Instituting A Minimum Wage is The Same As Tasking government to Regulate Rent -Both of Which Constitute Direct Interference In The Private
Sector
By Fred Daka Kamwada-kamwada
Since the Labor Day
which is usually celebrated around the world on every first of the month of
May, there has been a lot of agitation for the institution of a minimum wage.
Last week Hon Mwesigwa Rukutana attended a conference organized
by the international labor organization (ILO) and was tasked to explain when his
government was going to institute the minimum wage.
At that time he dillydallied and later revealed that by June
next year, 2015, the issue of minimum wage will be solved. He also said that a
board had been instituted to look at the issue.
But when you look into the details of the matter, you
realize that most of the agitators for the minimum wage are motivated by the
fact that it (the minimum wage) will improve the status of the worker.
I have however come to realize that Most of the arguments on
the social media and other forums around the country are mostly basing their
argument on the ideal rather than the reality.
Yes, it’s true that Uganda first instituted the minimum wage
in 1964. From that time we continued
having it set basing on inflation and dynamics related to cost of living.
While many are making that argument of the previous
government putting the minimum wage in place, they forget that the
circumstances of the time were different.
We have shifted from a nationalized atmosphere where it
employed almost the entire workforce. Today we champion a private sector led
economy. Therefore determining how much should be paid within the private sector
would tantamount to interference in the sector that is naturally regulated by
the market forces.
For instance at that time In the 60s when the minimum wage
was set , the government was the sole
job provider within the public sector.
Since government was the sole employer, it was easy to
institute a minimum wage.
But today government has withdrawn from business related
enterprises. Out of 34 million Ugandans, government is only taking less than
0.3m Ugandans mostly in the civil service.
Yet, from the statistics from the ministry of labor show
that the Ugandan labor force is around 14 million employed people.
This means that the effect of government in determining the
wages of its citizens has been minimized or diminished altogether since it
employs few people.
The emergence of a very powerful private sector has meant
that government has little or no influence on how much the worker is paid in
the private sector.
Even if government went out of its way to institute the
minimum wage as many are agitating, there are no guarantees that it will have
the desired effect.
HOW MUCH?
Because first of all there are different opinions about how
much constitutes a minimum wage.
Even if you calculate it basing on inflation and cost of living,
some people will still criticize it for not being enough.
It’s therefore obvious that we cannot have a concrete
consensus on what should constitute a minimum wage because the economy keeps shifting
all the time.
For instance, a casual calculation shows that if someone is
sleeping in the cheapest accommodation which goes for 70,000 shillings, and
eats 5,000 shillings per day ( for lunch and super), a basic transport allowance of 2,000 per day without going into the other needs , that
alone will take the minimum wage to 280,000 shillings per month.
Now how many employers are going to pay this amount of money
as a basic start for the lowest paid worker?
But most of all, the logical question is how many people are
ready to pay their maid 280,000 shillings per month?
In fact if you
institute the minimum wage, it might instead have an adverse effect of job losses
on the job market.
It means that the employer will employ few people thus leading
to the unemployment of so many people who are willing to work for less.
This will certainly lead to adverse joblessness.
Yet in a freewheeling market within the private sector that
is dictated by market forces, the employer can be in position to employ two
people for the fee that you would regard as minimum wage (0.28m).
And it’s crucial to note the worker will also willingly work
for lets say150, 000 shillings paving way for another job opportunity for
someone else if it’s done in a laisez fair atmosphere where the worker personally
agrees with the employer.
EXPLOITATION
Besides the reality of joblessness associated with the
minimum wage, once we have it in place, there is a possibility that the
employer will even exploit the worker more than ever.
The exploitation will happen because the worker will be
tasked to do jobs which would have done by more than two or more people.
This will be done by the employer in a bid to recover a
value for money from the worker.
Another issue which has been taken out of context is the
politicization of an issue which is entirely not political at all.
It’s very unrealistic to expect government to determine how
much the employer should pay their workers when market forces can deliver the
living wage where the worker agrees to offer labor at a given wage.
When you say that the government should determine the wage,
it means you are inviting government to also determine how much the landlord’s
should charge for the rent of their premises.
Having made all those arguments, I strongly believe that
it’s not conducive for government to institute a minimum wage in an economy
that is private sector-led.
We should all agree that although Ugandans are not paid
enough, some of them are earning a living wage. Besides every worker has the
right to negotiate his wages with his employers and also has the right to withdraw
labor if it’s not satisfying his or her needs.
I rest my case with high possibility of being completely
misunderstood.
Fred Daka Kamwada-kamwada is a journalist, social critical and
political commentator. You can get him on kamwadafred@yahoomil.com or
0782480480
