A voice crying in the wilderness on the Minimum Wage

By Bruce Danckwerts

A few readers may remember a series of eight articles that I wrote for The Post in 2006 under the heading ‘Economic Suicide’.

For those of you who don’t remember them, may I introduce myself.

I am a white well-educated male, who grows tobacco (in Choma District of the Southern Province). As such, my opinions may be discounted by many as not worth listening to, but, I came to this country as a child in 1963 and have farmed here since 1976.

So I know something about what I shall be talking about. My opinions may invoke consternation, indignation and even outrage among many readers because I intend to be deliberately frank in these articles; not with the intention of upsetting readers, but with the desire to provoke a proper debate over the many issues that face this country. (A debate, which was sorely lacking during the campaign for the General Election of 2011.) If you disagree with me I hope you will take the trouble to express your opinion in these pages, not by calling me names, but by proposing an alternative point of view. It is only by engaging in meaningful debate that any society can arrive at appropriate solutions.

Readers may wonder what has provoked me to write after nearly four years of silence and they would be right if they guessed that it was the two Statutory Instruments that have been announced recently.

The two SIs are by no means the only issues that warranted discussion during the last four years, but I have been extremely busy trying to save my farming business from bankruptcy and have not been able to spare the time.

I still cannot; but the second of these Statutory instruments (on the Minimum Wage) is such a threat to the future of my business (and many others in Zambia), that time spent discussing it is no longer an option, but essential.

Any step taken by a government that may reduce poverty ought to be applauded and, in a country such as Zambia, where poverty is rife, one might think that raising the Minimum Wage should receive universal approval. But Poverty is a complex issue. As such, it requires complex solutions and raising the Minimum Wage is neither sophisticated enough, nor even appropriate enough to be part of the solution.

I believe the first point to understand about poverty is that it is relative. A person earning $2 a day in a country where nearly everyone earns $2 a day can be relatively happy. A person earning even ten times as much in a country such as Zambia (where some parts of society now get married in a stretch limo, with the bridesmaids sitting on the window sills of the doors, waving at the crowd, while a lackey in another vehicle blocks the traffic at traffic lights) will feel miserable and inadequate.

A person with no job at all will feel worse. Economists use the Gini Coefficient to measure this income disparity, and although it is crude (and therefore subject to ridicule) it is a useful starting point for any debate. Since 2005 the Gini Coefficient for Zambia has been rising rapidly; I am not sure where it stands now, but one does not have to be a social economist to see that it is getting worse and so clearly something needs to be done. (I should emphasize that this rapid rise in the Gini Coefficient (think of it as a rapid rise in relative poverty) began with the previous government and the blame cannot be laid at the door of the present one.)

Yet I contend that, in a country where unemployment is already unacceptably high, this sharp rise in the Minimum Wage is actually going to make the problem worse. Space does not permit me to expand on the Gini Coefficient (though I shall come back to it in a future article) so I shall just leave you with a few facts, and ask a few questions, so that readers may at least begin to question the wisdom of this Statutory Instrument.

(I will justify this statement in a future article) but Zambia needs to create 190,000 new jobs this year; and 200,000 next year. Indeed more and more EVERY year. The vast majority of school leavers who will be seeking those jobs have, through no fault of their own, received totally inadequate education. Many of them will therefore be seeking jobs in those sectors where this Minimum Wage is most relevant – domestic help and agriculture. So, Question One: Do you think a sharp increase in the Minimum Wage is going to make it easier for these 190,000 leavers to find a job?

I contend that this increase in the Minimum Wage will actually cause many existing jobs to be destroyed and replaced by machines. Question Two: If a worker (in a country such as ours, with very high unemployment) is replaced by a machine, whose economy benefits the most – ours, or the country that made the machine?

I further contend that those people who lose their jobs (and those people who are leaving school and seeking jobs) will have very limited alternatives. Selling air-time (or vegetables) on the street? Question Three: Will they be able to sell enough to earn even remotely as much as this Minimum Wage? Another alternative would be to grow Maize (with subsidized inputs from the Input Support Program) and then to sell the Maize (at subsidized prices to the FRA). This option means that the thwarted worker actually becomes a burden on the government budget. Question Four: Can we afford this?

Finally, if eliminating or even reducing Poverty were as simple as raising the Minimum Wage, poverty would have been eliminated soon after money was first invented. So Question Five: Why stop at K750,000 a month? Clearly, if a Minimum Wage is going to be part of the solution (and that is a big IF) the level at which it is set needs to be agreed by all stake-holders. This process arrived at a figure of  K337,500 for a casual worker in Agriculture after nearly six months of debate under the intense pressure of the PF promise of a million kwacha a month. A process that the Minister was aware of (as he had only recently signed this agreement into law). Question Six: Why should a democratic government override a consultative and inclusive process with a SI that is reminiscent of the dictates of communism?

I shall return to this subject next week.

To contact me direct use: [email protected]

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