Employers oppose blanket minimum wage . . . Demand sector specific model

12 Feb, 2020 - 00:02 0 Views
Employers oppose blanket minimum wage . . . Demand sector specific model

The Chronicle

Oliver Kazunga, Senior Business Reporter

EMPLOYERS have said they prefer a sector-specific wage review mechanism as opposed to a national minimum wage policy being advocated by social partners under the Tripartite Negotiating Forum (TNF).

In its submission, the Employers’ Confederation of Zimbabwe (Emcoz), argued that a blanket minimum wage threatens the going concern status of businesses through loss of competitiveness.

Emcoz president, Dr Israel Murefu, said organised businesses have since June last year been participating in the TNF and that apart from the issue of “erosion of wages and salaries,” the rest of the issues under negotiation were generally resolved by consensus.

“A blanket similar wage policy ignores the issue of peculiarities and seriously threatens the continued existence and viability of some sectors including the going concern status of players therein through loss of competitiveness,” he said.

Emcoz contends that a blanket wage policy will create a scenario where it would be cheaper and attractive to import finished goods, which will cripple domestic production, erode competitiveness and widen unemployment. As such Dr Murefu said the path being taken by the social partners to index a proportion of the August 2018 Poverty Datum Line (PDL) to the exchange rate was not sustainable.

“This approach threatens a re-dollarisation of the economy because the US-dollar becomes the point of reference for all pricing including wages,” he said.

Dr Murefu noted the TNF has already agreed that the economy should run with the local currency with a condition that the authorities will commit to local currency stabilisation and contain money supply to targeted levels.

Emcoz also said that while it acknowledges the erosion of salaries and wages due to high inflation, a blanket national minimum wage was a form of price control, which runs against the spirit of the Transitional Stabilisation Programme (TSP) that seeks to promote a market driven economy.

“This erosion of incomes also has the effect of causing a drop in aggregate demand in the economy at large, which has resulted in a significant fall in volumes for business,” it said.

In dealing with incomes and wages erosion, Emcoz proposes the need to look at the PDL as at August 2018, (which is consistent with the TNF technical committee recommendation) and identify each sector to see what proportion of the PDL a worker was earning.

After this, Dr Murefu said it should then be established that a worker must be able to afford the same proportion of the current PDL. The PDL in December 2019 increased by 14,5 percent to $4 188 from $3 656 in November, official statistics show. 

“The PDL is the accepted measure of minimum value for employment and it has always been a target benchmark used in collective bargaining across sectors,” he said.

This would only be a starting point as national employment councils would then continue to carry out sector-based negotiations based on the fortunes and challenges being faced by each sector, said Dr Murefu.

“For example, some sectors are affected by power outages more than others yet some are affected by water, fuel and foreign currency shortages in a different way from others while others face stiffer competition from imports than some,” he explained.

“The drought will also affect negatively inputs and supplies to certain sectors while the same impact will not apply to others.”

Against the background, Emcoz says it is instructive to continue looking at a proportion of current PDL that an industry or sector can afford as a reference point. 

“Another policy measure that may assist is to look at regional parity for wages in respect of similar skills/jobs as well as regional productivity and capacity utilisation and then determine minimum wages for each sector taking into account other variables. 

“Indeed, the current PDL may look lower in US$ terms but this has to do with the interventions and work done during the life of the TSP, which has resulted in the improvement in prices of goods (when one looks at US$ prices obtaining in 2018 compared to the equivalent in local prices today) and making the economy competitive,” he said.

Dr Murefu said Emcoz considers that PDL should be looked at with two people working per family as both parents should earn or contribute to household incomes as it was not sustainable to render 50 percent of the potentially working population unproductive.  — @okazunga

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