The
government's announcement recently that it will set a minimum wage is
good news for the economy and also for the worker, but not in the way
they think.
As
it is now
we have a minimum wage of sh6000 a month which was decreed in 1984, but inflation and an increasingly higher standard of living means the number is worse than redundant....
Our
workers' union have been pushing for a revision of this number but the
government has argued it's best left to individual employee employer
negotiation, fearing that if they set a number investment in the country
will become unattractive.
Both are right but for different reasons than they think.
Let
us take it from the investors point of view. Investors like cheap
labour if they are producing for a market that is not finicky about
standards and one that does not consume much anyway. In such a market
you can literally source your labour off the streets and not care about
what value they are bringing to the operation other than their sweat.
Looking
at the payroll the cost of this labour maybe cheap but the attendant
costs of welfare - meals, health and labour laws, change this figure
dramatically.
Imagine
you start a backyard brewery for labour you can employ the children to
collect water from the well, the wife to peel the matoke and you can
all jump into the canoe to stamp on the bananas until they are a nice
consistent mash ready for fermentation.
Your
labour is inexpensive, need no highly specialized skills and are
readily available. The market are your neighbours and at worst the
village drunks on market day.
Imagine you wanted to scale up this operation to supply the sub-county, the district maybe even the nation.
For
starters your labour has to change, initially in terms of quantity and
eventually quality. Now you will not only be peeling the odd bunch of
matoke but probably truckloads. What was a small loss occasioned by the
temporary lack of focus by the wife in which she peeled off more banana
than peel becomes a much bigger deal when it happens with a few
thousand bunches. The workers in tying to beat the system by collecting
18 liters at the well instead of the 20 liters that a full jerrycans
holds will cost you as well. And finally ensuring quality control across
100 mashing canoes is a whole different ball game than when you could
lord over the wife and kids to step some more in your single canoe
operation. And finally you will need a more advanced skill than your
seasoned tongue to ensure the standards across your product is good to
ship out to market.
If
the government raises the cost of labour, your first instinct will be to
cut staff. Initially you may cut numbers and pay the remaining workers a
bit more. But the market demands that you step up production. But
getting more staff will kill your margins, so what are you to do?
Mechanize!
"The one off cost of plant and machinery maybe daunting but the running cost of these machines, which can be worked more than the stipulated eight hours a day, over the life of the machine makes more sense when viewed against the stress and cost of maintaining a work force....
In
addition with increased production -- you have to sweat the machines to
pay for themselves, you will have to step up your marketing, word of
mouth just will not do going into the future.
"Uganda workers are the least productive in the region and its not because they are lazy, it's because the capital injected into their work process does not match regional standards...
Think
about it you and your family combined cannot churn out as much beer in a
year as a single worker in Uganda Breweries can in a week.
So
the workers will be paid better, but the kind of worker who will be
required is not that who can mash banana underfoot but one who can,
using chemistry, manage the fermentation process of thousands of liters
of beer. The worker required will not be the one who can
carry four crates at a go but one who can man a forklift. The worker
required will not be the one who has to grin and bare the hot sun as he
sells beer in the market all day but one who can understand the market
and design marketing campaigns that will lead to greater sales.
So yes the minimum wage is good for the economy in that it will force us to inject more capital into our processes, boost production, improve efficiencies and pay the worker better, not just any worker off the street, a more educated and skilled one...
