Why value-based salaries might help African effective altruists achieve more impact

Acknowledgement

I wish to acknowledge the help of Luke Eure whose thoughts and insights greatly challenged my initial ideas while writing this post.

1. Introduction

The career guide from 80,000 hours provides many insights for people who aspire to have a positive impact with their work. It offers various career advice, tailored for people who intend to work on global challenges such as pandemic preparedness, climate change, nuclear war, and risks from artificial general intelligence (AGI), as well as others that are not yet known. It also provides abundant resources on how to gain career capital to make a difference, with a job board for high impact jobs. A brief look at the salaries offered for positions in these places reveals that the location of the employees, rather than their value, determines how the listed organizations such as GiveWell and multi-national companies like Google and Microsoft pay them. This is not the main focus of this post, but the debate between location-based salary and value-based salary has been discussed elsewhere and is probably useful for giving this post context.

A large number of job opportunities on 80,000 hours’ job board are from organizations located in developed countries. This means that international applicants might be more interested in those that allow working remotely, unless immigration is facilitated by the employee or employer. However, most organizations may adopt location-based salaries as a compensation model, which takes into account the differences in living costs and market rates across regions. For instance, if you work for a high-impact organization such as GiveWell in New York, you will earn more than if you work for GiveDirectly in Kenya. But is this fair? And more importantly, is this optimal for maximizing your impact as an effective altruist in a developing country somewhere in Africa? The issue of fairness has been addressed elsewhere, so I won’t drag out that argument here. It is important to also note that this post does not in any way imply that all multinational enterprises in EA only offer location-based salaries. 

The intention of this post is to find out whether, through value-based compensation models can ensure there is more direct impact by Africans. Hinged on Stefan Schubert’s incentives argument that “higher salaries will make it more appealing to do high-impact direct work”, I also envisage more Africans taking on high-impact jobs in the EA space if there are enough incentives to do so. Also, I attempt to explain how paying Africa-based employees the same as those in developed countries does not affect their giving potential but affects their ability to make a difference in their local contexts.

     2. A brief overview of the case against location-based salaries

The main argument for location-based salaries is that they ensure that employees have a similar standard of living and purchasing power across different regions. This is supposed to prevent unfairness and resentment among employees who work for the same organization but live in different places. However, this argument assumes that employees who are effective altruists value their own consumption and comfort more than their impact. One might eventually feel compelled to strike a delicate balance between lower standards of living and higher costs of living to ensure most good can be done with their resources [money, time and energy].

Moreover, location-based salaries create perverse incentives for employees to choose less impactful locations over more impactful ones. For instance, if you are an EA who wants to work for GiveDirectly, you may prefer to work in New York rather than in Kenya, because you will earn more money and have a higher quality of life and give more to organizations that are working on more pressing problems. But this means that you will miss out on the opportunity to have direct impact on the ground, to learn from the local context and culture, and to potentially start new initiatives or projects that could benefit the people you are trying to help.

   3. Value-based salaries would allow effective altruists in Africa to have more direct impact

Paying Africa-based and New York employees equally would not change their giving, but their impact. If you are an effective altruist who works in New York and earns $100,000 per year, you may be able to donate 10% of your income ($10,000) to effective charities. Ideally, on the other hand, if you are an effective altruist who works in Kenya and earns $100,000 per year, you may be able to donate a significant amount of that money. Ideally, let’s say 90% of your income ($90,000) to effective charities [these are very rough numbers, and can be tweaked to any percentage above 10%]. This is because the cost of living in Kenya is much lower than in New York, and you can live comfortably on $10,000 per year – at least in principle. But this does not mean that you are giving nine times more than your New York counterpart. This is because the marginal value of your donations depends on how much money is already available for effective causes. If there is already a lot of money flowing into effective charities, then your additional donation will have a smaller impact than if there is a scarcity of funds. For example, if GiveWell has already raised enough money to fund all of its top charities for the next year, then your donation will not make much difference. But if GiveWell has a funding gap and needs more money to support its top charities, then your donation will have a bigger impact.

Paying EA organization employees the same salary regardless of their location would also essentially allow them to save more money and donate more effectively. For example, if an EA organization started paying 70k per year instead of 100k per year to its employees, but paid that amount regardless of where they lived, then they would be saving 30k per year per employee. This could be used to fund more projects or hire more staff. However, this argument assumes that the living expenses and personal obligations of the employees are similar across different locations. This may not be the case [consider the case scenario between NYC and Kenyan-based employees highlighted earlier in the post]. However, the Kenyan-based employee may also have to give 10k per year to their family in "black tax", which is a common practice in some African cultures where relatives expect financial support from those who are better off. This leaves them with 50k per year to save or donate.

