quite honestly, rarely the case.

    ”For things like brain drain we're not concerned about the scale. And it's the same principle.”

We are not? How so?

    Doctors or engineers or whatever are a small segment of the population. We don't care about the brain drain because of the scale but because we loose valuable workers.
    Similarly, loosing valuable workers to NGOs or the public sector has an effect on the private sector (or the public sector which competes with NGOs)

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  9. ”If in urban mining areas, there was any type of monopsony power (and a lack of competition between mines), mining wages wouldn't be higher than non-mining wages and there would have never been any kind of migratory movement towards those regions.”

    Of course that is incorrect because the MRP and MC curves is what ultimately determine the wages in a monopsony market, and these may differ between the various labour and product markets.

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  10. Of course that is incorrect because the MRP and MC curves is what ultimately determine the wages in a monopsony market, and these may differ between the various labour and product markets.

    We're talking about mining. For the most part, it's unskilled labour competing with construction and other heavy consumers of unskilled labour. Unless we're discussing skilled labour specialized in minign activities, there's no such thing as a specific mining labour market, just a general unskilled job market. And mining because of competition between the mines, because of the need to attract migrant labour pays above market wages and for a few other reasons, pays above market wages. And there's no monopsony market in mining, unless you can prove otherwise.

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  11. Interesting, because actually with automation in the mine, I had the skilled miners in mind!

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