Trickling Up: An Expat Economic Theory

The U.S. Trickle-Down economic theory sounds hopelessly pessimistic to me. The word “down” used as an adjective reflects negativity and is downright depressing. It defines a lower position ( Nicaragua has a down economy.), something unable to function (Our electricity is always down!), and someone who is sick. ( My neighbor is down with the flu.)

Therefore, with optimism and enthusiasm, I am going to attempt to explain my expat economic theory of Trickling Up. Just the word “up” sounds so much more encouraging, don’t you agree? If there is one thing I have learned while living in Nicaragua, it is to always be optimistic and encouraging, and lend a hand up when possible.

When we moved to Nicaragua, we received advice from everybody… from how to purify our water to how to bargain like a Nica. Some of the advice was well-received. Other advice, I couldn’t help but wonder about. For example, I was reprimanded by other expats for providing a free lunch for our workers, tipping too much at local restaurants, and paying too much for a taxi. They said, “You are driving up the cost of everything by paying gringo prices willingly.” Or, “The workers will expect the same treatment and pay from us, too.”

I look at it this way. Trickle-Down has never worked in impoverished countries because huge sums of money allocated to government officials never reach those who need it the most. What is wrong with reversing the system of aid by trickling up? The average Nicaraguan earns five dollars a day! Even in Nicaragua, that is well below a level of poverty that defies my understanding of how hard-working families exist.

Here’s an example of my trickling up theory. We are building an addition to our guest house. We hired Marvin to build a bathroom, dig a new septic tank, and add a new kitchen/living room area…nothing fancy…just small and comfortable for our guests. First, we had Marvin make a list of all the materials he would need and give us a list of the costs of materials. Then, we told Marvin that in the U.S., we usually figure labor costs based on the cost of materials. Labor is usually the same amount as the cost of the materials. The carefully prepared list of materials came to $2,000, so we told Marvin that we would pay him $2,000 for his labor. “That is not how we do it in Nicaragua,” Marvin honestly replied. “We charge $10 a day for the contractor and $5 a day for the helpers.” If we did it Marvin’s way, he and his helpers would make much less and take more time to complete the job.

We wrote up a contract, specifying the payments in six weekly installments. Marvin orders the materials with our approval and we pay the bill at the local hardware store. It is a win-win situation for all of the families. Marvin will have enough money to buy more tools and supplies for his business, and meet the needs of his growing family. His son and another friend are his helpers. Marvin can decide how much of a percentage to pay them and knowing Marvin, he will be generous with his percentage.

Marvin and his crew

Trickling up is a fair and sound economic system for expats. We can live comfortably on our retirement savings because the cost of living in Nicaragua is about 1/4 of the cost of living in the states. Our money goes a lot farther here, so why not invest in the future of Nicaragua? Trickling up makes sense to me! With a simple system of accountability and fairness in good labor practices, everybody is happy.


15 thoughts on “Trickling Up: An Expat Economic Theory

  1. When Sam and I were living together on the beach in San Jorge we hired a man to erect a water tower and he gave us a bid for the job that included everything. He did good work and I could see he knew what he was doing. Afterwards we had many small projects and I told Sam we needed to hire him on a daily basis. Sam returned later and told me the rate of pay, I replied ‘sorry that is not enough’ and we paid him a little more that he asked. He was proud to work for us and now Sam says he is one of the more desired contractors in the area. I believe it is best to start the workers at the ‘going rate’ and then pay them what they are worth soon there after, which may include telling them good bye!

