THE MINIMUM WAGE

Determination of the minimum wage is vital for domestic policymaking.

It is vital that the lawmakers find a wage that is just sufficient to keep the labour force content, while also just sufficient to attract direct foreign investment and ensure a thriving business environment. It rests upon the government of the day to constantly and consistently check whether the minimum wage satisfies all these objectives. I am giving this background because I am pondering on the current and ongoing strike by textile workers and now the transport operators.

Setting minimum wage

The determination of the minimum wage should look into a number of issues and paramount is the ability for all employees to cover all expenses related to executing the job in a humaine manner. This means that the employees should be paid enough to afford transport to work, basic nourishment during work hours, transport back home and accommodation. This is what we refer to as an efficiency wage, a wage just sufficient to cover employee nourishment so that they can execute their work mandate. The word nourishment is used loosely here, it does not relate to nutrition one gets from food, but refers to broader well-being. In essence the efficiency wage should just be sufficient to cover employee well-being. The question that begs an answer is the wage that is paid to textile workers sufficient to cover their basic nutrition viz rent, transport, lunch and meals. At the bare minimum, the efficiency wage should be able to cover these costs for the individual and if a surplus remains to cover additional expenses then that is acceptable, but the basic premise is it should be sufficient to cover the basics.

Implications of wages below efficiency wage

I am sure we can all agree that the wage earned by textile workers is far below what the efficiency wage and there is need to upgrade it. Otherwise we have an economy built on a subsidy from the working poor, only for the rents to be extracted by the ultra-wealthy and this is not equitable. Building an economy on the exploitation of the working poor is not sustainable and does not bode well for all-inclusive growth. Such a policy stance always ensures that the working poor are deliberately left at the fringes of economic development so the capitalist sector will always have access to cheap labour, this at times is done as a deliberate policy action. Also, building an economy on this premise always meets social resistance, this we can learn from China and all the other Asian tigers. As an economy develops, the cheap labour begins to resist and begin demanding more and this is usually the starting point for conflict and social bargaining.

Social impacts of wages below efficiency wage

The micro effects of wages below the minimum wage below the efficiency wage are profound. Employees need to find ways to pay the subsidy; that this alternative means of survival. The employees may find themselves having to walk to work and skip lunch during working hours just so that they can have lunch. These habits compromise the health of the working class, while they do not have health benefits to somehow replenish the diminishing health stock that is worn out during the lengthy walks to work and skipping meals since the wage is not sufficient to cover the meals. This results in a lot of claims on the national health system, adds unnecessary pressure which could have been prevented by paying an efficiency wage. Sadly, basic reasoning regards the supply of cheap rural labour as infinitely inelastic and therefore can be exploited and quickly replaced if they cannot work.

We need to move away from this thinking in that the supply of labour is not infinitely elastic we have 1.2million people and if we do not take good care of them what will we have left? Also, it takes at least 18 years to replace labour, regardless of the investments made on them, natural processes dictate a minimum of 18 years. Hence, the exploitative model of using the working poor to subsidise production cannot be sustained if the labour is not well cared for. Furthermore, the working poor falls prey to social vices such as transactional sex, illicit drug trade and contributes to a number of social ills which also affect their children, eventually breeding generations that are trapped in the poverty cycle.

Towards the future

We need to rethink are development philosophy as a country. This is not a sustainable business model since it compromises on the quality of the labour force. We need to invest in training our people on trades that can be done with a minimum level of schooling. This will ensure that the labour force receives training and can participate in value addition and better paying skills jobs. We need to invest in building our people and growing them so that we have a balanced growth path, we need to ensure that we leave no one behind. The model of relying on the exploitation of cheap labour is not sustainable and it is not fair that the economy should be built on the sweat of cheap labour who do not reap the benefits.

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