The father of the arrested Indian diplomat met with India's Home Minister, Tuesday.

Posted by & filed under Asia, Emerging, India, Regions, South & Central Regions, Uncategorized.

Washington and New Delhi are in the midst of a damaging dispute after the US arrested one of India’s diplomats for failing to pay her nanny a minimum wage, among other offenses. From the perspective of many Americans and some Indians, it’s a puzzle why India is not simply embarrassed by the nanny’s mistreatment and has not quietly let this go. Partly it has to do with New York police allegedly strip searching its diplomat. But partly it’s the different vantage point India has on expatriate pay and its vast distortions in an age of globalization.

The rationales behind international pay are not as cut-and-dried as they might seem, as any American expatriate who has lived in the developing world knows. And the reputational risks stemming from determining expatriate pay will only intensify as companies globalize, workers cross borders to find jobs, and employees grow less tethered to an office.

Let’s state upfront that minimum-wage law should be respected, and on that level, the diplomat has no real moral case. Period. Devyani Khobragade brought her nanny, Sangeeta Richard, to the US by allegedly falsifying visa documentation, saying that Ms. Richard would be paid a legal US wage. Instead, the New York district attorney’s office alleges that the nanny was paid $573.07 a month – or a little over $3 per hour if Richard worked only a 40-hour week. Richard allegedly worked “far more,” meaning she was paid even less by the hour.

Indian official mutterings in the press that the cost of paying US minimum wages would top the salaries of the diplomats are both untrue and inelegant. New York authorities indicate the prevailing wage for Richard’s work is $9.75 per hour, or $1,677 per month for a 40-hour work week. Ms. Khobragade’s pay, however, was reportedly $4,120. Admittedly, from the vantage point of what India is paying Khobragade – considered “high” by many Indians compared with what other civil servants are paid – a prevailing wage for Richard could be considered out of whack.

Aside from abiding by local wage laws, on what principle is pay supposed to be judged as fair across such vastly different economies: prevailing wage, home-country wages, cost-of-living adjustments? They all come with ethical and practical difficulties.

If the principle is to pay the prevailing wage wherever the work is done, the Indians have reason to be frustrated. India’s most common experience with expatriate workers is the millions of its own citizens who work in Gulf countries. They are paid less than the prevailing wage that a Gulf citizen would be paid for similar work. American companies do it, too. Studies have found US high-tech firms who hire programmers and engineers from India on special work visas are – contrary to the law – also paying less than prevailing wages.

When I was sent to India for several years, I was not paid the prevailing Indian wage for a journalist. And almost no US company would succeed in relocating an employee to a less developed country like India on those terms.

Then, too, Western work arrangements are increasingly virtual and remote from the home office. If an American employee who usually works from home decides to relocate to Mexico where she plans to eventually retire, should her US employer suddenly pay her far less?

Striving for pay fairness based on prevailing wages butts up against the economic realities of supply and demand. There will always be some workers who have few options but to take “underpaid” jobs overseas and some companies that have few options but to “overpay” jobs to get their employees to locate in key parts of the world.

Another principle that attempts to address this reality is to pay home-country wages, often with some extra pay to recognize the hardship of the dislocation.

Khobragade apparently followed this principle, albeit beyond the boundaries of US law. The nanny’s pay of $573.07 per month far exceeds what almost any nanny is paid in India. From what I observed up until 2011, it is at least twice the amount that domestic workers were generally paid in New Delhi by Western expats, who stir up a lot of local resentment for “overpaying their help.” Some two-thirds of Indians live on $2 a day, or roughly a tenth of Richard’s salary.

But Richard is no longer earning and spending money in the context of India’s economy. It’s extremely hard to imagine living in New York City on $3 an hour. One could argue that if she had zero commute and received free room, board, and health-care as reported, the nanny might have more left over for other expenses than a significant number of New Yorkers. This is more of a sad indictment of the American worker’s current situation than a winning argument for Khobragade. Besides, as journalist Mihir Sharma noted on Twitter yesterday, “cash grants workers agency. ‘Benefits’ of this sort do not.” In other words, a live-in nanny beholden to her employer for her visa status doesn’t have the same mobility as a local who might wind up with a similar net income after expenses.

There are deeper troubles with making national origins largely determinative of salary scales. In mixed expat-local offices, the gross inequalities of pay within a team leave employers exposed to charges of racism, imperialism, and the like.

One international employer that I was familiar with during my time in India had several tiers of pay: overseas-based-overseas-hired (i.e. an American hired in the US to go over to India), overseas-based-locally-hired (i.e. an American already in India getting hired locally), and locally-based-locally-hired (i.e. an Indian citizen hired in India). The pay difference was significant among all three tiers, but especially between overseas-based and locally-based, or Americans and Indians. When tensions over this arose, the setup was explained partly on the different educational backgrounds, but occasionally there would be the awkward case of an Indian who went to a US college – a situation only likely to grow more common in years to come.

Employers can also attempt to set salaries in one country and adjust for cost of living elsewhere. It sounds nice in theory, but few employers would succeed in shrinking the salaries of employees who relocate to a cheaper country. And cost-of-living coefficients can’t always factor in inevitable – but very disruptive – changes to lifestyle. How do you cost out intangibles like moving to a much more polluted environment, or moving to a culture where domestic help is only for the rich? In India, my wife and I could afford for the first time – and probably last time – a housekeeper and a driver, yet my wife got so sick from living there that she claims no amount of money or perks could lure her back there.

Ultimately, wages are the result of whatever an employer and employee can agree upon within the boundaries of labor law. Explaining them, especially when they straddle such yawning international inequalities, is no simple matter.