  2. I think you and Ron handled this just right – – those workers did an arduous job, and they did it well. They certainly deserve more than $10 a day, and their families, I’m sure, are very grateful that they were paid a fair (and unheard of, I’m sure) wage. The rewards for both parties involved are evident – and I’m sure your relationship with these workers will be a strong and lasting one. You also showed them respect for the work that they do, and that in itself is its’ own reward – KUDOS, my dear! Are there more pics of the new addition? xo, Charlotte

  3. It seems to me that, considering your past experiences, you have worked out an equitable solution for yourself and your contractor and his workers. If I ever build in Nicaragua, I want Marvin doing the work. Sounds like you found yourself a good one πŸ™‚

  4. I really appreciate your generousity and heart and I also appreciate your theory. But my husband is a semi-retired contractor in the U.S. and he always charged an hourly rate for his workers and himself, granted which is considerably more than in Nicaragua, but also varied according to the state the work is done in, i.e. you can’t charge the same in Florida as California. We based our bids on this hourly rate in addition to the cost of the materials and the estimated time we thought it would take to complete the job. I usually prepared the bids for the jobs for the business. We would have never charged for labor the same amount for materials because the cost of materials vary so much depending on the job. On some very upscale homes he’s remodeled the toilets along could be thousands of dollars or the type of wood used can vary quite a bit. If the job went over the estimated time we lost money at times, unless there were unforeseen circumstances in which the owner agreed to the overage like changes to the plans, addtional work found once walls, etc were opened. He worked as a contractor in California, Florida and Colorado and this practice was used in all those states.

    • Linda, thanks so much for all of your valuable information and experience. I guess I shouldn’t assume that materials and labor costs are equal, because like you mention, material costs vary drastically from state to state. From our experiences in building in the states, we usually paid a little bit more for the labor over the cost of the materials. The problem with Nicaragua is that there is no fair formula for construction. There is no formula for anything, no contracts, no permits, no bids, nothing.Try to find a licensed electrician or plumber in Nicaragua! I don’t think there is such a thing. It is a home inspector’s worst nightmare here! Not that there are any home inspectors here anyway. It is a foolish concept in Nicaragua. It is quite a challenge to build anything in Nicaragua because there are no building codes and no zoning regulations. It’s kind of like a free-for-all. We’ve heard horror stories about construction projects, and we wanted to avoid the problems, yet provide a fair living wage for our workers. If you read my response to Eric, you get a sense of what kind of construction chaos we’ve encountered. We’ve made a lot of mistakes in our last two building projects, and we’re slowly learning that you get what you pay for. Our previous workers couldn’t even do simple multiplication. They had never used power tools. They were great at hefting bags of cement and mixing and pouring it by hand, but when it came to technical skills beyond strength,they were tragically lacking the necessary skills. Live and learn. I want to be understanding and compassionate..I am grateful for all the opportunities I have had and just want to pay them forward to those who deserve a better chance in life. I certainly don’t want to be perceived as a rich gringa who can be easily conned out of money. It’s all so relative..I am rich compared to my neighbors here, but poor compared to my neighbors in the states. Where do I fit??? I just want to find a fair, precise formula for paying our workers. $10 a day is outrageous. Even the Nicaraguans will admit that they can’t survive on $10 a day. There has to be a fair system of pay for all workers. What should be the basis for their pay? Experience? Skill? Education? I am open to any and all suggestions. In the meantime, I’m hoping that this formula for our experienced workers will be good for all involved.

      • I think the key is finding the right people to do the job as you did with Marvin. My husband’s rates were higher than most in Florida, but he was rarely out of work, because of the quality and honesty of his work and crew. He was often called to fix the mistakes of others who charged less, which ended up costing people much more in the long run. When we decided to move back to CA, many of his Florida clients offered to fly him back from CA to do their remodels, etc, because they just didn’t want to deal with anyone else. You know the old saying “you get what you pay for.” And you’re right you learn by trial and error, we had to do that when we relocated from state to state here as the construction industry really varies from state to state. In CO and CA the contractor pretty much handles everything from start to finish, but in Florida everything is subcontracted out and my husband was shocked with the shortcuts contractors took there, often leaving the home less than safe. These would have never been accepted practices in CA or CO.

