Economics is about making choices in the face of unlimited wants and limited resources. Economists study the choices humans make. Why they make certain choices, what they hope to gain from the choice and how much they give up each time they choose.
We are forced to make choices in our daily lives because not all our wants can be satisfied with the available resources. When we make choices, we have to give up something else.
Now, let us try to understand the difference between financial costs and economic costs.
Financial costs are measured in money. For example, the salary given to the sales person at a shop is a financial cost to the shop owner. How do we understand the concept of opportunity cost here?
When the shop owner decides to employ a new staff at his shop, he could consider two options. That is either to employ a Maldivian or to employ a foreign worker.
Now, if he considers only the financial costs, he would probably employ a foreign worker. Why?
To hire a Maldivian, the shop owner usually has to pay MRF4000 per month, while a foreign worker could be hired for just MRF1800. Considering the financial cost, the choice of the shop owner would probably be the foreign worker. That is understandable since almost all the marts around Male’ have foreign workers. Now let’s consider the economic costs:
A Maldivian is usually more educated and thus will be able to work with the new technological introductions. Therefore, the flexibility makes the Maldivian much more efficient and can generate more revenue and profits in the long-run.
The efficiency also comes with the Maldivians usually being able to communicate better in Dhivehi and English as well, compared to the expatriates.
Any salaries given to the foreign worker is going out of the economy and is considered as a leakage and is bad for the economy. The more foreign workers around, the more pressure at the bank queue to buy US Dollars. Therefore, giving preference to Maldivians when giving jobs is one way to help solve the Dollar crisis.
Where as, the salaries given to the Maldivians will circulate inside the economy. Any boost to the economy will in turn benefit the shop as well. It improves the social stability too. A stable society is good for the business.
Let us do some calculations. Let us assume that there are 30,000(I know the actual number could be much higher) mart shops in Male’. Each shop hires 2 foreign workers at a rate of MRF1800 each.
1800 X2 = MRF3600 per month from each shop.
MRF3600 X 30000 = MRF108,000,000 (One Hundred and Eight Million Maldivian Rufiyya)
Converting into Dollars. 108000000 / 15.42 = 7,003,891.05 (Over Seven Million US Dollars).
Now can you imagine the Bank having to sell over US$7,000,000 every month? It is the Maldivians who suffer the Dollar shortages. The small businesses like mart shops are real losers here.
Therefore the conclusion is that, hiring a Maldivian for the double salary of an expatriate is still better for the shop keeper, if he considers the economic costs.
As someone who thinks about the economic situation of the Maldives, I have a sincere request to the business/company owners.
Try to hire Maldivians for the jobs even if it may seem like having to give a higher salary to them. The resulting economic boost will benefit the company or business in turn.
We, as individuals, can do many things to improve our economy. Always think about the ‘economy’ before doing anything that involves money. Think about the long-term benefits. Let us save our economy.