Labour economics and national development

There is obviously a philosophical and religious belief that those who are willing to work should earn the right wages and hopefully live above the poverty line. The reality, however, is that at its current level the minimum wage has failed to lift the average family out of poverty. Even worse is the imprudent manner in which the last government dipped its hands into workers’ pension funds.  At the least, both employers and employees agree on this.

The establishment by law of the daily minimum wage is regarded favourably by almost all members of society – especially employers and employees. Many see the minimum wage a vehicle for helping those at the lower end of income to raise their wage rates, and thereby raise income and general conditions of living.

Looking back at the plight of workers in both the formal and informal sectors, a couple of old economics questions remain relevant today. What are the economics effects of the minimum wage? Is it a good means of improving the condition of workers? Does the minimum wage improve the distribution of income and wealth?  Perhaps these were the questions on the minds of organised labour when they embarked on a peaceful procession as part of the 2019 May Day commemoration.  Thus, the theme of this year’s commemoration – ‘Sustainable Pensions for All’ – is apt.

Fundamentals of labour

Economics was one of my best subjects at both O’ level and A’ level. One of the basic topics in economics was ‘the factors of production’, in which labour was said to be the most important factor of production – arguably, though. In fact, my O’ Level economics teacher, Mr. Mike Abowen (alias Bojador), impressed on his students that ‘labour’ is very central to economic development. The argument is that if an investor has the other factors of production (land, capital and transportation) without labour, no amount of production can take place – at least in terms of return on investments.

In classical economics, a lot was said and continues be said that man (gender inclusive) is both a consumer and a producer. Labour is an important factor not only in production but also in all other economic activities. Classical economists like Ricardo and Karl Marx gave prime place to labour as the main source of production.  Some of the rules of labour they espoused are highlighted below:

 

  • Basis of Consumption

Labour is a human factor and the main source of consumption. Utility is created (Production) for the satisfaction of his needs. Lord Keynes was of the view that a stimulus to investment comes via increase in consumption. When investment increases, income increases, which leads to increase in consumption. The basis of this consumption is labour.

  • Basis of Production

Producers produce the commodities when they are assured by consumers that their products will be consumed. Thus, labour is the basis or the compulsory factor of production. Labour is a mobile factor and brings into use the other factors of production like land and capital.

  • Basis of Exchange

Labour is a basis of not only consumption and production, but also serves as a basis of exchange. A man needs so many commodities to fulfil his daily needs. Since he cannot produce all of them, he has to satisfy his needs by exchanging his surplus production with others. So, labour serves as a basis of exchange.

  • Basis of Distribution

National income is the result of the contribution of all the factors of production. So, labour becomes the basis of this distribution of national income among all factors. The contribution of each factor depends on its marginal productivity. The assumption, therefore, is that if labour is efficient, its share in national income will go up.

  • Basis of Economic Growth

More importantly, labour serves as the spinal cord of a nation. On this basis, an efficient labour force makes proper use of the scarce natural resources of the country. A dincere, dedicated, devoted, hardworking and intelligent labour force helps the country to march on the path of development.

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The above rules espoused decades ago are still relevant for us in the developing world, as our economies are still struggling to get the fundamentals right. Year after year, government (which is the largest employer in Ghana) and organised labour confront each with the issue of low wages and low productivity. These, again, were highlighted in the speeches of both President Dankwa Akufo-Addo and General Secretary of the Trades Union Congress, Dr. Yaw Baah.

President Akufo-Addo admitted that no robust economy can be built without a sustainable pension scheme for all workers.  He also admitted that the lives of many Ghanaian workers are marked by poverty. “Too many people either have no pensions at all or have inadequate pensions to match the needs of old age.”

In his 2017 May Day address (the first encounter with workers after assuming office), President Akufo-Addo complained about low productivity in Ghana. In his view, any attempt to improve the working conditions of workers must be accompanied by a commensurate improvement in productivity. Anything less than that would inevitably lead to macroeconomic instability, according to the President.

“I do not suggest that current pay levels are satisfactory in all sectors of our economy, but I am saying that productivity levels and work attitudes are unsatisfactory in all levels of the economy.  Mr. Secretary General, while the government has work to do, we have to accept that the workforce must accept its responsibility and contribute its part,” the president pointed out in 2017.

Labour laws

On its part, organised labour has been unhappy with the current state of labour laws in Ghana.  In his address, Dr. Baah urged government to review the ‘colonial’ labour laws governing employment in the country. According to Dr. Baah, the current labour laws are outdated and cannot address the challenges facing contemporary workers. He disclosed that the TUC has made its case known to the National Tripartite Committee for a review of the labour laws, especially the National Labour Act to protect the interest of the workers of Ghana.

Dr. Baah also disclosed that there are many flaws in the current pension scheme for workers, which need to be addressed. “We trust that government will provide necessary support to the Ministry of Employment and Labour Relations, the Ministry of Justice and Attorney-Generals’ Department, and Parliament to facilitate the review process.”

