Why are expats paid so much?

A popular pastime in some expat circles is justifying their huge tax-free salaries and expensive benefits.

Different people take different approaches. Many expats will explain (at length) that they need to get paid that much in order to persuade them to leave their comfortable, happy lives in the UK. They will discuss the cost of sending three children to private schools, explain that they still need to pay rent back in the UK, and conclude, wistfully, by pointing out that they could have earned so much more in the private sector. Other expats take a different approach, speculating smugly about how bad the project would be if it wasn’t for their wisdom and strategic insight, and pointing out that their high pay just reflects the value that they add to the project.

Bullshit.

I’m not trying to say that expats aren’t an important part of development programmes. They bring essential skills, build the capacity of local staff, manufacture confidence that the programme is going well, and generally help the sector we know and love operate better.

But the stated reasons why expat salaries are so high are rubbish. Certainly a few expats would leave the sector if salaries were lower. But most of the weird people who have floated round the world for decades aren’t motivated by money – but by the job and the lifestyle. There’s a common misconception that the private sector is desperate for balding ex-hippies who can put together a logframe and speak an obscure West African language, but there’s no reason to think that’s true. With mediocre middle-managers able to pull down a six figure, tax free salary, expats earn way more than they would in other sectors, and more than they need to keep them in the business.

Instead, salaries are driven by structural factors in the aid industry that ensure a high demand for expats, but a very limited supply. Expats are typically required for senior management positions. This might be because they are more able than local staff, or simply because donors are biased towards nationals from their own country. Both factors probably play a role. It doesn’t matter for the sake of this argument; the result is that there is a high demand for experienced, capable expats.

But it’s increasingly difficult to find positions for junior, inexperienced expats. Why would any self-respecting development organisation hire a 22 year old Harvard graduate when they could get a much more experienced local staff member for the same role, at the same price?

So expats are in high demand – but only when they’re able to take on positions in senior management. The supply of expats, however, is hugely constrained. The consequence is that very few people actually get the experience which would allow them to take up a senior management position, leaving the lucky few facing relatively little competition, able to charge more or less what they want. Competition between aid agencies drives up salaries, and the big, unaccountable giants of the aid world (UN, World Bank, etc) have relatively little scrutiny over pay, further increasing salaries.

It annoys me immensely when aid agencies spend 100,000 pounds a year on an incompetent advisor, and all the more so when that same manager spends their time after work drinking expensive cocktails and complaining about how they’re not paid enough. But I’m not naïve enough to think that this is going to change by itself. Turkeys don’t vote for Christmas, and World Bank staff don’t vote for salary reduction.

The only way in which this might be solved is through an increase in the pool of workers. As education levels improve, as aid agencies gain more experience in building management capacity, and as the expanding aid sector trains up more strong local staff, perhaps there will be a bigger pool of potential senior managers to draw upon, leading to a reduction in average salaries.

Neither NGOs nor consulting firms have much incentive to ensure that this happens. Capacity building of staff sounds great, but typically leads to good staff leaving for better pay elsewhere. As a public good, this is something which donors should be investing in. In particular, they need to help local staff get that all-important first international experience. This is often a real catch-22; you can’t get international jobs without international experience, and can’t get international experience without international jobs.

So there is a need for better training, mentoring, and a better structured career path leading talented local managers to progressively more senior roles. Trainee schemes, secondments, and overseas placements would make a big difference here. I have seen isolated examples of good initiatives, often driven by a single manager passionate about the issue. But little evidence of what is most successful or systematic attempts to increase the pool of qualified senior management staff. If you have any good examples to share, please put them in the comments!

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