Help for those in debates over pay

payThis week we have an economic blog that features the opinions of well-known Zimbabwean economist, John Robertson. This week he gives an update of the Poverty Datum Line Index.

The Central Statistical Office was hoping to issue an update of its Poverty Datum Line Index by now, but as yet I have not received figures more recent than those for October.

However, as negotiations on wage adjustments are in progress and as the unions are trying to extract unrealistic rates from employers, I am hoping that even the October figures will assist you if you are involved in debates on pay.

The index shows that, for the whole of Zimbabwe, the average cost of food and non-food items for a family of five in October was US$451,22. This was lower than the figures for the first three months of 2009, during which prices were trending downwards, and they reached their lowest point at US$418 on May, since when they have been a little erratic. The October average was almost matched by the July average of US$450,22, but in that month the spread around the country was much less pronounced, ranging between US$408 and US$468, depending on which province was being surveyed.

In October, the lowest was US$392,29 for Mashonaland Central and the highest was US$553,40 for Matableland North. While the figures do indicate that many breadwinners who are responsible for families of five would struggle on wages of less than US$450 a month, and in certain areas this figure would fall well below requirements, it is also evident that most households in the country would need to have more than one wage earner or more than one source of income.

Trades union arguments that minimum wage levels have to be high enough to permit a single wage-earner to meet the families entire requirements have already made Zimbabwean goods uncompetitive on export markets and are even making them uncompetitive with goods imported from neighbouring countries.

No competitive edge

As Zimbabwes failure to recover a competitive edge for its own products in Zimbabwes shops is already impacting severely on the pace of recovery in the manufacturing sector, Trades unions and workers committees should be advised that demands for wages that would make the goods even less competitive are certain to slow the creation of new industrial jobs and are even likely to cause the loss of many jobs now in existence.

Zimbabwes employers desperately need some respite from steadily rising production costs while the slow recovery progresses. Demands for unaffordable wages now could easily reverse the recovery and force retailers to continue relying on imported goods.

Many employers are trying to make direct comparisons between wages paid in neighbouring countries, grade for grade, with those being paid and now being demanded in Zimbabwe. Having come from the highly distorted situation of a year ago, many Zimbabwean packages included allowances that have since been factored into wage demands and the justification for many of these fell away with the adoption of a stable currency. They now appear to be one of the factors that has caused Zimbabwean wages to be higher than those paid in the region and very significantly higher than those paid in India and China, with whose goods Zimbabwean producers have to compete.If you are involved in wage debates, I hope you will be able to introduce some of these issues into your negotiations.

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