In defence of the NGO SUV

My boss recently told me that the India chief of a very large environmental INGO moved here from a corporate sector job in Singapore and took a paycut of 50%.  His annual income went from INR 4,00,00,000 (that’s four crore to you non-South Asians out there – USD 896,000) to half of that.  One could look at this in two ways:

1. This guy’s awesome – he left $$$ to do some good in the world.

2. Whoa this guy is making so much $$$ while working at a non-profit…how immoral.

Which brings me to the main point of this post – why does conventional wisdom tell us that development type work should not be monetarily well rewarded?

That's our tax money at work

It is easy to think of the development sector as being completely different from the corporate world.  In the latter, it is assumed that people will act in ways to maximize personal and institutional profit.  In the former, personal motivation is supposed to come from some intrinsic desire to “do good”, while institutional performance is measured not by the bottom line but rather by some (often abstract and arbitrary) development indicators.  There has been a lot of interest in the last few years on better defining success, the most visible example being the Millennium Development Goals, but it seems to me like the labour market in development still works on the assumption that people are in this industry to do good.  There are many problems that this creates:

1. It makes hiring and firing processes very complicated. How do you rate someone who is awesome at managing projects but doesn’t care about the poor?  Can you fire someone for being shit at their job but really caring about poverty?

2. Looking at market wage rates, development sector professionals are usually underpaid. While I don’t know if such a study has been done, I would hypothesize that if we take, for example, all the economics graduates from a particular liberal arts college in the last 20 years and look at their income in the first 5 years after graduation, then we will find that those working in NGOs, think tanks etc are paid less than their peers in the corporate world, even when controlling for GPA and such.

3. Given that money flows in development are largely top-down, the idea that one should be paid below market rates follows the money and finds its way to the lowest level workers too.  This is a big problem in the Indian context (and I would imagine others too), because there are a large number of people who are in development because they just need a job and want to support their families and not because they want to save the world.  These guys start out with NGOs, get some training and become more qualified in, e.g., doing surveys, then leave for the private sector where they earn a lot more money.  There is little incentive to stay in development when they see that even their superiors are earning less than entry-level people in, e.g., a for-profit market research firm.

Now to the SUV, which is often used as a symbol of the cost-inefficient ways of aid workers (side note – hilarious SEAWL post on drivers).  The nice car serves a very important function that is easy to ignore – incentive to work hard and stay in the development industry.  This is probably not true when foreign “experts” visit “the field”, since locals are acutely aware that those guys are just special, but rather when local superiors hang out with local field staff.  Status indicators like nice cars (and they’re Toyotas…hardly super fancy) and, much more importantly, competitive pay cheques, will encourage people to continue working in organisations doing socially desirable work.  If donors are serious about wanting to find local solutions etc, then they need to create a system that encourages locals to look for these solutions.  Right now, there is a much greater incentive to join a better paying job in the private sector.

There is obviously much more to this topic but I fear this post is already long enough that, if you’ve made it this far, you’re probably alone. I don’t mean this to be a defence of all aid spending and I have no doubt that current mechanisms are hugely inefficient (e.g. one of my friends at the IMF told me they installed new TVs at the DC headquarters so people could watch the football World Cup – that is ridiculous). But I think the decision makers in this sector are woefully out of touch with field realities.  While World Bank senior economists may have given up lucrative jobs in the private sector to work in development, the majority of local level development workers are probably more interested in the pay cheque than in the social benefits of their work.  Local solutions are great, but there needs to be a structure which incentivizes finding them, and SUVs might be part of that structure.

Advertisements

10 Comments (+add yours?)

  1. kb
    May 24, 2011 @ 01:03:46

    Dear KS,

    You make excellent points. Let’s have a debate this summer.

    Sincerely,
    KB

    Reply

  2. Kabs
    May 24, 2011 @ 18:58:15

    When we all meet up this summer, MR and you will be more educated than the rest of us. Fuck.

    Reply

  3. Kārlis
    May 24, 2011 @ 21:38:46

    Completely unrelated, but kind of on the same theme: when I was doing an internship for The Nature Conservancy a few years back, I was given a car to drive around from site to site. Not a pickup, but rather a nice small rental car perfect for the highway. My mother made me take a picture of myself by the car and send it to my grandparents. Sure enough, of all things I have ever done, my grandpa still thinks that the greatest achievement I ever had was that job where I was given the car 🙂

    Reply

  4. Tommy
    May 25, 2011 @ 10:34:38

    Do you have a SUV as well??

    I’ve read in David Rieff’s Humanitarianism in Crisis that these humanitarian NGOs, many of which do development work, hire a lot of young idealistic people on low pay short term contracts. I guess these NGOs like to save money by getting these youngens when they’re real passionate, and let them go once they go disillusioned.

    In the case of KOICA-Tanzania, I am not really sure how serious they are about finding local solutions. Whenever I’m in the office the local staff are either on facebook or youtube, and when they are working, they’re buying bus tickets or booking hotels.

    Reply

    • Barbara Johnson
      May 26, 2011 @ 03:05:56

      I am sure that you are aware that hiring the young and the passionate is not limited to NGO’s. For profits love the young because they are faster, have up to date education, will work more for less to impress the boss and their insurance rates paid by the employer are lower.
      Hence, many 50+ folks that lost jobs in the past few years are being replaced by the young as our economy improves.