Now, compare this to an employee who lives in NYC. The living expenses of the person in NYC are maybe 60k per year - that gets them a decent but not luxurious quality of life. They may not have to give any money to their family, or only a small amount. This leaves them with 40k per year to save or donate. In this scenario, the employee in Kenya can still donate 20k per year - more than the 10% someone would be donating in NYC. However, they may also face more challenges and risks in their work and life, such as political instability, corruption, violence, disease, etc. They may also have less access to opportunities and resources that could help them advance their career or personal goals. 

I submit to the counterargument that paying employees the same salary regardless of their location may not be as simple or fair as it seems. It may overlook the differences and trade-offs that employees face in different contexts. It may also create resentment or dissatisfaction among employees [and this might also be true for location-based salaries] who feel underpaid or overworked compared to their peers. I am no expert in economics, labor laws neither do I claim to know the operation costs of organizations that employ people in the global market, but I think it is extremely important that a more nuanced and flexible approach may be needed to account for these factors and ensure that employees are motivated and effective in their work.

   4. Location-based salary supporters often overlook that many employed Africans remit black tax

As I had highlighted earlier, the arguments in favor of location-based salaries ignore the fact that many Africa-based employees have to support their extended families financially, often out of obligation. This is known as "black tax", a term that originated in South Africa for money that black professionals provide to their family every month outside of their own living expenses. Black tax is caused by continued economic imbalance that can be traced back to apartheid and slavery. Therefore, an Africa-based employee who earns $100,000 per year may not be able to donate 90% of their income to effective charities anyway, because they have to pay a lot of black tax and $10,000 would not afford the comfort they [including extended family] would like.

   5. Some reflections on the fairness and efficiency counterargument

The obvious counterargument that claims that location-based salaries are fair and efficient, because they reflect the different costs of living and market rates in different regions has several flaws, and I intend to highlight some of them in this section of the post. 

First, this viewpoint wrongly assumes that employees who live in expensive regions have higher expenses and face more competition for jobs. This is not always necessarily the case. Some employees may have lower expenses due to factors such as family support, housing subsidies, or lifestyle choices. Some employees may also have more job opportunities due to their skills, experience, or network. These "reliefs" may lack in developing countries in Africa. Although I do not assume that there are privileged people in Africa [whether because of their skills, money, or networks], but this is a blanket statement that covers a majority of situations for people in the continent.

Second, it ignores the potential benefits of paying employees based on their value and performance, rather than their location. This could motivate employees to work harder, improve their skills, and contribute more to the organization or company's goals. It could also reduce turnover, increase loyalty, and attract talent from diverse backgrounds.

Third, it overlooks the possible drawbacks of adjusting pay to reflect the cost of living in employees' new locations. This could discourage employees from moving to cheaper regions where they can have more impact with their donations. It could also create resentment, confusion, and inequality among employees who do similar work but receive different pay. Location-based salaries may seem fair and efficient at first glance, but they are not the best way to compensate workers.

   6. What using the value-based salary model would look like for effective altruism

But what if we reversed this situation? What if we paid equally to all employees regardless of where they live? Then we would have more money available for effective causes by paying less to employees who live in expensive regions and more to employees who live in cheap regions. This means that there would be more money left for donations and grants, and that the marginal value of each dollar donated or granted would be higher.

And this is not all, equally paying Africa-based employees the same amount as those living in New York would also increase their impact by enabling them to have direct impact on the ground, to learn from the local context and culture, and to potentially start new initiatives or projects that could benefit the people they are trying to help. For example, if you are an effective altruist who works for GiveDirectly in Kenya and earns $100,000 per year, you may be able to use some of your income to fund local entrepreneurs who have innovative ideas for improving the lives of the poor. Or you may be able to use some of your time and skills to mentor local staff or volunteers who work for GiveDirectly or other effective organizations. Or you may be able to use some of your connections and influence to advocate for policy changes or systemic reforms that could have long-term positive effects.

These are just some rough examples of how an Africa-based employee could have more impact than a New York-based employee with the same salary. Of course, this does not mean that every effective altruist should move to Africa or work for an Africa-based organization. There may be other factors that affect your personal fit and comparative advantage as an effective altruist. But it does mean that high-impact organizations should not use location-based salaries as a way of attracting or retaining talent. Instead, they should use value-based salaries that reflect the impact potential of each employee regardless of where they live.

   7. Conclusion

Here, I have argued in favor of value-based salary for African effective altruists, with the projection that this would help in achieving direct impact on the causes they deeply care about and even chose to work on more pressing problems by pivoting to an effective career. Employees would also ideally have more incentives to perform well and align their goals with the organization's mission. Value-based salaries could provide them with more resources and autonomy to pursue their altruistic endeavors by using their extra income to fund their own projects, donate to effective charities, or upskill if they are already working in a high-impact career. Value-based salary could also increase their motivation and satisfaction, as they would feel more valued and recognized for their contributions. Also, value-based salary could attract more talented and passionate people to join the effective altruism movement in Africa, creating a positive feedback loop of impact and growth.