Is it high cost of living or low pay?

THERE is an increasingly momentous disconnect between the cost of living and the cost of labour which is wages in Zimbabwe. I have been following closely the demonstrations by nurses at State hospitals demanding to be paid in United States dollars as inflation is eroding their salaries, and every other citizen’s.

The situation is just bad for everyone and I feel their cause is justified especially when the cost of living and salaries are mismatched. Let us face reality and address the real questions for us to find real solutions. The cost of living has gone up while the chances of living has gone down.

A very important aspect of working is for people to make money, yes l mean money which is the store of value. They need money for food, for rent, basic things and other uses too. Of course, there are other people who work to be part of and contribute to their communities, but still they need money to cater for their wellbeing.

When you get your salary, how much you spend every month matters.

The problem or a mismatch now comes when what you are getting is very low that what you will do with what you get becomes a problem. It’s a complete mismatch and employees suffer greatly. The current situation is dire and everyone knows that most employees and some employers as well are severely incapacitated and we are facing an existential crisis.

What is cost of living and cost of labour?

Cost of living refers to the amount of money required to maintain a standard of living, accounting for basics like housing, food, clothing, utilities, taxes, and healthcare. In other words, the cost of maintaining a certain standard of living is what we call cost of living. When the wages you get keep up with living expenses, things will be normal, but when what you get can’t cater for you it’s a red flag indeed.

Cost of labour reflects what a particular geographic market offers as compensation for a specific type of work — this in usually termed salary. In some instances, “cost of labour” refers to the difference in pay or labour price for a job from one location to another. The difference between the cost of labour and cost of living can mean many different things to many people.

What causes the cost of living to go up?

Some businesses are now refusing to take payments in bond notes, EcoCash and swipe or transfer except a few and that will only mean that a great number of companies are charging in US dollars. Employers at the same time are failing to match their wages and salaries, resulting in employees suffering. This rise in the cost of living is eating into the little disposable incomes of workers and further burdening people who are already suffering under the weight of unemployment. The result will be a serious decline in the standards of living and high poverty levels among the majority of Zimbabweans.

The current situation

Now we have four currencies, the US dollar which is accessible in some sectors of the economy, but inaccessible to the general populace, which is only using the other three currencies — EcoCash, Real Time Gross Settlement and bond note.

Why would business accept a currency that is losing value on a daily basis? It does not make sense for them to accept it because they will need to go to the black market and convert it to real value.

The Zimbabwean business environment — characterised by an unpredictable rising cost structure as production inputs are always on the rise, with weekly crippling production and unstable exchange rates — continues to worsen.

Effects to employers and employees

Businesses across various industries are failing to keep up with these everincreasing costs, hence they pass on the cost to the customers by continuously raising prices to maintain profit margins. Wages play a fundamental role in the distribution of income and reduction of poverty and economic growth.

Now the falling labour earnings produce a host of problems such as growing inequality, social exclusion, a rise in crime or even social and political unrest and mass demonstrations. There is a widening gap between employee expectations and what organisations can reasonably offer them, which could turn toxic if left unchecked.

Solutions

We urge the business community to avoid unjustified price rises and take into account that workers’ wages have remained stagnant over a long period of time. In fact, salaries have seriously declined in real terms and nothing has been done by business to make the necessary cost-of-living adjustments so that wages and salaries keep up with inflation.

The cost of some basic commodities have risen 10 to 20-fold without any corresponding rise whatsoever in incomes. To make matters worse, the overwhelming number of consumers upon which businesses depend are unemployed. This rise in the cost of living cuts a deep wound in the lives of people, harming the young and old, employed and unemployed, in a profound way even for people accustomed to pain in recent years. Restructure the wage system

A cost-of-living increment is an increase in pay that is intended to keep the buying power of a salary the same during a period of inflation. Without a cost-of-living increment, the declining value of the dollar will leave workers with less real money in their pockets.

Employee remuneration has been eroded. It’s known that at this stage most employees are struggling to make ends meet given the devaluation of their salaries and rising inflation. The increase in inflation has impacted on how employers structure employees’ remuneration.

To tackle cost-of-living pressures and achieve sustainability of remuneration, it may be necessary to look at the following options.

Linking wages to productivity

If an entity is earning revenue in foreign currency, it also pays its employees in forex, but if it is generating revenue in local currency, it will be a problem. Directly linking wages to productivity, the employee is continuously rewarded for hard work, which drives him to generate more profits for the business. The relationship between productivity and wages is a central issue for fair distribution between labour and capital. Productivity can be defined as the amount of goods and services (output) produced in the economy for every unit of labour.

For example, output per worker and output per hour of work are both productivity measures. When output per worker increases, workers’ contribution to a firm’s revenue increases causing demand for workers to increase also.

Continuously review NEC pay structures

The institutional wage negotiation setting in the private sector (NECs) is overally good, but its role has been relegated to once-off wage negotiations. It is critical that the role of the NECs be realigned so that it also encompasses its main role of representing the workers. Key business decisions may occasionally require consideration of both cost of labour and cost of living in the analysis.

Workers purely live on the proceeds of selling their labour. It is only logical to pay all workers a United Statesdollar salary. I am calling for those responsible to revoke Statutory Instrument 142 of 2019, to save employees, employers and general Zimbabweans from the current economic tragedy.