Transcript Minimum wage - Economics Association of Zambia

“Minimum Gross Wage of K3,003 in all
Negotiations: What is the Impact on
Private Business and Rising Cost of
Living?”
CHITI, Leonard, S.J
[email protected]
Jesuit Centre for Theological Reflection
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Objectives of the Conversation
To discuss the concept, the
principle and foundation of
minimum wage in Zambia.
To discuss the impact of the
minimum wage on Private
Investments and businesses.
Highlight government response to
the minimum wage.
To explore the way forward on the
revised minimum wage.
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Methodology of the
Conversation
Introduce the minimum wage concept.
Present key determinants of minimum
wage in Zambia.
Present the pros and cons of minimum
wage.
State JCTR position on the minimum
wage conversation.
State some recommendations to
government.
Conclude
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JCTR – Who we are and what we Do
• We are a project of the society of
Jesus ( Faith based organisation).
• We are founded primarily on
implementing the Social Teaching of
the Church ( CST) which
emphasizes the dignity of the human
person.
• Therefore, our role as JCTR is to
promote social justice.
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JCTR & Social Analysis
JCTR approaches contemporary
challenges by examining their
context, identifying challenges and
responding to the call to work with
God by undertaking Social Analysis.
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JCTR’s Approach
From a faith inspired perspective JCTR promotes
justice for all in Zambia, especially the poor,
through research, education, advocacy and
consultations.
JCTR sees itself as contributing towards the
creation of a society where justice prevails, faith
informs and shapes all human activities, which are
oriented towards raising the living conditions of all
Zambians.
Therefore, our approach on this matter is premised
on Social Justice.
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The Employment Situation in
Zambia
According to the Central Statistics Office (CSO),
majority of the working population is employed in
the informal sector.
As of 2012, there were 4,652,253 (84.6%) people
in the informal sector against 847,420 (15.4%)
people in the formal sector.
The bulk of the people working in the informal
sector particularly 2,586,964 are skilled
agriculture, forestry and fisheries workers.
In the formal Sector, private businesses and
farms are the highest employers with 57.8% of
the workers, followed by central government with
28.1%
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Formal Sector Employment Distribution in Zambia
Institutional / Sector
Number
Percent
Central Government
237,846
28.1
Local Government
29,304
3.5
Parastatal/State Owned
firm
55,496
6.5
NGO or Church
24,518
2.9
488,323
57.6
8,424
1
-
0
Producers Co-operative
1,367
0.2
Not Stated
2,142
0.3
Private Business or
farm
Embassy, International
Organization
Private Household (e.g
Domestic Worker)
Total Formal Sector
847,420
Source: Central Statistics Office, (2012). Zambia Labour force Survey Report. Lusaka: Central
Statistics Office
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Minimum Wage Vs Employment
Situation
Minimum wage is the body of law which
stipulates the barest baseline salary per hour,
per day or per month.
In Zambia, the Minimum wage is governed by
Statutory Instrument No. 45 of 2012 otherwise
referred to as “The Minimum Wages and
Conditions of Employment Act.”
This Act is meant to dictate the Minimum
Wages and Conditions of Employment for
Domestic Workers.
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Minimum Wage
However, recently there was a directive from the
Republican President and Head of State, 2014 Labour
Day Celebrations, directing the Minister of Labor and
Social Security to ensure that no worker is paid below
the food basket as measured by the Central Statistics
Office. (http://www.daily-mail.co.zm/index.php/localnews/)
The directive from government dictates that collective
agreements should be improved to / or above the
minimum gross wage in government amounting to
K3,003.00.
The directive further stated that the wage freeze is only
for public sector employees and does not apply to the
private sector.
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General Perceptions of The
Minimum Wage
The recent directive and decree by the
Head of State lacks clarity whether it
supersedes the Minimum wage
Statutory Instrument No. 45 of 2012 .
Further, there is lack of guidance from
the State on the matter whether the
Presidential decree has been ratified by
parliament and it is to be applied across
industry.
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What has informed this New Drive
for Minimum Wage in Zambia
The Patriotic Front ( PF) Government was
elected primarily and ostensibly on the
promissory position of putting more money in
peoples’ pockets through descent pay and
lower taxes.
The PF swept into power largely riding on the
vote of informal sector employees.
It is this constituency the PF is appealing to by
insisting on implementation of K3,003. 00
minimum wage. This consistent with the PF
Manifesto.
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Government Application of Minimum Wage
The Reports we have received indicate that
government has directed the Labour
Commissioner to decline recognition status of
Collective Agreements whose lowest gross pay
is below K3,003 as is obtaining in Government.
This implies that collective agreements for
categorized workers that are below K3,003.00
should be rejected.
This is the way of proceeding of the PF
government regarding Public Policy, i.e.
Unilateral policy decisions based on political
imperatives.
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Impact of The Minimum Wage on
Private Business and Investments
The following labour intensive industries
are going to be impacted namely;
 Agriculture –
 Negatively ( Largest employer of
none skilled labour)
 Construction – Negatively (limited by
Contractual Obligations and time
frame)
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Impact of The Minimum Wage on
Private Business and Investments

Manufacturing – Positively / Negatively
Higher wages may act as an incentive to workers,
spur productivity and stimulate demand.
 In the short-run it may increase production costs,
reduce profits and lead to job losses.
Mining – Positively / Negatively
 Higher wages may act as an incentive to workers,
spur productivity and stimulate demand.
 In the short-run it may increase production costs,
reduce profits and lead to job losses.
 Mining is Capital intensive hence impact may be
marginal.


