Handle Adjustments to Minimum Wages with Care
The directive by President Michael Sata for the Ministry of Labor to adjust the minimum wage will have a significant impact on the standard of living for the majority of Zambian workers. The cost of living in Zambia has, since the last adjustment of the minimum wage, risen by over 200 percent, thereby making it difficult for over 100,000 laborers and casual workers to sustain a decent livelihood.
However, in making this adjustment, the Government will need to carry out wider consultations and research in order to determine a minimum wage that does not negatively shock the country’s economic system. A sudden and unrealistic adjustment in salaries for a large number of people has the potential of increasing inflation. High inflation will be another way of taxing the same people we are offering the relief.
In addition, wages that do not reflect high levels of productivity generally lead to stagnation in corporate growth and investment. In the long run, employers will respond by adjusting head counts which will eventually lead to high levels of unemployment.
It is for this reason consultations on the minimum wage should not be limited to unions, employers and government but should allow monetary authorities to have a big say so that any possible repercussions are fully managed before any such adjustments are made. The best option for now is to get those companies failing to comply with the existing minimum wage to do so. Logically, if they are failing to meet the barest minimum wage, they will have challenges meeting the adjusted one.
Secondly, Zambia can learn from the South African model where the minimum wage adjustment was made over a period of time to allow for proper macro-economic re-alignment with an increase in productivity. In the Zambian situation, it would be advisable to adjust the minimum wage over a three year period.