Thursday May 1 2014

Instead of minimum wage, let’s push for fair wages

By Benard Mujuni

As Uganda joins the rest of the world to mark International Labour Day today, it is vital to reflect on some key economic fundamentals and realities vis-a-vis the expectations from the largely youthful population.

According to the Urban Labour Force survey, 2010 by UBOS, Uganda’s unemployment rate in urban areas is three times higher than rural areas. The highest unemployment rate of 11 per cent was found in Kampala while in western and eastern regions, the unemployment rate was just 2 per cent. The low rates of unemployment in rural areas may be explained by higher percentage of people engaged as casual labourers.

Underemployment is visibly manifested in the informal sector where close to four million people are self-employed in poor working conditions.
According to Uganda National Household survey of 20/11, Uganda’s dependency ratio is 1.17. This ratio is expected to rise under the current population growth trends of 3.3 per cent. The high population growth, combined with a high dependency ratio, contributes to the low savings rate of 10 per cent. Low savings lead to lower capital formation and hence lower employment creation.

The labour force remains predominantly rural, with a proportion of 81 per cent per cent of the employed persons located in rural areas and informal sector. This population pressure results into scenarios where job creation is overtaken by population growth, hence perennial unemployment debacle.

The high growth rate of the population of 3.3 per cent per annum and the subsequent increase in the labour force estimated at 13.4 million (UBOS, 2009/10), has aggravated unemployment and underemployment.

Uganda’s total labour force has continued to grow from 7.6m in 1992 to 9.6m in 1999/2000, 9.8m in 2002/02, 10.5m in 2005/06 as well as 13.4m in 2009/10 to currently, 14m, (UNHS, 2012/2013: 16); reflecting an annual growth rate of 3.5 per cent, between 1992-2009. Among these, 77.4 per cent are males and 85.4 per cent are females (UNHS, 2012/2013: 64). In the same vein, out of Kenya’s total labour force of 13.5m, 12.1m are employed, while 1.4m is not employed. Whereas Kenya has a big number of working poor, there is existence of minimum wage hence a threshold below which these people will not fall. For Uganda, it is a free dive and fall.

Uganda’s minimum wage was last set in 1984 at Shs6,000. This basis creates the largest pool of the working poor who won’t stimulate the economy into a consumerism one as envisioned in Vision 2040.

In the whole of the East African region, the informal sector, which has the largest numbers of working poor, employs more than the formal sector. Yet, this is where the challenge lies. Uganda’s labour legal regime, especially in respect to the National Social Security Fund Act of 1985 and the Pensions Act do not provide for a range of social protection and retirement benefits.

The Pensions Act caters for only government workers’ retirement benefits as a non-contributory scheme. In the same respect, the NSSF Act only caters for its 400,000 contributors as a contributory scheme, which leaves out more than 10 million workers. This social protection gap has engineered pension reforms that intend to open up the sector.

The entire strategy in eliminating the working poor as a larger section of working population must focus on the following: deepening appreciation of the role of small and micro enterprises in national development; promoting Uganda’s cultural industrial aspects; effective intra and inter workplace exchanges for young workers; guide, harmonise, complement and promote the decent employment agenda as developed by the ministry of Labour, guide the private sector on fair wages as opposed to minimum wages, harness the creative industry through deliberate incentives and large scale infrastructure development, development of hands-on ICT hubs, institutions and enterprises.

Mr Mujuni works with the Ministry of Gender, Labour and Social Development.