As labour unions (Zimbabwe Teachers Association - ZIMTA, Progressive Teachers Union of Zimbabwe - PTUZ, Zimbabwe Congress of Trade Unions - ZCTU) continue clamouring for salary increments or payment in United States (US) dollars, there is great need for Government and economists to up their game in schooling civil servants and labour unions on the implications of continuous salary increments on the economy.
Given the austerity measures that Government is trying to implement – (making structural reforms to liberalise the economy, privatise inefficient parastatals, reduce red tape, big cuts to perks and unnecessary expenditures means/budget; likewise the salary increment issue) it would be paradoxical for them to initiate huge salary increments especially on civil servants who constitute at least 70% of the employed population in the country.
Whilst the general public seems to operate under the assumption that increasing salaries for workers would fatten their pay checks and people get to spend more, and probably stimulate economic growth -economic logic tells a different story.
Increasing salaries is the wrong medicine for any ailing economy, Zimbabwe is no exception. Government is trying so much to avoid market regulation but to liberalise the markets in an effort to promote free trade. Hence, letting free market determines wage rates is consistent with a free society. It is the surest path toward greater income mobility since younger, low-skilled workers get experience and move up the income ladder as well. Cutting that ladder off by mandating a higher minimum wage is a recipe for poverty and not progress.
There is no magical way to stimulate the economy by increasing salaries. Salary increment is neither necessary at this point in time as it doesn’t stimulate economic growth but instead erode efforts which Government is trying to put up.
Hong Kong grew rich by undertaking reforms that fuel growth which included free trade, low tax rates, small Government, a stable rule of law that safeguards private property and low costs of doing business. Likewise Zimbabwe could borrow leaf from Hong Kong.
Inasmuch as proponents of salary increments argue that with improved salaries, workers will equally consume more, which will increase aggregate demand and increase Gross Domestic Product (GDP); that line of argument is a case of upside-down economics. Consumption is not a determinant of economic growth; it is the result of a prior increase in production. Workers cannot be paid what they haven’t produced first. Hence Zimbabwe should first work on production before clamouring for huge salaries.
The fact that Zimbabwe is coming out of decades of economic doldrums and the economy is still ailing is no secret, however, this equally doesn’t mean that workers ought to suffer in silence. As much as civil servants’ remuneration has been eroded by price distortions, Government is equally struggling to keep pace with salary increments, and continuous calls for industrial action is no solution.
Recently Government moved in to provide affordable transport to and from work for urban workers, a situation which can still be augmented by other alternative incentives (accommodation, medical aid.)
With a depressed economy, salary increments should try to be matched with Government’s revenue inflows especially considering that 70% of Government revenue is channelled towards salaries. And as of now, companies which should be providing the bulk of Government revenue through taxes, duty and other payments, are struggling to remit.
Instead of pushing for mass demonstrations and salary increments, trade unions should engage in dialogue with Government, try to understand the how the economy operates, then negotiate for a reasonable package for the workers.
