Fix the entire economy, not just salaries of particular sectors

OPINION | PUBLIC SERVICE

Bt Richard Ssempala

Of recent, the country's health segment has been in a "sorrowful state" due to the strike by health practitioners particularly doctors and internship medical students. This was due to the meager salaries these people have been getting accompanied by poor working conditions despite the commendable services they render.  In simpler economics, a salary is an agreed upon and regular compensation for the time and skills an individual receives from the employers. Therefore, it is an entitlement which has to be commensurate with the service rendered or amount of work done.

Why salary increment in all sectors?
Since a salary compensates for the time foregone, a worker in principle expects to meet a larger percentage of his /her needs using the earned income and in this case salary. According to the Uganda National Household Survey 2016/17, one in every four households (25%) reported wage employment as the main source of earning thus Individuals depend directly on salary as their major source of income. In fact, a few individuals in Uganda are in working class inspite of the high population strata in the dependent class. This implies that the little salary earned by an individual is subjected to numerous needs.

Increment in the prices of the basic needs
According to the Consumer Price Index, sugar is at sh5,000 and on average a Ugandan household has four people. This means that a kilogram of sugar can't sustainably satisfy this household a month unless the head raises an excuse of health precautions claiming that Sugar "causes diseases" or perhaps denied by ancestors. In addition, majority of the workers in town centres are renting and every year landlords increase rental charges yet the salary increase seems to be a day-dream. This also acts to reduce the would-be disposable income. I will not mention school fees bonanzas in which a kindergarten pupil pays more than a university student. One needs to ask what brought in all these. It should be recalled that in 2012, inflation in Uganda rose to 25.7% and all prices increased, since then though it reduced, all prices of essential goods have never reduced to an admirable level.

Generally, there has been a reduction in economic production in the country, but with an intimidating population growth. The key sectors in the last financial year all registered negative growth rates; for instance, agriculture grew by 1.3 percent compared to 2.8% in FY 2015/16, industrial sector which would be a source of employment for youth also registered a negative growth of 3.4% down from 4.7% in previous financial years. Even the service sector, the biggest among all sectors contributing to 51.7% of the total employment also reduced during the FY 2016/17 significantly with a slower growth of 5.1% compared to 5.9% in FY 2015/16. This clearly implies that the few produced goods are chased by many people, which in turn skyrockets the prices. Higher prices have made it difficult for households to meet the rising cost of living.

The price indices indicate an increase of more than 20% between 2010/11 and 2016/17, which has undermined the welfare of all salaried employees, as they have not received a similar increase in income. 

As long as any increase in nominal salary is lower than the rate of inflation, employees will continue to advocate for better pays since increased inflation and stagnant pays actually mean that employees earn less.

What should be done?
Even without introducing a harmonized salary structure as proposed, the entire economy is not performing well.

Currently, the government budget is intensely squeezed by a chain of challenges caused by exorbitant government expenditure and limited revenues. The issue at the time thus, does not necessitate focusing on salaries only but the entire economy of our motherland. It's not simply that salaries are the key constraint to our growth but there is a need for economic reengineering.  

Until that happens, increasing salaries, inevitable as it may be, might not solve the problems at hand rather will trigger more strikes in other sectors. Therefore, the government should either find course of action for the entire economy or keep on increasing salaries. Short of that, we should expect for more strikes from both government and private sector workers and general macro-fiscal imbalances in the country.

The writer is a research associate at the Uganda Debt Network