Monday February 23 2015

Instituting minimum wage will protect workers from exploitation

By Stuart Oramire

In 2013, Workers’ Member of Parliament Arinaitwe Rwakajara and two other MPs tabled a motion seeking leave of Parliament to draft a Private Member’s Bill on the minimum wage in Uganda. This would form the basis for the proposed Minimum Wages Bill 2011.

If eventually passed into law, it will introduce a minimum hourly amount that employers will have to pay their workers. Uganda, currently the only country in East Africa that does not have a minimum wage, last set a minimum wage of Shs6, 000 per month in 1984.

However, the initial interest in this important Bill seems to have fizzled out and the Bill is steadily picking up dust on the shelves of Parliament.

Perhaps, Parliament’s reluctance to pass this law is attributable to the negative innuendos and interferences from the Executive arm of the government.

For example, last year during the Labour Day celebrations, President Museveni assured minimum wage crusaders that government would not rush into setting a minimum wage saying the focus was on attracting investors to create more job opportunities.

According to the Federation of Uganda Employers (FUE), the proposed minimum wage would make Ugandan exports uncompetitive, reduce investments and put jobs at risk (Devereux 2005). This would thus translate into negative growth.

Firstly, Uganda’s persistent failure to institute a minimum wage contravenes International Labour Organisation (ILO) Minimum Wage Fixing Machinery Convention, 1928 (No 26) which Uganda ratified in 1967.

Article 1 of this convention states that “each member of the ILO which ratifies this convention undertakes to create or maintain machinery whereby minimum rates of wages can be fixed for workers employed in certain trades or parts of trades (and in particular, in home working trades) in which no arrangement exists for the effective regulation of wages by collective agreement or otherwise and wages are exceptionally low.”

President Museveni and a section of his aides have dismissed the proponents of the minimum wage as human rights enthusiasts who view the minimum wage through the prism of human rights hence ignoring the economic reality of this country.

Their argument here is that the minimum wage stifles investment and economic growth. This argument misses two important points- the essence of any economic growth is to enhance the enjoyment of economic rights as provided for in Article 40 of the Constitution, and this is a part of human rights.

Secondly, human rights constitute economic, social and cultural rights that are indivisible, mutually inter-related and interdependent. Hence any form of employment that does not aid the social and economic transformation of workers is futile and should not be protected. For example, according to the ILO, in 2005, slightly more than 50 per cent of waged and salaried workers in Uganda were poor with 30 per cent living in extreme poverty (ILO, 2013).

Similarly, the 2009/10 labour market survey indicates that of the 24.5 per cent of the population (7.5 million persons) living below the poverty line, about 2.7 million (21 per cent) are classified as the “working poor”. Yet according to the World Investment Report 2013, Uganda received the most Foreign Direct Investment (FDI) in 2012.

Is it possible that multitude numbers of foreign investors are flocking into Uganda because of its fertile grounds of exploitation?

Is Uganda’s foreign investment competitiveness solely tagged to the absence of the minimum wage? Invariably, is the President’s fear that instituting a minimum wage in Uganda will scare away investors not far-fetched considering that it is only Uganda that has no meaningful minimum wage across the region?

Perhaps the most controversial argument of the minimum wage debate is that minimum wage hurts growth by lowering investment and making exports expensive. Really? In fact evidence by the ILO and studies from countries implementing much higher levels of minimum wages indicate that rather than stifle growth, minimum wage stimulates consumption by guaranteeing and increasing incomes of low-income earners which stimulates local economies leading to positive impacts on growth. Consumer spending is key for stabilising the economy and allowing local businesses to expand and create jobs.

Indeed, Uganda’s National Development Plan (NDP) 2009/10-2014/15 identifies instituting a minimum wage as a critical step to increasing access to gainful employment which in turn contributes to the reduction in poverty, tackling inequality and stimulating growth through increasing people’s incomes.

In a private sector-led economy, the government’s main role is to put in place a regulatory mechanism that mitigates the predatory aspects of unfettered capitalism through effective policy and legal framework. For example, a minimum wage set above the poverty line and indexed to inflation can help mitigate workers’ exploitation and have an effect on poverty and vulnerability.

Mr Oramire is a child rights advocate working with Centre for Children’s Rights.