Should employees in third world nations get paid in US dollars?


If a business owner employs workers in a third world country, is it better (for the workers) to pay them in strong American dollars vs paying them with the local currency? Considering the American dollar will likely be stronger than that of a third world country, the workers will have more economic power with greenbacks than their own national currency.


If the third world country has low and stable inflation, then it should not matter much; after all, there is a market exchange rate between say $1 and Indian rupees (these days, $1 = Rs. 60) and whether you pay an Indian worker $1 or Rs 60 should not, in principle, matter. But if India's inflation rate is high and increasing, then Rs. 60 will buy less and less in India until the exchange rate between the dollar and the rupee readjusts to that new reality.

Last updated on
March 9, 2018

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