Panama offers expats amazing buying power.
Housing is inexpensive compared with many places in the US and Canada.
Food costs are cheaper, especially if you shop at vegetable stands, fish and meat markets, or buy from local farmers.
Labor costs are similar to those paid 30 years, or more, ago in the US.
- For example, a gardener in Panama can earn $12 a day, which is $1.50/hr.
- In 1976, I earned $2.65/hr at a fast food restaurant. It was my first job, and I was only a high school student.
Hidden Labor Costs In Panama
Panama’s cheap labor can make it seem smart to start a business here.
You’d simply find an unmet need, hire as many cheap Panamanian laborers as possible, and watch the profits roll in. Right?
The truth is that there is a huge gap between the “apparent cost” of hiring Panamanian labor and the “true cost” of that labor.
First of all, there is a big difference between what an employer would expect of a worker in the States and what an employer is likely to receive from a laborer in Panama. It doesn’t matter if you are hiring a gardener, a cleaning person, a fruit picker, or agricultural worker on a coffee estate, palm oil farm, etc…..
There is a clear link between the absolutely abysmal public education system and the kind of employee that one is likely to encounter in Panama. Since there is no emphasis placed upon independent thinking and problem solving in many Panamanian schools, the average worker is totally unprepared to take on even the simplest responsibility.
I have seen painters wait all day for the boss to return to the job site to show them the paint brushes they should use. Meanwhile, there were perfectly good brushes on site, but under a few rags in a paint bucket. No one even thought to look for them. They just waited for the boss.
Hire the Right Worker
Those painters would demand to be paid for a full day, even though they didn’t paint at all that day. Which means, if a painter was being paid $15/day, the first day’s labor cost has just doubled, and the actual cost for the painter is now $30/day.
You, as the employer, now understands that if the paint brush is not placed directly into that painter’s hand (right hand, if he’s right handed; Left hand if he’s left handed), then it is safe to assume that no painting will be done, until this first step is accomplished. Okay, maybe I’m overstating the case, but you get the idea.
Of course, with experience, you will learn to vet prospective employees more carefully, talking to former employers (hopefully expats), to see if the laborer is capable of doing the required task to your satisfaction.
You need to master this first, and most important step, of hiring the right worker. It is critical to your success, whether it is doing a small home remodeling project, or opening a hotel or restaurant.
Expat As Employer
Expats who wish to hire an employee, even for a simple domestic task such as house cleaning, cooking, or gardening, may talk to their Panamanian neighbors and find out that the neighbor has employed the same couple, the wife to cook and clean, and the husband to garden and do handyman tasks, for the past 25 years. You may also discover that the couple, in all that time, has never had a pay raise, a paid holiday, or had any social security payments made on their behalf.
To the tender hearted, this sounds like slavery. To the unscrupulous, this sounds like a money making machine. Imagine, laborers who work for peanuts, and demand nothing in return! If this sounds too good to be true, that’s because it is.
The same innocent Panamanian couple who will work for slave wages for a wealthy Panamanian, will never, ever, give an expat that kind of a deal. Don’t try to figure out why a poor Panamanian has no problem being taken advantage of by one of their own countrymen. You will waste a lot of time.
Books have been written about the sense of inferiority which poor latinos, from all over the Americas, feel which causes them to feel powerless in their relationships with their wealthier compatriots.
Some hypothesize that it is a vestige of their conquered and colonized past. Whatever the origins of this attitude of inferiority, rest assured that though an expat may receive some superficial respect, merely for being presumably wealthy, that is where the homage ends.
An expat has no access to the historical mandate that a Panamanian of wealth has over his less affluent countrymen. If you make the mistake of thinking that you do wield this same power, this same historic right, you are in for a rude awakening.
How To Hire A Good Employee
The number one way to have a good working relationship with a Panamanian employee is the same as it is anywhere: Choose the right person for that employment.
- Take your time.
- Talk to lots of other folks who’ve had employees.
- Talk to at least a few who’ve hired the person you have in mind.
Panama is a tiny country. With very little effort, you should be able to talk to former employers of your prospect.
Create A Good Relationship
Once you have a good employee, you need to treat him really well.
Since there are so many truly worthless prospective employees in the country, if you do your research and land yourself an outstanding employee, you should feel grateful.
Not just a little bit grateful. But very grateful.
In Panama, as in other more traditional cultures, a good employee, one who thinks he has landed a good, long-lasting job is also very grateful.
As an expression of that gratitude, he would probably like to continue to be your employee for the rest of his life.
If this is what you want as well, then this is a match made in heaven. You want a forever employee whom you like and trust. Your employee wants a lifetime job with a compassionate and appreciative employer.
What To Pay A Good Employee
Probably the best way to show your appreciation for your employee, is to pay him more than other employees who do similar work in your area receive. But be careful about creating expectations and a sense of entitlement.
If you have the best employee in your town, you should pay your employee the highest wages in your town. It’s just that simple.
While there are those who say that if you “spoil” your employee by paying him too much. His work output will fall off, and you will end up with an overpaid, underperforming employee. No one wants that. But it can happen.
It is my opinion, and personal experience, that you avoid this problem by successfully hiring the right employee. If so, then paying an above average wage to that employee will not cause a problem.
However, you must also remember that workers in Panama are not motivated by money the same way as a worker is in the western world, especially in the States.
A person’s pride is often just as important to them as their wage. And people are not necessarily motivated by accumulating more money, just to have more money. But they do want what they consider enough money. The trick is finding out what that amount is.
Please look for my next article on hiring an employee in Panama, in which I will cover the topic of social security for employees, and hiring a contractor.
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