Why isn’t your pay climbing faster?

Tuesday March 17 2020

With many people looking for jobs even with

With many people looking for jobs even with skills, there is a higher chance that these will end up being paid low wages because of a higher bargaining power by the employer. Shutter Image 

By Paul Murungi

John, an old friend recently called on me for an abrupt meeting. A lot had changed about him when we met. His gleaming eyes suggested he had good news. He handed me a hardly pressed paper.
It was a job appointment from one of the government agencies where he will be working on contract basis as a store keeper for six months. His earning is a gross income of Shs15,000 per day translating into Shs300,000 per month.
I inquired whether he had any other benefits to the job. There was none apart from the Social Fund; implying he had no transport and lunch benefits.

This was John’s first formal job since he graduated from university in 2018. He had tried his hand at several casual jobs without contracts, earning Shs150,000 per month.

Although he had faced unfair dismissal on some occasions, his pleas to the authorities went unheard.

His degree saved him. Some of the people he had worked with on the casual jobs earned a paltry Shs3,000 per day without transport or lunch. Worse still, the money was not paid in time.

According to a 2019 report by the World Bank titled, ‘Uganda: Jobs Strategy for Inclusive Growth,’ Uganda’s paid employment is not increasing fast to provide better job opportunities to Ugandan youth.

According to the report, access to paid employment increased between 1992 and 2016 relatively slowly: by 9 per cent over 24 years. This slow transition is typical of other low-income countries in Sub-Saharan Africa, where increases in employment in services largely represents self-employment in the informal sector, presenting a dilemma in wage payment even for the employed.

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Prof. Augustus Nuwagaba, an economist, explains why wages aren’t rising.

He says Uganda’s economy is characterised by a low wage economy generally compared with other East African neighbours such as Kenya.

Prof. Nuwagaba explains that Uganda’s economic performance is low with low production capacity, resulting into low export sector performance and low foreign exchange support on both foreign reserves and current accounts.

“You cannot expect to operate at a low GDP, with low production and expect a high wage. If you pay a high wage in a low performing economy, then expect inflationary pressures to pile,” he says.

With no law in place for the minimum wage, wage payment in Uganda has been left to the forces of demand and supply.

Dr Ramathan Ggoobi, an economist and a lecturer at Makerere University Business School, says the high unemployment rate a low skilled labour force in Uganda explains the low wages in the economy.

Quoting Scottish born economist Adam Smith’s law of wage differentials, Ggoobi explains that in societies with many people looking for jobs even with skills, there is a higher chance that these will end up being paid low wages because of a higher bargaining power by the employer.

“We have many unemployed people that even those with skills find it difficult to find jobs and this makes the employer have a high bargaining power than the employees. Therefore, they offer bad terms knowing that people don’t have alternative sources of employment where they to go.”
Because of high unemployment, workers don’t have trade unions, and working conditions have become poor.

Ggoobi notes that Uganda’s labour market is liberal in nature largely driven by demand and supply.

Therefore, that is why some sectors have low labour with a higher pay. He cites specialist physicians who are paid a high income because they are few and their demand is high.
He warns of dire consequences.

“We are overworking ourselves and we are reducing our life expectancy and yet at the same time, there are no savings for the old age,” he says.

Prof. Nuwagaba says there’s need to industrialise the country to create more jobs, while Dr Ggoobi says mechanisation of agriculture will help move the economy forward.

Education level and wages
Pursuing a Master’s degree programme or any post-graduate programme in Uganda costs anywhere from Shs6.6 m to Shs19.8m and lasts approximately two years, according to the survey by www.salaryexplorer.com, a platform that does salary and cost of living comparison for professionals in different countries.

Many people pursue higher education as a tactic to switch to a higher paying job.

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