      Reply

  5. Johan
    May 25, 2011 @ 11:44:30

    While I generally agree with you on point 3, that local wages shouldn’t be adjusted downwards (too much) for ‘development’ work since local labour might be less likely to join an organisation for its ideals, I think you’re generalising your experience too widely. In UG, wages in ‘devt’, from drivers on up to technical positions, generally track higher than corresponding positions in the private sector. That plus a degree of satisfaction from doing ‘good’ that my colleagues feel plus an oversized SUV definitely makes ‘development’ an attractive career choice (also, on the SUV, Toyota is ‘super fancy’ in this class of vehicles, LandCruisers are priced similarly to Range Rovers and that UN vehicle you’re showing costs well into the $ six figures).

    While your wealthy bastard clearly competes in a global labour market, not a national one, surely it is somewhat relevant that he went from making 25x GDP per capita in Singapore to 375x GDP per capita in India in terms of purchasing power (not to mention intangibles like social status, etc).

    Which brings me back to points 1 and 2. While there are glaring exceptions (bonuses after the 2008 crash), compensation is relatively straightforward in the private sector. Results = $. (This isn’t the time for a Marxist analysis of this statement.) What = $ in ‘development’? Given the growing sense that the industry is characterised primarily by spectacular failure, why should ‘development’ workers get paid even more to just keep messing things up? Of course everyone is working on figuring out how to measure success and meet deliverables but there’s no good system of doing that and if linked to compensation could increasingly lead to tampering with the stats (Citation: The Wire, though there is a growing body of literature on stat juking). That sentiment is supplemented with my sense that you are overgeneralising here as well. My contract will not only take home over $seven figures in fees for a publically listed American company, my boss’s net compensation is $200k + and I’m doing alright for myself to do not much of anything (other than contribute to the KabCity community, obvs).

    We do have the good hearted volunteers here as well and a range of salaries in the EAW industry but their wages should be compared to the corresponding sector in the developed world, not to Mac econ grads, adjusted for purchasing power and seen in comparison with the local labour market. Even if after these adjustments these wages are lower than their corresponding fields in the developed world, it is likely within the margin supplied by meeting ones ideals, especially when the failures of the ‘development’ industry are taken into account.

    Reply

  6. Kabs
    May 25, 2011 @ 14:12:22

    Thank you all for the great comments!

    Karlis – there is definitely something to be said for symbolic achievements, and few things have more powerful imagery than big cars!

    Tommy – I don’t have my own SUV, but when I go to “the field” I usually hire a Mahindra Scorpio or Toyota Innova because there are 4-5 people in addition to me that need to travel.

    Johan – Excellent points as always. I think you are absolutely right that I am generalizing too easily. Among developing countries, India probably has one of the largest and wealthiest private sectors. Although in Cambodia too many NGOs complained that their well-trained workers quickly left for private sector jobs; skills like typing, speaking English, and working on Excel got them much higher salaries at corporations than at NGOs etc. I guess the lesson here is to make sure that when the private sector does develop, wages in development don’t get left behind. As you mentioned too, the fancy car is an important incentive to stay in this sector.

    On point 1, what I was trying to say is that the “do good quotient” makes the development labour market more rigid. While calculating pay and bonuses is a more complicated issue, I would hypothesize that low performers are less frequently fired in development than in the corporate sector. Part of this may also be because of the assumption that this is government-type work, where firing is practically unheard of.

    As for cooking data, this is definitely a major problem, but I don’t think the current system is a sustainable one where wage is a weak indicator of performance. Instead, there needs to be more investment (time, money, research) in improving our understanding of how projects work and why or why not they are successful. In recent years there has been a large push to do this, but our understanding is still limited.

    Of course having said all that, there are huge shortcomings in a purely “evidence based” system. Ultimately decision-making comes down to much more than what the data say.

    Reply

  7. Johan
    May 25, 2011 @ 17:04:37

    On point 1, I think the ‘do good quotient’ is overstated as a factor in hiring/firing. I think the biggest result on the dev labour market of not having concrete ways of measuring results (which is yes, a fatal flaw that needs fixing) is that dev markets are more prone to the distortions of connections and personalities. This is true in the EAW sense and also in a national dev labour market, EAW managers are more likely to promote nationals who make them feel comfortable linguistically and culturally.

    Reply

  8. Barbara Johnson
    May 26, 2011 @ 03:00:28

    My friends will no longer support organizations like American Lung, American Red Cross, MADD etc, when they find out that the Directors of these programs make large sums of money.
    So, I might say that organisations funded by contributions must understand that transparency will affect willingness of contributors to continue supporting them.
    In this instance, inkind services can offset lower pay such as when Anne got housing in lieu of hiher wages.
    P.S. I know your command of the English language is broader than “shit”.

    Reply

  9. Anne
    Jun 01, 2011 @ 09:11:53

    Its true, transparency is a big issue in the aid world. So much of the success of development organizations depends on their ability to convince people that they’re being effective (see all the glossy brochures and website success stories I write), that orgs are reluctant to admit to the less nice things about what they do… the negative effects our programs sometimes have, the amount of money we spend on salaries and general admin costs (which are still important, even if they’re less sexy than “program costs”), and the downright failure of programs (admittingfailure.com/ is a great place to read up on that).
    Normal people probably would stop contributing to charities if they knew the details about NGOs’ big spending on top exec salaries. But when you think about how much MORE it costs to pay less-experienced people to do a shoddy job and then fix it multiple times (if at all), it can be worth it to pay a high quality worker if you want high quality work. That much remains true even if we ignore the worker retention and job rewards argument that Kabir makes above.

    Reply

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s

%d bloggers like this: