Govt employees’ calls for salary review justified

06 Apr, 2018 - 07:04 0 Views
Govt employees’ calls for salary review justified

eBusiness Weekly

Taurai Togarepi
Since the adoption of the multi-currency system, salaries and wages have been static in most companies. There are cases though where companies realigned salaries to productivity in a bid to remain viable.

When the economy started to show signs of distress around 2013, several companies reviewed salaries and wages downwards to contain costs. These strategies to a large extent helped many businesses to remain afloat.

There has been talk of internal devaluation by many industrialists in the past and Government recently reduced taxes on fuel as they believe it is one of the major cost drivers in the economy. These calls were mainly targeted at reducing salaries.

However, indiscipline on the part of Government in recent years created a huge gap between electronic money balances and physical cash in the economy leading to the current perennial cash shortages, resurgence in inflationary pressures and the emergence of black market being experienced in the economy.

My point is, the last few weeks have seen a lot of calls by some Government employees (doctors, teachers etc.) for a salary review/adjustment as their purchasing power has been eroded by a wave of price increases.

These calls are justified, a quick look at economic conditions one year ago will tell you that the purchasing power of most employees especially those that rely on a fixed salary or wage has been eroded making them poorer than they were let’s say a year or two ago.

The emergence of the parallel market due to shortages of hard currency in the formal system has resulted in most businesses increasing their prices by at least 40-50 percent to cater for the premium they pay to source foreign currency.

This increase is being passed on to consumers whose salaries have remained static for over the same period.

Some may argue that the cost of labour is higher in Zimbabwe compared to most countries in the region. This may sound true if one does not take into account the standard of living in those countries. In some instances yes, but with the current increase in prices, the general public in Zimbabwe are suffering as most people now live on a dollar per day.

Those that had borrowed money from banks and micro-finance institutions risk losing their property as their income is squeezed due to an increase in the cost of living without a corresponding rise in income.

With inflation expected to reach 7 percent by year-end according to forecasts by the International Monetary Fund (IMF), most of the working class will be sent into poverty as their income is being eroded on a daily basis.

This should be a concern for policy makers as this has a huge impact on effective demand in the economy.

Normally when this happens people will resort to buying the most basic commodities and in some cases fail to even afford the most basic foodstuffs.

Though it’s not wise to start increasing wages and salaries under the current environment where Government is running a huge budget deficit and at least 80 percent is going towards recurrent expenditure.

The Government is faced with a serious challenge as it has to push for economic reforms which are critical to remedy some of the highlighted challenges.

There is need for sincerity on the part of the current administration to address to plight of its workers and the general populace in the shortest possible time.

So far, the President has been consistent in addressing most of the challenges being experienced in the economy especially on opening the economy to potential investors.

Notwithstanding these positive developments, most investors are waiting for the outcome of the election and whether they will held in a free and fair environment.

The current administration has the chance to win the hearts of most Zimbabweans by delivering them into Canaan which they had waited patiently for over 37 years.

 Taurai Togarepi is an Economist and writes in his capacity. He may be contacted on [email protected] or 0712 832 182.

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