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Impact of The Minimum Wage on Private
Business and Investments
It has been argued that this directive will
make Zambia uncompetitive by making the
country uncompetitive as an investment
destination.
Still others have pointed out that the minimum
wage may lead to structural unemployment
on account of labor being expensive and
therefore unaffordable.
The business Sector may thus respond by
cutting the labor force size to guarantee
returns on investments.
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Impact of The Minimum Wage on Private
Businesses and Investments
Still some sections of society consider this
approach as risky as it may lead to
inflationary trends which will in the
medium to long-term erode the
purchasing power of the revised minimum
wage.
In effect because the minimum wage is
not informed by productivity ratios but by
political imperatives we are actually killing
the milking cow, it is argued.
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JCTR Position on Presidential Directive
on Minimum Wage Vs the Cost of living
The revised minimum wage of K3,003.00
which is based on the Presidential directive is
a social protection mechanism of labor.
Therefore, the minimum wage ( By presidential
decree) must be viewed, over and above the
productivity perspective, with the notion of
social justice.
In a sense it guarantees labor being
remunerated justly.
There is no justice at all in paying workers
lower and uncompetitive wages.
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JCTR Position on Presidential Directive
on Minimum Wage Vs the Cost of living
Therefore the minimum wage is a
mechanism for enforcing a decent work
agenda in Zambia because of the huge
disparities in earnings in the country.
This can greatly improve the standard of
living in Zambia especially of lowly paid
workers who have little or no bargaining
power by ensuring that they access decent
working conditions under protection of
labour laws.
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JCTR Position on Presidential Directive
on Minimum Wage Vs the Cost of living
Additionally, the minimum wage has the
potential to leverage the country’s
aggregate demand which has the
potential to stimulate productivity,
employment and profit.
Minimum wage has the potential to
motivate workers and increase
productivity in return.
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JCTR Position on Presidential
Directive on Minimum Wage Vs the
Cost of living
Colleagues there is needy to protect labour in
Zambia on account of the fact that labour is
vulnerable to abuse, since as economies grow
income inequalities tend to increase.
Rapid economic growth generally generates
inequalities, hence the necessity of the
Minimum Wage.
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JCTR Position on Presidential Directive
on Minimum Wage Vs the Cost of living
JCTR gives the minimum wage a positive
interpretation . Potentially the minimum wage
can help build the middle class in Zambia.
It is the middle class who are the real drivers of
nation-states both economically and politically.
If we expand the middle class in Zambia we are
guaranteed sustained economic growth and a
mature political system.
Therefore by way of inverse insight, the
minimum wage seeks to expand the middle
class.
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JCTR Position on Presidential Directive
on Minimum Wage Vs the Cost of living
The government directive on
implementation of the K3,003.00
minimum wage should therefore not be
viewed negatively
In fact compared to the JCTR BNB the
revised minimum wage is below.
The latest April basic needs basket
(BNB) for Lusaka as measured by JCTR
indicates that a family of five needs
K3,650.01 to access a decent living .
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Way Forward
While we affirm the implementation of the
K3,003.00 Minimum wage for categorized
workers we appeal to government to embrace a
culture of dialogue and consultation when
making public policy decisions that have wider
implications. ( 2012 minimum wage was enacted
in a similar process).
This is because of our conviction that effective
and efficient public policy is often an output of a
broader and wider spectrum of insights.
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Way Forward
Government should also consider
reducing other costs of doing business
other than wages
Why is our fuel the most expensive in the
region?
 Why is electricity so expensive in Zambia?
 Why is cost of borrowing so high?

If these were addressed, minimum
wage might not be seen to be such a
threat to companies profitability
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Way Forward
The revised minimum wage must be
implemented gradually and consideration
must be sector based.
Zambia as a nation, we should address our
national productive capacities by diversifying
our economy.
Government MUST stick to procedure and
undertake stakeholder engagement in making
adjustments to public policy.
The revised minimum wage must be linked to
long term employment trends.
The revised minimum wage must be linked to
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the Macros to ascertain its sustainability.
Conclusion
Thanks for your
attention!
“May God Bless the
Worker and the just
employer”
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