  5. Where to begin on this one — yes Marvin will be happy to receive ‘the American Equivalent’, ie materials here cost the same as in the States? What will be his sentiments and feelings forever, and on his next project when he returns to ‘the Nicaraguan Way’ what resentments are there likely to be tied in with this? Are you as well going to pay $3.00 for your next cup of coffee instead of $.60, how about $12.00 for your next breakfast, lunch or dinner instead of $3.00? My workers as well are treated fairly, live close enough to go home to join their families for lunch, and get paid a bit more than the ‘going rate’ you mentioned, with ongoing steady work for the last year and a half, so far. I agree you are free to pay whatever you wish — is it ‘right or wrong’? My impression is that Marvin was trying to tell what was ‘right’ in his opinion, and that he would have been comfortable working under those conditions. Having paid contractors here to do their work as fast as possible in order to make 3 and 4 times the going rate has showed me the value of having good reliable workers who look after my interest as well as theirs.

    • Eric, thanks for your response. I was hoping for and expecting someone to reply with questions. There are a few things I left out of the post that may help to clarify my way of thinking. First, we learned many lessons from our previous workers. Our first experience with builders in Nicaragua was a disaster in some ways. We were taken advantage of simply because we didn’t understand the language and the way things worked or didn’t work in Nicaragua. We paid the head worker $10 a day, and each of his 3 helpers $5 a day. We were charged much more than the going rate for materials because our contractor ordered the materials and often “forgot” to give us the receipts. We stupidly gave him the money for the materials that we couldn’t purchase at our local hardware store. A worker consistently showed up drunk, the other worker had no clue how to use power tools and we caught him cutting a limb off our mango tree with our power saw. Tools walked off the job, and someone stole Ron’s hiking boots and my son’s cell phone..among other little things that quietly disappeared. We graciously hired our neighbor to cook for the first set of workers because they had bicycled several miles to our house, they never brought anything to eat, and there was no place to buy food near our house. Plus, we wanted to help our neighbors, so they could make a little money by cooking lunch for us and our workers. The second project, the casita, was somewhat better. With a different crew, we hired a contractor who gave an estimate for the entire project. We didn’t request a list of materials and their costs, though we were in charge of the money and paid the hardware store. It took three and one half months to build our two story casita.Some days the workers would show up late, some days not at all. They never worked on Saturday. There was a new pulperia close by, so the workers bought their own lunch. Again, because we didn’t have a list of the materials and their costs, we realized that we had overpaid for the project when we totaled up the receipts. Marvin had done all of the ironwork on our house and made my iron furniture. We’ve seen his work and know he is a good builder. He charges more for his work than others because he does quality, careful work. When he gave us a list of the materials and the cost from our local hardware store, we asked him how much he would charge for his labor, and it was comparable to the cost of the materials. We said that when we hired contractors in the states, the cost of materials and labor was about equal, so we agreed to his fee with the stipulation that it be completed in six weeks with six weekly installments. This is our third ‘experiment’ with contractors in Nicaragua. I honestly don’t mind paying more for quality work. This formula for work makes more sense to me because we control the time and the money, and Marvin is responsible to complete the work in a specified time, which by the way is a reasonable amount of time for this project. The cost of materials is 1/4 of the cost in the states. For a comparable job in the states: my mother got a bid for a small addition including a bathroom, almost the same size as our addition, and the bid was $24,000 including labor. I honestly don’t know whether there is a right or wrong in providing what I feel is a fair pay for our workers. I do feel that $10 a day is a ridiculously low amount to pay contractors for building a house…especially if they are professional and experienced. Most of Marvin’s work is for foreigners. Local residents cannot afford to pay for his work. He may be resented..jealousy is a big problem here. But, he doesn’t lack for work. I look at it this way..with our first projects, we probably paid the same amount because we were ripped off by the workers. Now, we have a formula for pay, a contract, a time schedule, and good quality work from a professional who understands how to please his customers. I wish I had more answers for your questions. I’ve debated with myself over these issues, too. I honestly hope that the third time is the charm for our construction nightmares. Thanks, Eric for offering your thoughts.

  6. Awesome Deb! That is practicing fairness and using your common sense. I tell people that the only reasons some of the foods they eat like coffee are so cheap it is because big companies pay workers a dollar a day in the third world.

    Deborah For Nicaraguan President πŸ™‚

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