Every so often, the issue of the minimum wage crops up. Then, people will argue for and against it before the debate runs out of steam and the issue is once again kicked down the road until the next time.
After concluding a labor workshop last week, Richard Mawoko, the Treasurer General of the National Union of Trade Unions (NOTU) brought it up again.
Quoted in the media he said, “For 39 years the government has been attracting investors, but the problem we see is payments that are increasingly low due to the lack of a minimum wage. This country last had a minimum wage in 1984 and we think it’s long overdue that it’s returned.”
With the Covid-19 pandemic and its negative economic impact still fresh in the mind, the phrase ‘long overdue’ is not the best choice of words for business owners. Faced with cash flow disruptions, they had to cut costs. Either laying off workers reducing wages or doing both. This is no time to talk about minimum wage when plenty of businesses are still in recovery and operating on very thin margins.
The government itself is also constrained by rising public debt together with growing debt servicing costs and a limited budget to work with. Enforcing a national minimum wage would be a big expensive headache. It’s no surprise then that Ramathan Ggoobi, the Secretary to the Treasury said, “It is not wise to implement a national minimum wage in an economy like ours.”
The year 1984 is when former President Dr. Milton Obote announced during his budget speech, (he was also finance minister), a close to 500% hike of the minimum wage. The increment was pegged to one US dollar, equivalent to six thousand shillings at the time. Workers were ecstatic with joy until they woke up the next morning to realize how raging inflation had eroded their purchasing power.
Compared to then and now, and at the current GDP of $50 billion, Uganda’s economy is 12 times bigger, but according to NOTU workers are more exploited. Their dignity is also lessened somewhat when government officials keep telling foreign investors about the availability of ‘cheap labor’. It sends the wrong message, allowing employers to arbitrarily pay what they want.
Officially, Uganda does not have a minimum wage law, but unofficially we have a benchmark figure. In 2015 the Ministry of Gender, Labour, and Social Development set up the Minimum Wages Advisory Board and recommended UGX 136,000 per month as the lowest pay for any worker in Uganda.
This was later packaged by legislators into the Minimum Wage Bill 2015 and then forwarded to President Yoweri Museveni. But even after several consultations between Parliament and the State House, towards the end of 2019, he declined to sign it into law.
Ironically, in the first National Development Plan (2009/10- 2014/15), a minimum wage law was lined up for implementation which only added to NOTU’s frustration. However, the International Labour Organisation (ILO) concedes that in low-income countries most of the working population is either self-employed or engaged in family work (on farms), so job security rules, minimum wages, and other regulations cannot be applied in any relevant way.
In explaining his decision, Museveni said there was a need for Uganda to be cautious in implementing the recommended wages by international labor organizations since Africa has structural differences from the Western world.
During his New Year address to usher in 2024, he said, “We need to harmonize with our people working in the factories. Sometimes, they are impatient for good salaries from the employers. We agree that our factory and other workers should get good salaries if the employers are getting good profits. Profits are influenced by the costs of production.”
Whenever business leaders sit down with Museveni, the top of the agenda is reducing the high cost of doing business. Acutely aware that owners of capital are vital for Uganda’s future prosperity, Museveni has made it his crusade to appease them; even if it means upsetting various segments or groups within society, such as NOTU. Although NOTU will strongly disagree, this is the price you pay for having any jobs at all.
Setting a high minimum wage can stimulate domestic demand and hopefully cut the poverty rate, though at the same time, it can lead to increased labor costs, job losses, and price hikes for consumers.
Since the hatchet job done on the public sector beginning in the 1990s, under the IMF structural adjustment programs, NOTU knows the clout of unionized labor has been steadily diminished. It is not easy to remain relevant in a relatively small economy with high unemployment and a large informal sector operating under liberalized policies. This has impacted membership and morale.
For NOTU, the minimum wage issue is like a rallying call. In the distant past, it drew mass appeal, but in this era of rapid adoption of new technology and automation, the speed of capital is outpacing labor dynamics. If the investor feels it is not worth their time and money remaining in Uganda, that factory you see today can be gone tomorrow.
NOTU has not mentioned a specific figure for minimum wage. But just for the sake of comparison, let’s look at Kenya. At present, the region’s biggest economy has a GDP of $107 billion (twice Uganda’s) and the minimum wage is legislated and periodically adjusted.
On May 1, 2024, President William Ruto announced a 12% increase from 13,500 Kenyan shillings to 15,120, equivalent to just over UGX430,000. According to the Uganda Bureau of Statistics, the average monthly wage in Uganda is around UGX 200,000.
Instead of making demands, NOTU and other civil society organizations need to engage with both government and business. As challenging and frustrating as it sounds, all parties have to put themselves in the shoes of the other. Do some thorough research, particularly on whether a minimum wage law is really necessary.
If so, find the appropriate balance between a decent income and the employers’ capacity to pay without hindering overall economic growth. Perhaps a sector-by-sector approach can deliver the best outcome rather than coming up with one national figure. Rather than continue to kick the issue down the road, let’s reach a definitive position.
It all boils down to affordability. All employers are not MTN, Stanbic Bank, Uganda Breweries or Coca-Cola Beverages. NOTU should also appreciate small and medium-sized business owners, who make up the bulk of Uganda’s private sector, are not flush with cash.
