The Public Utilities Regulatory Commission (PURC) has announced its intended implementation of a 4.22 percent increase in electricity tariffs for all non-lifeline residential customers, affecting the average end-user starting September 1, 2023. This decision comes after a review carried out for the third quarter of 2023 by the PURC. According to the PURC, the primary objective behind the tariff adjustment is to ensure that the real value of the cost of providing utility services is upheld.
This electricity tariff increase forms part of the key measures government has taken to secure the International Monetary Fund (IMF) support programme. Thus, with regard to debt sustainability, government seeks to undertake fiscal adjustment with revenue and expenditure measures to improve debt sustainability measures with periodic adjustments of increase in electricity tariff.
The Ghanaian workers need job in order to generate earnings to purchase goods and services. They enters the labor market willing to supply their labor in exchange for wages or salaries. While wages are hourly or daily payments for work done during the working day, salaries are fixed upon payment agreed to by both the employer and employee. Wages or salary, is most often than not, the primary incentive for increase productivity.
That notwithstanding, it is workers labour that essentially generate or extract the wealth from productivity. Therefore, the idea that increasing productivity will rather attract better wages for workers is unfounded and not progressive. It is a motivation for labour exploitation where workers are taking unfair advantage of to increase their expenditures.
And considering the fact that the work force in Ghana is mostly in the public sector where the means of production is owned by government, it comes as a crooked thought by government to insist on increasing utilities without increase in salaries. Extracting revenue with increase in tariffs for workers without giving premium to better salaries and wages for the workers as the best approach to redeem our moribund economy is not misconceived.
Recent studies undertaken under the International Labour Organization (ILO) have shown that increase minimum wages not only help to reduce wage dispersion and to channel productivity gains into higher wages, but they also can contribute to higher labour productivity – at the enterprises level to the aggregate economy-wide level. At the enterprise level, workers may be motivated to work harder.
They may also stay longer with their employer, gaining valuable experience and also encouraging employers and employee to engage in productivity-enhancing training. At the aggregate level, increase minimum wages can result in more productive businesses replacing least productive ones – and surviving ones becoming more efficient. These mechanisms can increase overall economy-wide productivity. What’s more, below are some reasons why government should adhere to the calls for better wages for Ghanaians workers:
- Good governance
The efficiency in managing the machinery of state does not lie in the use of a large force of ministers, some of whom have poorly defined job descriptions adding to lack of fiscal and monetary discipline. The marginal decline in the size of government as a result of the reduction in the number of ministers should be strictly adhered to. This will surely save some money for the state rather stifling workers with tariffs increases.
Governance and development at the local level is hitting a snag as a result of the long delay in apportioning resources to MMDAs. Government should treat the MMDAs with a sense of urgency to give life to our local government system and make it properly function and responsive in addressing the needs of local people. Much is yet to be seen in terms of development after the creation of the new regions. As against the promise given by government to expeditiously bring development to these newly created regions, the conditions of the people have remained the same and, in some cases, worsened.
It is worrying to know that many infrastructural projects inherited by the government in the newly created regions have been abandoned and left to rot. Government must be empathic to the suffering of Ghanaians workers living in these regions who need these projects completed to improve their livelihoods, but not the making of perfunctory statements and promises with the worsening situation of increasing expenditures in utilities.
- Workers are more motivated
A number of studies have supported the hypothesis that employees consistently provide higher effort levels in response to higher wages, the so-called “efficiency wage” theory. Most of these studies have focused on pay levels of individual agencies, organizations and companies, showing that higher pay compared to elsewhere can attract more experienced and motivated applicants. Higher pay can also elicit greater commitment and productivity from existing employees (Ehrenberg and Smith, 2009). The effect of better minimum wages on workers’ motivation has also been found to be positive.
- Efficiency of work
Although some labour experts argue that productivity increases may be the result of a fall in employment due to the minimum wage, as works substitute capital for labour and adopt more capital-intensive production technologies, this remains a distinctly insignificant as the minimum wage of some work is set high. In addition, they aver that increase in labour costs such as expenditure increases also increases labour productivity. Labour productivity changes do not come about through a reduction in workforce by laying off workers or through capital-labour substitution. Rather they are associated with increases in total factor productivity, consistent with organizational change, training and efficiency wage and salary responses to increased labour costs from minimum wages. (Riley and Bondibene 2015).
- Increase efficiency at the micro level
At the macro-economic level, it can be observed that minimum wages may prompt low-productivity works or organizations to leave the market and higher-productivity firms to expand – thereby raising overall efficiency of the economy. A typical example is the Chinese economy, in that in 2014, data shows that more than 160,000 manufacturing companies in China realized that increases in minimum wages resulted in lower survival probability of low-productive companies.
They explain this finding by the fact that productivity in surviving companies improved significantly, allowing firms to absorb the higher labour costs without hurting their employment or profitability. They conclude that minimum wage growth allows more productive companies to replace the least productive firms and forces incumbent companies to strengthen their competitiveness.
Labour agitations
Government should therefore reconsider the further increase in salaries and wages. The labour union leaders should, in good faith, continue to press home their demands from government for it to go back to the negotiation table with them to reconsider its decision. One of the core principles about negotiation as captured under section 97 of the Labour Act, 2003 (Act 651) provides that all parties to the negotiation of a collective agreement shall negotiate in good faith and make every reasonable effort to reach an agreement.
It is believed that there is room for further negotiations between labour and government and that negotiating parties are expected to be honest, faithful, believe in their course and observe reasonable standards or norms of the various organizations that constitute the public sector of the country to bring the impasse of strike and those looming to rest.
Those ones who understand the situation of the economy and manage should be in a better position to know that workers who struggle daily to contribute to the development of the economy deserve better salary, not otherwise.
How can someone taking a salary of less than GH¢2,000 survive after all these utilities and taxes are deducted in addition to SSNIT, and other levies? Adding to the fact that government claims that the low salary increase is due to the dire economic situation created by IMF conditions, meanwhile, it has increased the salary of Article 71 holders astronomically. This simply does not sit well in mind. To labour, this explanation is discriminatory and unfair.
Conclusion
From all indications, studies have shown that there is positive correlations between wage increases and productive, and a regressive correlation between increases expenditure and reduce salaries and wages. For that matter, it dawns on government the responsibility to ensure that the Ghanaian economy in its ailing states receives the stimulus through the provision of better wages for workers to shore up the economic production in the country.
This, most importantly, includes providing the teeming unemployed youth, who are the work force of the economy, jobs for the rapid growth of the economy. The economic reality on the ground is, many of our fellow country men and women are struggling to survive. The projected increases in tariffs is suicidal.
>>>the writer is a Professional Law Student. He can be reached via [email protected]
References
- Ehrenberg R. G. and R. S. Smith, 2009. Modern Labor Economics: Theory and Public Policy, 10th Edition, Pearson.
- Riley, R.; Bondibene, C., R.; 2015. The Impact of the National Minimum Wage on UK Businesses. Report to the Low Pay Commission. National Institute of Economic and social Research and Centre for Macroeconomics.
- Mayneris, F.; Poncet, S.; Zhang, T.; 2014. The Cleansing Effect of Minimum Wage: Minimum Wage Rules, Firm Dynamics and Aggregate Productivity in China. CEPII working Paper.
