Good pay for public servants will help boost our economy

Tuesday July 1 2014

By Morrison Rwakakamba

While delivering the Budget speech for Financial Year 2014/15, the Minister of Finance Planning and Economic Development, Maria Kiwanuka, announced that Shs450 billion was allocated to enhance the salary of all public servants. This includes provisions for the teachers’ pay increase in line with government’s agreement with the Uganda National Teachers’ Union. The salary of the lowest paid teacher will, therefore, increase by between 15 per cent and 25 per cent. Other public servants’ salaries will also be adjusted within the available resources. This is good for the economy- going forward.
You know, there is a tendency to think that improved salaries/wages for public and private workers constrain economic performance of countries. Those who argue against higher pay for workers in both public and private sectors look at salaries through the prism of burdensome recurrent cost stream that should be at minimal if farms and firms are to be efficient. Yet, better pay has potential to expand fortunes of companies and governments through its ability to stimulate productivity of the workforce. Of course the other credible argument is that improved salaries are only desirable if they are matched by improvement in performance of the workforce. But there is more to this dominant narrative.
New York University economics Professor, William Easterly argues that higher wages for workers drive aggregate demand and in turn grows the economy. I agree with him- because demand is the oil that lubricates the engine of any economy. When middle-class or working class families can no longer afford to buy the goods and services that businesses are selling, it drags down the entire economy from top to bottom.
Incentivising workforce through high wages/salaries requires a delicate balance based on rationalisation, if we are to stimulate morale and productivity of workers in the public sector. It is for example common knowledge that the wage structure of civil service in Uganda is confusing. There are some officials who even earn salaries or what some call ‘take-home” that are higher than what the President and Prime Minster earn.
Of course some of these distortions are explained under things like allowances, mileage, facilitation, severance, etc. But these distortions are not democratic. For example, teachers and nurses don’t have these allowances. Some people are asking legitimate questions like – Why are Members of Parliament earning 10 times more than a teacher yet most MPs have the same qualifications, or rather some teachers have even better qualifications since the minimum qualification for an MP is the equivalent of Advanced Certificate of Education? This question should be resolved by a wage restructured regime that looks at ingredients like- qualifications, specialty and expertise, uniqueness of labour, labour demand, risk, working conditions, expected results, etc. This kind of structure breeds equity and balance in the economy.
Allowances should also be rationalised. For example, data visualisation by Advocates Coalition for Development and Environment shows that Parliamentary Commission expenditure is shooting through the roof. From Shs82b in the 2008/9 financial year, it hit Shs280b in the 2010/11 financial year and continues to grow. Many MPs are spending tax payers’ money on foreign trips without clearly showing benefits of their trips to their constituents. Whereas some MPs trips or other public officials are justified, travels should be streamlined to national interest to avert bloating public administration expenditure and balance our wage bill.
Mr Rwakakamba is the chief executive officer – Agency for Transformation.