Will minimum wage framework protect workers in Uganda?
Posted Monday, March 21 2016 at 02:00
Minimum wage will hurt small businesses more than larger ones and in the long-term result in higher long-term unemployment rate. If the law works well, it should minimise the loss of jobs while preserving competitiveness.
The issue of determining a minimum wage in Uganda based on the different sectors of the economy has been debated for quite a while. Recently, it was reported that Workers’ MP Arinaitwe Rwakajara revived the debate by submitting a Private Member’s Minimum Wages Bill, 2015 to Parliament. I am interested in the private wage determination mechanism where the parties agree contractually to a minimum wage that should not be lower than the minimum wage as determined by a government sector.
I am not an economist or a statesman, but I think the agitators for this minimum wage law for Uganda have not balanced their equations well. They are looking at the State as having the primary duty to protect its working citizens from unfair exploitation. But the very people they are trying to protect may, in fact, suffer higher unemployment rates created by a minimum wage law. Uganda does not have a conducive economic environment for this law to be effective. We need a stable economy.
You cannot have a minimum wage and have a proper service delivery when the State cannot even provide a reliable power and water supply. An investor has interest in making profit. In Uganda, we have erratic power and water supply. Power is not stable; it can be dim or with high voltage that sometimes damage equipment. The legislation will affect workers differently – those whose previous wages were closest to the minimum will enjoy higher wages. Those with the lowest pre-legislation wage rates will be unable to work and will be pushed into the ranks of unemployed or out of labour force. If companies are forced to increase wages, they can pass on the increase in wages to consumers in the form of higher prices
The economy will be adversely affected due to small businesses not being able to keep up with the need to subsequently increase all workers’ wages. Minimum wage will hurt small businesses more than larger ones and in the long-term result in higher long-term unemployment rate. If the law works well, it should minimise the loss of jobs while preserving competitiveness.
I hope some research has been done by the proponents of this law. More research is probably needed on the Ugandan economy before pushing for this minimum wage. These should include, among others, real and nominal gross domestic product, inflation, labour supply and demand, wage levels, employment terms, productivity growth, labour costs, business operation costs, economic freedom rankings and standard of living and the prevailing average wage rates. Minimum wage law works where there is a stable economy. We should not just go into it because other countries are doing it.
Mr Edward Balaba also mentioned in a recent article that the argument against minimum wage is that it may scare away investors. I believe our investors are very comfortable. Where else do you find foreign investors given free land and tax grace period? However, allow me to comment on labour exploitation by some investors in Uganda at the expense of our faith. We need protection from the State from this exploitation. Some foreign investors do not respect our Christian values. They take advantage of the high unemployment rates to make people work on Sundays or other days of Christian prayer obligation.
The teaching of religion in Uganda is already marginalised. Schools are in the hands of the State where religious teaching is minimum. It is in the Churches that there might be some hope that Christians would go to listen to the Word of God. It is in the Church that war on corruption, which has eaten up the fabrics of our society, could be waged.
Dr Okoth is a concerned citizen. firstname.lastname@example.org