“Inside the person you know, there is a person you do not know.”
― Christy Lefteri

It’s not a huge revelation that the lack of workforce on the labor market in general has been prevalent these last couple of years and hiring outside of local pools is the go-to resort for many companies. There are many issues with this, as you can imagine, and there is no workaround but to accept, adapt and deal with them accordingly and yet there is one which stands out the most which is the disparity between the local and foreign workforce in financial terms. Slowly over the years here in EU, expatriates have been moving the goal posts for western countries closer to the eastern ones consistent with their economic development. Countries which are newer to accepting expats are not exactly fond of the differences, not only in culture, behavior or native levels of ethics, but mostly the salaries and benefits the employers offer them. There is no easy way to explain why this phenomenon occurs but I wanted to simplify it in economic terms. Let’s try and dive into it.

What exactly is the issue

The local workforce mostly has a problem with the gap in the combination of salaries and benefits offered to foreign workforce and that is understandable. If a company is offering to pay the rent AND give a higher hourly rate then of course the local would feel mistreated; anyone would. The Guardian did a study back in 2016 which basically confirmed that the skill and performance aren’t the factors which determine that gap but the expectations set by the expats because of economic differences between the native and expat countries. What the local workforce doesn’t understand is that the employer doesn’t exactly have a choice in the matter because as the labor market currently is, it’s influenced by the basic economic principle which is the law of supply and demand. I’ll explain it in layman terms but as it’s not an everyday topic or something discussed within the basic, general knowledge about how the world works, many in the workforce wouldn’t and don’t accept this as an argument.

Explaining supply/demand and scarcity/value

Basic principle of supply and demand tells us that something that is scarce gains in value and vice versa. In this case, lack of workforce on the labor market presents scarcity and its value tends be higher than usual with progressive increase over the years. An expat’s value in this sense is much higher than that of the local workforce because as opposed to an expat, an existing local worker is readily available and therefore not scarce whereas an expat presents a higher value because they’re in demand. The higher value is then translated into higher salary and more or effective benefits. The layman term argument to the local worker would be filling the expat’s shoes and therefore probably getting the same treatment in a more developed country. Obviously there’s rarely a consensual agreement to this because of emotions taking place and employers/HR departments have difficulties mitigating this so there’s isn’t an end all be all solution.

Approach to sympathy for the expat

Not to be too direct but to some degree we have to incorporate empathy into judging others and others’ actions. While an expat presents a higher value, the cost of their services isn’t just labor but also the position in which they find themselves. It’s not easy to leave your home country and everything you know, I should know, I was an expat once. Once you migrate, you basically hit a reset switch on your social circle and lifestyle and you have to deal with a lot of emotions, mostly negative ones because of the attachment that’s suddenly gone. So in a way, they’re compensated, not only for their labor, but also for uncomfortable predicament they’re in; that’s something that the local worker doesn’t have to endure. In a capitalistic sense, they’re offering more goods in quantity, in a manner of speaking.

Takeaway

This is a sensitive topic, for the most part, because it deals with financial compensation and that’s always something that’s not easy to discuss. On the other hand, we also have a mixture of cultural and behavioral challenges that are always present but less likely to cause as big of an issue as a salary, for example. On the surface level, the answer to this issue is quite simple once you incorporate economic and business demands but when communicating in layman’s terms, it’s not so easy to explain. Supply and demand will always dictate any market and businesses have to adapt in order to thrive but they also have to make sure to properly communicate and manage any tricky questions that may be raised with this issue.