Unions call for a formal Wage Policy

Government has been challenged to introduce the Wage Policy as a matter of urgency for the benefit of the labour force in the country. Public Sector Unions have underscored the point that a Wage Policy is long overdue for Botswana, and in particular that the absence of one suggests the existence of a gap in the country’s demand management framework. The five Cooperating Public Sector unions- Botswana Land Boards, Local Authorities and Health Workers Union ( BLLAHWU), Botswana Nurses Union ( BONU), Botswana Public Employees Union ( BOPEU), Botswana Sectors of Educators Trade Union ( BOSETU) and Botswana Teachers Union ( BTU) have registered this concern in their Salary Negotiation Position Paper for 2022/ 23- 2023/ 24. They argue that Wage Policy is a potentially potent demand management tool because the Marginal Propensity to Spend out of income ( MPS) is quite high for wage earners, especially in a lowwage economy such as Botswana. The cooperating unions have reached an agreement with the employer for a five percent salary increment for a period of three years. The unions had initially proposed an 11 percent salary adjustment. The negotiations for salaries and conditions of service for public servants for the financial year 2022/ 23, 2023/ 24, and 2024/ 25 started on the 3rd of May 2022 and were concluded on the 7th of May 2022 in Palapye. The Wage Policy negotiations between the unions and the employer are expected to commence next month with an expected conclusion date being December this year. The unions have indicated that the majority of Botswana’s public servants are in the A3- D1 salary bands, where saving is particularly constrained. Thus, they spend a large share of their incremental incomes. “In a context such as Botswana’s, Wage Policy is a potentially crucial mechanism for adjusting to economic shocks, whether policy acknowledges this or not. Increasing real wages when the economy faces low demand injects spending into the economy when it is needed. “Conversely, lowering real wages, whether through market adjustment or passively through sub- inflation rate wage adjustments, denies the economy spending when it is needed,” the union said. Basing their argument on the EU Wage Policy, Stockhammer ( 2008), the unions argued in the Position Paper against allowing real wages to fall during economic downturns or adverse shocks. The union party stated that the dominant practice, informed by the wage flexibility viewpoint, is to allow nominal wages to fall during shocks in the hope that lower Nominal Unit Labour Costs ( NULCs) will stimulate investment and net exports, and consequent thereto, output and employment. According to the unions, this position is not borne out by empirical evidence that bears repeating. “The absence of a formal Wage Policy for Botswana denies the economy the deliberate and informed use of a powerful policy tool. As things stand, Wage Policy in Botswana is passive but approximates a constrained Flexible Wage Regime. “It can be argued that Wage Policy is in fact generally used to pacify workers rather than as a policy instrument for demand management. Labour calls for an explicit Wage Policy. There are a number of wage regimes to consider each with its own merits and demerits. “A productivity- led wage policy, for instance, has the advantage of factoring both productivity growth and inflation into the nominal wage inflation target,” the Position Paper states. The labour movements stated that Public Sector Wage adjustments can be used to address inequality and poverty. They pointed out that the Wage Policy can be used to secure economic justice for workers and to reduce poverty and inequality. “The incidence of the working poor requires minimum wages that are set above the poverty line. Wage policy may also be used to protect workers’ share of the gains from productivity growth and to achieve equity in the workplace. “Evidence from the United States of America and Europe show that productivity growth almost always exceeds wage growth. This means that workers retain a less than equitable share of their incremental output per hour of sweat. “Labour’s share of national income is an important variable to trace in the interest of an inclusive and socially just economy and society.”