India, the US, and the nanny: what's a fair wage in our globalized age?

The dispute between the US and India over the arrest of diplomat Devyani Khobragade in New York City this week is heating up. She's accused of paying her nanny a little over $3 per hour.

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.... For the full story, continue reading at our new business publication Monitor Frontier Markets.