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Esap’s stance on wages is a disaster

Retrenchments or wage freezes currently being implemented by Zimbabwean companies because of the current economic crisis could be doing more damage to those companies according to experts.

They argue that the policy espoused by certain quarters that wages must be flexible downwards so as to price the unemployed back into jobs or to enable business people to invest their profits is erroneous and totally misleading as it ignores the fundamental truth that employers who pay poor wages end up getting junk labour services.

Entrepreneurs, they say, should not view wages as “just a cost” but payment for a full service. Even in the former communist countries workers said: “employers pretend to pay, we pretend to work.”

Low wages are devastating in that they lead to double jobbing, moonlighting and theft of public funds and stores.

“Wages are not mere payments to workers and thus a cost to entrepreneurs which has to be reduced to increase profitability. They ensure that labour reproduces itself in the primary, secondary and tertiary considerations. Workers produce children who must live, be educated and become workers. Better-reproduced labour will tend to be more productive and innovative. Sick and underfed workers and their children promise neither productivity and growth nor peace and stability in a country,” the experts argue.

They also argue that wages play an important role in the market because workers are consumers. Low wages lead to low purchasing power. Reduction of wages therefore reduces the market size thus locking an economy into a low level of equilibrium.

The experts also argue that workers must be paid fair wages to enable them to buy goods. Underpaying them reduces the size of the market forcing businessmen to seek foreign markets by all means : “fair and foul”.

This seems to be exactly the position Zimbabwe is now in where, the declining market, every entrepreneur is trying to export. In most cases, goods exported seem to be sold at give away prices which in turn makes the products cheaper to buy outside than in Zimbabwe.

Retrenchments, which so far have affected more than 25 000 workers, although the government puts the figure at below 10 000, have also reduced Zimbabwe’s market to such an extent that there appears to be an abundance of goods that were once scarce.

 

Minimum wage trends in commerce and industry (1980-1990)
Year CPI Nominal Wage Real Wage
1980 100.00 $70.00 $70.00
1981 113.1 $85.00 $75.00
1982 125.2 $105.00 $83.87
1983 154.1 $115.00 $74.63
1984 185.2 $125.00 $67.49
1985 200.9 $143.00 $71.18
1986 229.7 $158.00 $68.79
1987 258.3 $158.00 $61.59
1988 277.5 $182.00 $65.59
1989 313.3 $226.00 $72.14
1990 367.7 $266.00 $72.34

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