In response, President Akufo-Addo admitted that there are unresolved issues with the Social Security and National Insurance Trust (SSNIT) and the National Pension Regulatory Authority (NPRA).

“I have asked the Minister for Employment and Labour Relations to liaise with SSNIT and NPRA to bring finality to all outstanding issues in the next three (3) months. In much the same way that we should build trust between workers and the new private pension companies, it is equally important that there is trust between workers and the state-established SSNIT,” he said.

Ghana beyond aid

Without doubt, productivity is key to weaning Ghana from overdependence on aid. President Akufo-Addo has indicated since 2017 that what Ghana needs is investment, not conditional aid. In his 2019 speech, he again underscored the significance of ‘Ghana beyond aid’ to our envisioned future – “A Ghana which is self-sufficient and prosperous, governed according to the rule of law, respect for human rights and individual liberties, and the principles of democratic accountability.”

In fact, the theme for 2017 May Day – ‘Ghana 60 Years On: Mobilising for Future Through the Creation of Decent Jobs’ – resonates with the agenda for ‘Ghana beyond aid’.   In a recent speech, the president once again highlighted the importance of actualising the economic transformation agenda through the various job creation initiatives – such as ‘Planting for Food and Jobs’, ‘One District, One Factory’, ‘Industrial Stimulus Package’, ‘Planting for Export and Rural Development’ – and private sector support schemes, which should soon start reducing unemployment and providing opportunities for citizens to work, earn higher incomes and contribute to their pensions.

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The president challenged Ghanaians to take up the challenge of building a modern, developed, progressive nation, and freeing ourselves from the mindset of dependence, aid, charity and handouts.                                 “We can, together, build a new Ghanaian civilisation, wherein there is fair opportunity for all in education and health; where hard work, enterprise and creativity are rewarded; where there is an abundance of decent jobs with good pay; where there is a dignified retirement for the elderly; and where there is a social safety net for the vulnerable and disadvantaged.”

Charter

To demonstrate his commitment to the ‘Ghana beyond aid’ agenda, thepPresident marked 2019 May Day with the launch of a charter to guide the Ghana Beyond Aid campaign. The charter is expected to present the meaning, purpose and implementation milestones for Ghana to reach the goal of developing through using its abundant natural resources.

However, attracting investment to boost ‘Ghana beyond aid’ requires a well-equipped and competent workforce. For our economy to be competitive, we need a human capital that can stand up to their competitors across the world.

In fact, government needs to take urgent steps to rectify the serious neglect of skills training by modernising and strengthening Technical Vocational Education and Training (TVET) institutions. There is also need to formalise all forms of apprenticeships and master craftsmanship, and to promote entrepreneurship among the youth.

These interventions will help government to resolve the age-old problem of skills mismatch between the majority of school-leavers and industry requirements. The way forward in attaining ‘Ghana beyond aid’ is to tailor the curriculum of skills development and job learning-based institutions to current industrial needs at the enterprise level and the job market.

In fact, in 2018 the president emphasised the TVET sector’s importance in equipping youth for the job market. Since then, government has announced funding for 21 state-of-the-art TVET centres. Also, Parliamentary approval had been given for all 34 NVTI centres to be upgraded and retooled to make Ghana an acclaimed centre for TVET education.

Child labour

As we continue to celebrate International Labour Day, we cannot continue to ignore the canker of child labour.  The prevalence of child labour in some key sectors of the economy is a worrying tradition that needs attention from all stakeholders. As early as the first quarter of 2019, Ghana came under international scrutiny due to the prevalence of children in the fishing and mining industries.

Without doubt, the child labour phenomenon is a blot on our collective conscience as a country. In fact, the president is on record as urging Ghanaians to stop hiding under so-called cultural practices to continue perpetrating child labour. “Children are children; they are our most important asset and deserve to be protected from being exploited in the labour field”, he noted.

It is worth noting that some global agencies, such as those in the cocoa sector, are determined to institute measures which could lead to the loss of markets for our goods and the loss of jobs.

The onus is not only on government and its agencies to combat child labour, but also on other members of the Tripartite Committee (Organised Labour and private sector employers) to ensure that children are never recruited to work under hazardous conditions.

“It is important to keep reminding ourselves that child labour and child trafficking are not only crimes, but also now pose veritable threats to our national security. We all have a responsibility to protect our children from the criminality of child labour,” the President said in 2017 – and I couldn’t agree more with him.

Reference

Sharp, A.M., Register, C.A.  and Grimes, P. W. (2002) Economics of Social Issues. MCGraw-Hill Higher Education. Boston.

May Day Speeches of President Akufo-Addo (2017, 2018, 2019)

(***The writer is a Development and Communications Management Specialist, and a Social Justice Advocate.  All views expressed in this article are my personal views and do not represent those of any organization(s). (Email: safoamos@gmail.com)

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