Monday, May 8, 2017

THE MINIMUM WAGE AND THE JUMP IN UGANDA MPS PAY

Last weekend the Saturday Vision reported allowances to parliamentarians would rise to sh330b next with the reintroduction of the constituency development allowance.

Going by budget estimates this is more than the money ear marked for all the 14 referral hospitals in the country.

This comparison is important in discussing why the economy is stuttering along.

"There only two ways to utilise money, either for consumption or for investment. If you consume all your money you are doomed to poverty but if you invest some of it chances are you will be wealthy in future or at least attain financial independence...

Investment is committing money with the hope of a return in the future. Financial freedom occurs when the returns from your investments are enough to cover your expenses, as opposed to financial independence when you work for a living and your earnings cover your expenses.

This can be extrapolated from the personal to the national level.

You can tell which countries have a bright future by looking at their budgets, judging each expense on whether it is an investment or consumption.

Expenditure on health is an investment. By keeping populations healthy you ensure reduced down time in the workforce due to illness – personal or family. One way of ensuring productivity, output per worker is optimised.

The same cannot be said for parliaments wherever they are. In our case our parliament is too big for our own needs, exacerbating the inefficiency of funnelling money to it. MPs argue that their value is in keeping government in check but we don’t need 446 MPs to do that, a quarter the number would do just fine. The payments to MPs can be counted as consumption and even if they actually invested much of their income the effect on the general economy cannot be compared to the benefit of keeping the hundreds of thousands of Ugandans who use our referral hospitals alive and well.

The difference between the wealthy man and the rest is that he invests an increasing proportion of his income. It is really that simple. It is not easy because investment presupposes delaying one’s gratification to a later date.

"In effect what our MPs are doing is refusing to delay their gratification. Because if we had a more productive population the economy would grow and the MPs pay would rise as well. Of course most of them will not be in the house in ten years to come, when investments made today may begin to bear fruit, so one sees why they are clamouring at the trough. What happened to “For God and my country”?...

But again to expect them to think long term, even despite the more likely short tenure in the house, is to ask too much. As a nation we have a saving rate of just about 13 percent compared to a sub-Saharan average of 20 percent and a world average of about 25 percent.

So it’s a bit much to expect that our MPs as soon as they take the vow will suddenly be transfigured from consumers they are to investment machines. Which goes to show that it is not money that makes you rich – they are among the highest paid “workers” in the country, but how one thinks.

By extension the development trajectory of a country is reflected in the mentality of the nation as represented by our political elite and how they budget for us.

But also this week the labour unions announced that a minimum wage is soon to be announced by government. There was no official communication to that effect. The remnants of our trade unions have been crying out for a minimum wage, interchangeably referred to as a living wage, for the last three decades. These calls have been thwarted by a combined effort of the employers – for obvious reasons and government, which has argued that setting a floor on wages would discourage investors.

"This is scary because it means that the unproductive sectors of our economy, read the MPs, have a stronger bargain power with the government than the workers....

We need to think about that.


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