July 27, 2016

Minimum wage necessary to rectify issues of social protection and poverty

Arguments for and against minimum wage in Uganda are intriguing, forcing one to wonder if we actually need the minimum wage or if we should simply implement the already existing legal framework efficiently bridge the gaps brought out by lack of a standard minimum wage.
To understand what the proposers of minimum wage are all about, we have to break down the ingredients and meaning of minimum wage for easy absorption to all audiences.

Minimum wage can be defined as the lowest remuneration that employers can pay their workers. This is also a ceiling of which employees may not sell their labour to employers usually as a protection measure from exploitation. One can further define this as a measure of fair returns to the labour used all to cater for the welfare of workers. The first Minimum Wages Board in Uganda was set up in 1935, and the first Minimum Wage Order was implemented in 1950, with the last minimum wage adjustment being in 1984 at Shs6,000 per month. Imagine what Shs6,000 can do in this age and era!
As it stands now, remuneration for labour in most companies for most employers is determined by market forces of demand and supply. Whichever way you look at it, this is a nursery bed for exploitation of workers since no one regulates the employers on how low they can go or not go in setting up wages for their workers.

Uganda as a member of the International Labour Organisation is mandated to enforce the conventions as a requirement and hence must have a minimum wage. The state in itself has a duty to ensure that her citizens’ welfare is paramount in all spheres upholding their fundamental rights as supported by the Constitution of Uganda. However, with the latest attempt to amend, repeal and reform minimum wage legislation in Uganda, there are skeptics arguing that labour market interventions that raise wages artificially will ration jobs and displace low skilled workers increasing the level of unemployment.
They further argue that setting up a minimum wage will reduce investment and growth in the economy, increase cost of labour and running of businesses and some countries like Kenya, which have a minimum wage are not so different from Uganda in terms of their Gross Domestic Product, which when they, hold water looked at on face value. But again, what is the plight of Ugandans in this picture?

Putting emotions aside, minimum wage in Uganda is not only a necessity but a means to rectify issues of social protection and poverty in the long run.
The first deduction from the above arguments is that Uganda currently has high percentage of unemployment of over 80 per cent, which means that minimum wage is not the cause of unemployment at the moment. Talking about affecting investment, a minimum wage increases individual worker and household income, which in turn raises consumption, savings and investment. This further propels economic growth, employment and expansion of opportunities and choice call it the multiplier effect. Therefore, increased consumption expenditures increase demand for goods and services which stimulates investment, innovations and productivity in an economy.

The spirit behind minimum wage is to set a guideline to prevent payment of a wage that is below the “natural wage” or “subsistence wage.” To protect workers’ livelihoods and our economies at large. Failure to set minimum wage guidelines exposes our people to potential exploitation by unscrupulous employers/ investors and undermines economic advancement. Minimum wage should be considered for the multiplier effect opportunities it presents into an economy. We should aim to create an economy whose central purpose is to uplift, dignify and empower the workers on whose shoulders livelihoods of many other Ugandans depend.Uganda has initiated steps towards enacting the minimum wage law to provide for a legislation that will guide the determination of a minimum wage based on the different sectors of the economy.

This is a step in the right direction as minimum wage can be a stimulus for breaking the fangs of household poverty and economic advancement of a nation.