Education and Management with Nii Armah ADDY: Minimum wage increase vrs Cost of living

Nii Armah Addy is an Education and Management expert

…of labour, politics and the reality

Wage increase is simply how much employees earn at a given period. It is a standard practice across the world that due to the increasing cost of living, annually employers increase the wage rate of employees to mitigate the increasing cost of living. It must be said poignantly that cost of living differ from country to country though increase wage is a constant feature in best labour practice.

Cost of living can be said to be the price of goods and services within a given period. Usually in determining the cost of living, only necessities at an average cost of living are considered. Luxury goods and services are not considered in determining the cost of living. Therefore, in assessing the minimum wage increase vrs. cost of living, one considers how much is earned over how much is spent on necessities of life like food, transportation, accommodation, medicine, clothing, utilities, etc.

Ideally, an increase in wage must lessen the burden on employee’s cost of living but that cannot be said of the recent spike in prices of goods and services in Ghana. The enduring hardship permeates all aspects of basic living expenses to the detriment of labour earnings.

The cost of living in Ghana is increasingly high to the extent that making a square meal a day is luxury rather that a necessity. Standard of living has fallen so low that minimum wage earners can hardly afford average goods be it locally made or imported.

To the extent that governments in developing countries are the biggest spenders in terms of labour engagement, the standard of living in developing countries largely depends on the wage rate paid by government. Therefore if government wage rate is good it will reflect in the standard of living of the people.

  1. The state of the labour market in Ghana

It is amazing how the government of Ghana has not been able to give an accurate statistic of the rate of employment in Ghana. What baffles any inquisitorial mind is the palpable failure of the government’s inability to give accurate statistics for public sector employment granted without accepting that same cannot be provided for the private sector.

It is a deep fear national planning is in jeopardy considering that government does not know the exact national labour statistics. If this is true and justified by the different labour statistics churn out by government, then one can draw a firm conclusion that all spheres of national planning by government is at the vagaries of permutation of numbers rather than a careful mathematical and methodological approach to national development.

In tracing the preliminary viability of employment in Ghana, I have linked the subject matter of this article to two (2) pointers below:

  1. Graduate unemployment:

It is a common knowledge in Ghana that graduate unemployment is so high. The university tracer system must be made effective enough to give accurate statistics of the rate of graduate unemployment. Some have even argued to the fact that the multiple postgraduate certificates owned by many in Ghana is mainly due to unemployment. They decided to take another degree with the hope of gaining employment and/or engaging themselves in schooling rather than been idle.

Among graduates who gain employment, underemployment is a sine qua non without which matching educational qualification to the level of employment given will be highly negligible. A frightening example is a petrochemical engineering graduate seeking employment as front desk staff in a hospitality company. Straightaway the employer can tell that such job applicant wants ‘‘to make ends meet’’ by doing any work.

The above paragraph makes it reasonable to say that ‘‘ends meet’’ becomes the foremost reason for many job seekers rather than the ‘‘joy of work’’. Unfortunately, in such instances turnout becomes low because it is the ‘‘joy of work’’ that brings out the best in the employee rather than a sole reason to making ‘‘ends meets’’. In this instance, it is unlikely the employees’ will earn commensurate salary to their educational qualification hence a mismatch.

  1. Supply exceeding demand

In my experience as an employment relations management consultant, I find two (2) qualifications always in excess supply than demand. They are Accounting and Information Technology graduates. These two (2) qualifications always comes in excess when call for vacancy is announced.

It is imperative that until Ghana’s economy expands or organisational systems are structure to accommodate the many graduates of these two-degree programmes, the unemployment or underemployment rate of graduates of these programmes will have tough time in the labour market.

Where supply exceeds demands, employers will have the excess luxury of selection, and remuneration will not be same as where there is scarcity of qualification. Prospective university applicants to these two (2) programmes must have strategic game plan other than the ordinary flow of events.

  1. Politics of labour

Politics of everything has become the order of the day. Governments take political steps to national development other than what necessarily benefits the people. Developments have become segmented to political strongholds, and where there is apathy little or no development is seen sometimes not even the smallest necessity of humankind like portable water, electricity, etc.

To the extent that employability is politically connected, it may not guarantee longevity that translates into lifelong employment. Political employments that are not grounded in meritocracy are bound to be truncated in the next government.

Where there are no national policy on employment or the policy exists but not followed, it does not ensure uniformity in labour development. Sometimes increase in national minimum wage are because of labour agitation and threats to vote against a government in the next general elections. The government instead of a policy position to increase wage, it is rather pushed by the political threat to increase the national minimum wage.

In instances where the leadership of labour is in bed with government, national minimum wage increase are either slow to come or a paltry increase is made thereby using politics of advantage to hinder income levels of labour.

  1. The reality of cost of living in Ghana

Consumers in Ghana are made to believe that the increasing cost of living is due to the Covid-19, and the Russia attacks on Ukraine. Believers of these reasons largely depends on one’s income levels and/or which political divide he/she stands. However, whichever way one stands, one cannot ignore the reality of the high cost of living in Ghana.

The recent increase in the national minimum wage though better than none, does not correspond to the increasing prices of goods and services that reflects in the increasing cost of living. Increase in national minimum wage must correspond to the cost of living.

In an environment where there is no single and accurate statistics of the labour force, one may not be wrong to speculate; howbeit, environmental scanning by driving around the country tells you that majority of the populace are not employed. The other population who are into trading do not make gains due to the majority who are not into employment and therefore do not have the purchasing power.

In conclusion, government endeavours to ameliorate the standard of living of workers must be seen to be actively working in pursuing prudent economic variables to hold inflation at minimum level whiles empowering and developing partnerships in the production of local food items. Rightly, mechanised agriculture, food processing, storage and supply chain efficiency all year round must be pursued vigorously. The most problematic and excruciating part of poor standard of living is the inability of countries to produce local food items in required quantities rather than importing. A whooping failure of any country is its inability to feed its populace with locally produced food items at affordable prices. When complaints are made of poor standard of living, it is usually because the population cannot afford basic food items on the local market.

Nii Armah is a Lawyer, an Educationist and a Management Consultant. He is a Lead Fellow, Education and Social Transformation Pillar at the Centre for Social Justice (CSJ), a policy think tank based in Ghana.

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