1. Behavior attempted to be explained:
Even with a huge large population of India below the poverty belt, everyday
experience shows that it is difficult to get and retain a reliable domestic help.
Explanation
Typically the value that domestic help adds to the master is saving their time,
which the master can utilize in tasks that earn them much more. With increasing
standard of living, it becomes more and more costly to spend time on chores –
the value add by domestic help keeps increasing. So, not only the demand for
domestic help keeps increasing, but is also very insensitive to price.
On the other hand, poor people really don’t care about standard of living, but
mostly want to satisfy physiological needs. With increasing costs, a small increase
or decrease in salary will have great effect on their willingness to work. So the
supply of domestic help is not only highly price sensitive, but also keeps
decreasing till compensation is increased due to rising costs.
Additionally, once physiological needs are satisfied and they have even little
savings, the additional incentive to work is very low for these people. Hence they
go back to their villages, often for long time, coming back only when they need
money.
The constant increase in demand and decrease in supply at the same time implies
that the supply of domestic help is always catching up with the demand, while
lack of incentive further dents the supply.